We all know getting a home insurance is important, but still some of us tend to scrimp on this basic aspect of our investment.
When deciding how much insurance you need to cover your home, think replacement cost rather than market value.
Market Value vs. Replacement Cost.
For starters, market value is the selling price of your home, or simply the price you paid for your home. This value goes up or down based on the economy, the supply and demand for homes in your neighbourhood, local employment levels and other factors.
Replacement cost, on the other hand, is the amount it would take to rebuild your home at the same spot, of the same size, and same construction standards, at today's prices.
Two homes may differ in their selling price. For instance, a home in a suburb compared to a home in a depressed neighburhood, but may require the exact same replacement costs. Insurance companies refer to the replacement cost, not on the selling price, when determining how much your insurance should be. After all, if your home suffered a devastating damage or in the event of a total loss, you would want enough insurance to pay the costs of rebuilding your home.
Hard to Get Home Insurance.
Keep in mind that homeowner insurance can be difficult to get particularly if you live in bushfire-prone areas or near-earthquake fault zones. Some older homes can be difficult to insure, and of course, houses built on slopes, particularly if there are landslides in the area, may be a problem.
Be sure your guaranteed replacement cost policy includes documentation that states your new home will be rebuilt and constructed specifically to today's building codes; not to the specifications when the house was first built. In other words, a house that was built in 1950 that cost £5,000 may now cost $125,000 or more to rebuild.
Start with a guaranteed replacement cost insurance policy.
Compare policy costs among several insurance agents.
Consider full replacement cost on personal property insurance.
Review your liability coverage to see if an umbrella policy will give you better protection at lower cost.
There's no doubt our homes are one of the most valuable investments we can ever own. The premium we pay for its proper and full insurance may be expensive but it is always worth it.
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Barbara writes articles and press releases for
http://realestate.ozfreeonline.com - which offers a comprehensive list of office & commercial real estates, homes for rent or sell and an apartment finder to thousands of properties in Australia.
