Our Blog‎ > ‎

What amount of home insurance do I need? | Michigan home insurance

posted Oct 29, 2015, 7:21 AM by Jason Grubbs   [ updated Mar 21, 2017, 3:13 PM ]
If your home had burned to the ground yesterday how much would your insurance pay?
There are two values taken into consideration when insuring a home: the market value and the replacement value.

The market value is the selling price of a home.  It's all about how much someone will pay for a home and takes into consideration factors including the supply and demand for homes in your area, the condition of the home, and the general state of the economy.

Replacement value is the amount of dollars it would cost to rebuild a home, regardless of age and condition.

The purpose of insurance is to restore you to where you were before a loss occurred.  With home insurance this generally means, whenever possible, your policy is designed to provide adequate coverage to rebuild your home using like kind and quality materials.

Most people wouldn't be satisfied with the outcome if their home was destroyed and their insurance company simply handed them a sum of money and effectively said: "Good luck finding a similar home at this price in your local community."

Your insurance agent will ask questions about the square footage and features of your home to enable them to calculate the cost to rebuild.  Whenever replacement cost protection is available this is the level of coverage you should purchase.

There are instances depending on the age, condition of the home, and the percentage difference between the market value and the cost to rebuild when a home may not qualify for replacement coverage.  In this case your best option may be limited to a market value or repair cost home insurance policy.

Once you purchase a replacement cost policy the insurance company will increase your coverage annually based on overall construction cost changes in your area.  You should inform your agent of any additions to your home or renovations that would affect the cost to rebuild, so they can make any necessary adjustments to your coverage.

Comments