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How to Handle Insurance With Rising Property Values

imagesIn this market of rising home values, it’s important not to overlook your homeowner’s insurance.  Homeowner’s insurance is something every home owner needs but doesn’t like to think about.  It’s there in case you need it, but what if your home was destroyed and you didn’t have enough coverage to rebuild?  That would be a terrible scenario and unfortunately this has happened to some unfortunate people in the past.

Let’s take a look at when you should increase your homeowner’s insurance and when it’s time to leave it as is.

When you purchases homeowner’s insurance you don’t buy coverage based on what you paid for your house, but rather how much it would cost to replace your house.  When figuring this cost the insurance company will take into account factors such as size and style of your home as well as local construction costs – coupled with the amount of risk involved in your location.  If you live in a high risk area like a tornado or hurricane prone region then costs are likely to be more.

To determine if you need to increase your coverage there’s a couple of factors you need to consider.

If local construction costs increase due to higher levels of construction activity then there’s a decent chance you need to increase your coverage.  Likewise, if you added on to your house or increased the value in someway such as a new sun room, remodeled kitchen, etc then it is going to cost more to replace those things if your house was destroyed.

When you probably don’t need to increase your homeowner’s insurance is when neither of the two aforementioned scenarios occurred or if the home values in your area increase due to market conditions or if new amenities such as parks, schools, businesses were built near your home.   Location is key when it comes to real estate and sometimes that means you pay more for a house when it’s near nice things like the parks, schools, and shopping malls, etc.  but it doesn’t always mean you should pay extra for homeowner’s insurance.

In order to properly assess the correct coverage rates you should check with your local insurance agent or run the numbers on a coverage calculator such as this one.

The bottom line is do your homework and consult with a professional to make sure you have the proper coverage.  Don’t buy insurance and then forget about it.

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