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Rebuilding Costs: Rethinking How Much Homeowners Insurance You Really Need

May 10, 2023 by Clean N Dry Today

Rebuilding Costs Rethinking How Much Homeowners Insurance You Really NeedBuying a home comes with numerous financial planning obligations. It’s far from a turn-key operation and one of the significant challenges involves developing a working knowledge about things often outside your area of expertise.

For example, working as an educator, police officer, investment banker or office staffer does not necessarily make you an expert about home repairs or insurance coverage. Yet, the average homeowner is tasked with carrying a certain level of homeowners insurance coverage without a strong working knowledge.

Many homeowners just purchase enough insurance to cover the purchase price or take the advice of others. Both of those methods could prove wildly deficient.

Rethinking Total Replacement Costs

A distinct difference exists between a home’s purchase price, assessed value and total replacement costs. Let that idea sink in a minute. What you paid for your home and its assessed value have zero to do with what it would cost to rebuild in the event of a total loss!

If you based your homeowners coverage on purchase price or estimated value, the word that comes to mind is: “Yikes.” Here’s why.

Construction costs are based on prevailing market prices that include building materials and labor costs. These vary from region to region and can peak due to materials shortages and shifting prevailing wages. National home-building averages run anywhere from $117 to $125 per square foot. But, even as you read this article, that could change.

Beyond the fundamentals of calculating home construction costs on a square-foot basis, consider that rebuilding your home means that some type of catastrophe occurred. Whether that was a hurricane, tornado, flooding, fire or another disaster, there will likely be cleanup costs.

Before starting new construction, the damaged property will likely need to be razed and damaged materials removed. That comes at a cost.

Building permits and licenses will come at an additional cost. An architectural blueprint and design may need to be secured and that also comes at a cost. The permitting process can be challenging and that could result in you having to rent a temporary residence while your home is rebuilt. Obviously, there are plenty of unforeseen expenses.

Specialty Building Costs

Although average building costs per square foot are a viable standard measure, many homes enjoy specialty items.

Consider that you own a home built decades ago. The high-quality building materials used in construction may be considered specialty items today. They may inevitably be far more expensive than common building materials. If you want the home fully restored, that could cost more than the estimated average.

Accents such as rounded archways or plank-board floors are also more expensive to replace than many average materials. Those are all considerations that need to be tallied when insuring a home.

How To Recalculate Homeowners Insurance

Take the time to calculate the square footage of your home against average construction costs in your area. Factor in specialty items, permitting, razing and other potential hidden costs. Add 10-20 percent. According to some insurance experts, the average home is underinsured by upwards of 22 percent. After the carrier has paid out the coverage limit, overages could become out-of-pocket expenses.

Don’t hesitate to consult with a reputable home builder or insurance expert. Full coverage means accurately accounting for all of the rebuilding costs. 

Filed Under: Real Estate Tagged With: Homeowner's Insurance, Real Estate, Rebuilding costs

4 Tips To Lower Homeowners Insurance For Your Home

May 28, 2014 by Clean N Dry Today

4 Tips To Lower Homeowners Insurance For Your HomeWith the prices for everything skyrocketing these days, every penny counts. This includes your homeowner’s insurance costs. If you’re thinking of buying a home and need homeowner’s insurance, here are a few tips on getting quality insurance for a fair price:

Tip #1: Shop Around

Ask family and friends about their homeowner’s insurance. Check the Yellow Pages, the National Association of Insurance Commissioners (NAIC) and the state insurance department. 

Other places to shop for insurance include consumer guides, insurance agents and online insurance quote services. Don’t just look for lower prices, however. You need a fair price for the services you need.

Tip #2: Raise Your Deductible

The deductible is how much you have to pay before the insurance company starts to pay a claim on your home. The higher the deductible, the lower the premiums.  If you live in a disaster-prone area, your policy may have a separate deductible for specific types of damages. 

Make sure, when reading the policy, you carefully go over damage-specific information.

Tip #3: Use The Same Insurer

Some companies will take five to fifteen percent off your premium if you buy more than one policy from them. If the insurer offers homeowner’s, auto and liability coverage, you stand a chance of having a lower premium than if they only offer one or the other. 

The key is to make sure that the combined price is lower than if you bought them separately.

Tip #4: Improve Home Security

By installing a sophisticated fire sprinkler system and a fire/burglar alarm that rings the monitoring stations, some companies will cut your premium as much as fifteen or twenty percent. 

For a smoke detector, burglar alarm or deadbolt locks, you can usually get at least a five percent discount. Check with your insurer to make sure that the system you’re installing will lower your premiums, though; the systems aren’t cheap and not all of them qualify for a discount.

Read everything carefully before you sign, to make sure the policy covers your insurance needs without adding on hidden fees. Even a little money saved can go a long way toward making it easier to live within your budget. 

Ready to buy a home? Let me help you find the perfect home and get it at the best terms and price. 

Filed Under: Uncategorized Tagged With: Homeowner Tips, Homeowner's Insurance, National Association of Insurance Commissioners

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