How much do you insure your house for?

Posted on December 22nd, 2015

This may seem like a silly question for some, but many people do not have the proper amount of Homeowners insurance. They believe that when they only owe $100,000 in mortgage then that is the amount to be covering. It makes sense because it’ll cover the cost of their mortgage, but where does that leave you as the owner? What do you walk away with?

Nothing.

That is right. If you insure your home for the amount you owe the bank, then you will walk away with nothing. The insurance will cover up to the amount you insured on the home which you will hand straight to the bank. If you are lucky in the case of a fire, you’ll have a partially standing building, but not one that would be safe enough to live in.

To give an example, you have the brand new 32g IPhone 6s with Retina display, 4K videos shooting abilities, and a 12-megapixel camera. You love it, and you become quite attached to it. One day you drop it, and the screen shatters. “No big deal!” You think, “I’ll just use my warranty and have apple replace it.”

You go to the apple store and tell them what happens. They smile and assure you to not worry because it has been covered. They walk into the back of the store only to return with the original IPhone. It only stores 8g, 320×480 pixel display, 2 megapixel camera, and no where close to 4K videos. Oh, and forget the front face cameras because no one even had thought of the selfie yet.

You question why you did not get the IPhone 6s. He says that was all you paid for since you only paid for partial coverage instead of the full coverage on the phone. This was all your policy covered for. Not quite what you were expecting, right?

How much do you Insure it for?

While a phone is not quite the same value as your house, you can understand why this would be frustrating after the fact. If you would not want to have this happen with your phone, why would you with your house?

So how do you avoid getting IPhone (Walking away with nothing) instead of your Iphone 6s (Your house)?

Do not under insure your house. If it is worth $200,000, Insure it for at least $200,000. The insurance should be able to compensate the cost of the repairs and possessions inside. That means you should have more than just the market value of your house.

protect your home

If you are looking to buy your house, you can ask to see if the realtor has an estimated replacement cost. If you are not looking to buy or they did not have an estimate, you can ask a building contractor or an appraiser. Not every building contractor will be able to appraise the house, so finding an appraiser to tell you the replacement costs is definitely the easier and quicker option to go with.

Don’t wait too long to find out your estimated replacement cost as that determines what you should insure your house for.

While you are figuring out the appraisal make sure you know exactly what your homeowners insurance covers and does not cover. This will help you know if something happens what all is covered. You do not want to Insure something for a high price and then it not be covered by the cost. You see it a lot with phones as well. You buy the warranty, but it does not cover your screen shattering because that was of your own doing. Not a good situation again. So when thinking about investing the money to insure your house, figure out what your homeowners insurance really covers and set up the plan you want.