home owners insurance policies
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is there a calculation for determining how much home owners insurance is enough?
I’ve had a policy on my home but I want to make sure I’m not over or under insured. How do you know if it’s enough?
According to Marshall & Swift/Boeckh, a company that monitors property values for the insurance industry, 58% of single-family homes are not insured for the full cost of rebuilding them. On average, these homes are underinsured by 21%.
Many insurance companies offer “extended replacement cost” on their homeowner’s policies. This allows for up to 20% more than the stated coverage to be paid toward replacement costs. Marshall & Swift/Boeckh takes this coverage into account when calculating underinsurance, however, so the insurance gap remains.
To avoid underinsurance, read your policy to see if your policy offers extended replacement cost coverage. If so, find out how much coverage you have. If you have been in your home for a few years and especially if you have made substantial upgrades to it, contact your insurance agent for an analysis of your home’s replacement cost. This could result in increased premiums, but the additional amount you pay will be well worth it.
