How Much Home Insurance Do I Need?

Your new home purchase may be the largest investment you’ll ever make. When protecting your investment with a Texas homeowners insurance quote, how do you decide your home’s value?

There are three common calculations that determine the value of your home; Reconstruction Cost, Market Value, and the county appraisal.

Reconstruction Cost is the cost to rebuild your home, ground up, with today’s cost of materials, labor expenses, revised city ordinances, navigating grown mature landscape, and debris removal. The insurable value of your home should be based on the cost rebuild after a natural disaster or total loss considering all of these factors.

When you call Britton & Britton Insurance for a homeowners quote, your personal agent will help you create a reconstruction cost estimate. By discussing your home’s unique features, square footage, improvements, and other renovations, your local insurance agent they can help you estimate a minimum amount of insurance for your home.

Of course, a professional home appraiser will help you calculate a more exact figure with an onsite evaluation. If you are buying a new home or refinancing, a professional appraisal is often included in the transaction. After the appraisal is complete, simply send your independent insurance agent a copy of the report when requesting your home insurance quote. Ultimately, it is up to you to decide how much coverage is appropriate for your home.

Market value is the amount you would pay to purchase a home, including the land.

The market value of the home is based on several items such as; the architect, quality of materials, the popularity of your neighborhood, and value of the land. Some sites such as Zillow, Trulia and Redfin assess home values, however online estimates are really just a good guess. This figure is different from the reconstruction cost, and the market valuation is best left to your local real estate professional.
County Appraisal District The county will calculate a value for taxes generally based on similar properties in the area and land value over several years. This figure may, or may not, be in sync with Reconstruction Cost or today’s Market Value.

What if the cost of reconstruction increases after I start my policy? Good question. Several factors can cause fluctuation in the cost to repair or replace your home.

After a major storm or natural disaster, building materials and laborers are in greater demand. This can increase rebuilding costs above your homeowners insurance limits. Other factors such as the economy, inflation, oil prices, renovations, and the overall availability of material in your local area can also impact the reconstruction cost.

Some insurance companies have the option to increase the insured value of your home by adding an endorsement for Replacement Cost coverage. There is also an available endorsement for Extended Dwelling coverage. This option adds 25% or 50% coverage on top of the 100% reconstruction cost estimate, for a new total of 125% or 150% of home insurance coverage. One of these options may already be included on your existing policy – ask your independent insurance agent to review and update your coverage options.
It’s a good idea to keep your agent informed about home renovations that may adjust the reconstruction cost or insurability. See our previous blog post.

Do I need insurance after my mortgage is paid off? Most often your bank or mortgage company requires you have insurance in place as a condition of your loan. Justin Hubbert with Park Place Financial says “Lenders require insurance to protect both the bank, and you the client, in case of a catastrophic events… Without insurance, the value of the property would be in jeopardy.” Even if you pay off your mortgage, insurance will continue to guard your investment.

What if I have a condo? Click here for more information on condo insurance.

Your condo and homeowners insurance company is designed to help protect you in the event of a natural weather disaster such as a hurricane, tropical system, tornado, hail storm, lightning, wildfire, and other covered perils. You can even request a separate policy to cover earthquake, flood insurance and umbrella liability.