Did you know that two out of every three homes in America are underinsured according to Nationwide Insurance? One of the largest mistakes homeowners make is under insuring their homes because they use the wrong reference points to determine their insured value needs.
People are often surprised by the differences between the market value, tax value and the reconstruction cost of their home. Determining the reconstruction cost (insured value) is the most important and sometimes the most misunderstood aspect of selecting the amount of your coverage for your homeowners insurance policy.
The reconstruction cost is the amount it would cost to rebuild your home as it was originally built, using materials that are similar in quality. Dwelling value does not take into consideration the cost of the land, because the land will likely not disappear in the event of a covered loss.
To determine the level of coverage needed, you first start with the building or dwelling reconstruction cost. Any additional living expenses, additional structures, debris removal and the contents of your home that you would like to insure would be in addition to the reconstruction cost.
To ensure your home is not underinsured, provide all of the relevant information to determine the proper reconstruction value of your home to an experienced property and casualty insurance representative, agent or broker and get their help in determining the appropriate value to insure.