With the recent increases in home prices, I realized that my home insurance is less than what the replacement cost likely would be. What's the best way to determine the replacement value to cover your home for in today's market?

This probably should get more people's attention.

In Denver a couple of weeks ago and had a discussion with a person who was rebuilding houses from the wildfires there last year. Over and over again the costs to rebuild exceeded the policy limits, sometimes substantially.

If your limits are more than a couple of years old and you are not otherwise covered from the huge increase in construction costs, its time to call your agent.

Ask your agent to look at it.

Probably a good idea to make sure you have "additional/extended replacement cost" on the policy as well.

I just shopped home insurance because my premium jumped so much. The "software" was all over the place for the companies/agents I got quotes from. And these are after I confirmed all their inputs and before the add on "extended coverage" offered.

My current broker didn't do anything and the insurer wanted to renew at 440, no change from prior year. All this to say shop around and get what you think is enough. 440 is no where near enough for me in todays market.

Safeco 497
State Farm 600
Allstate 687
Usaa 585

I have State Farm. If I recall correctly my policy is replacement value plus 20% which I believe is standard.

Texker said:

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I have State Farm. If I recall correctly my policy is replacement value plus 20%.

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Our policy is through Nationwide and it has an escalator in it that covers the increased cost to rebuild our home should it be a total loss. That said, I would strongly recommend having this in your home owners policy. We have some friends that lost their home in a fire (older home with old electrical wiring). They were underinsured by about 50%.

The software agents have access to determine replacement cost values are no better than you using your judgement. They are easily manipulated and relatively inaccurate.

When in doubt increase your coverage and at the very least add on a 25% dwelling extension. This will increase your coverage quite a bit for a minimal cost and not raise your deductibles in the process.

I own an Independent Agency and would be more than happy to give my $.02 on anyone's policy or their coverage amounts.

Matt@Dimitexas.com

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When in doubt increase your coverage and at the very least add on a 25% dwelling extension.

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Our escalator is 50%. Is it overkill? Probably. But the values of houses in Blount County Tennessee are insane. Our home has increased in value way more than 25% over the past year.

ToddyHill said:

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When in doubt increase your coverage and at the very least add on a 25% dwelling extension.

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Our escalator is 50%. Is it overkill? Probably. But the values of houses in Blount County Tennessee are insane. Our home has increased in value way more than 25% over the past year.

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Better to always error on the side of extra coverage instead of not enough.

Also, a reminder that that the market value of your home really has nothing to do with the replacement cost you insure it for. Most of that market value increase is the increase in the value of the land the house sits on, which you don't insure.

Thanks for your input. I was talking to our insurance agent just last week and I was surprised how 'low' the replacement value was compared to our present Zillow estimate. He said the same exact thing you did, that the replacement cost disregards the value of the property.

Obviously the price of real estate is insane. But when I look at the price of 'raw' buildable land I'm blown away. We live in a rural subdivision. The last 'empty' lot, about 2.25 acres, just sold for $350,000. The buyer is from California. Much like what's going on in Texas, people from California are buying properties in East Tennessee at prices they probably consider cheap, but are much higher than what the locals would pay.

Again, thanks for your comments.

Agree with the posters above on checking your amount of coverage for replacement costs. Couple of additional things to consider.

You may want to look at temporary relocation costs while the insurance process works and how long it may take to rebuild. Our policy includes language that they will pay for similar size, level of finish of property. If you have 4 kids and live in a 5,000sf house, you do not want temp living expenses that provide for a 2-bedroom 1,200sf apartment. We also have a similar rider on our car insurance.

These additional coverages are relatively cheap compared to the potential inconvenience during a time of supreme stress in the event of a total loss of your premises.

Independent agent here, reach out and we can look over your policy.

Some clients also don't understand that replacement cost and market cost are not the same thing. Insurance doesn't cover the dirt your house sits on, but you can bet that insurance companies will try and take advantage of certain zip codes where the lot may be worth more than the actual dwelling.

Craig@smithallen.com

fka ftc said:

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This probably should get more people's attention.

In Denver a couple of weeks ago and had a discussion with a person who was rebuilding houses from the wildfires there last year. Over and over again the costs to rebuild exceeded the policy limits, sometimes substantially.

If your limits are more than a couple of years old and you are not otherwise covered from the huge increase in construction costs, its time to call your agent.

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Weird, i'm pretty sure usaa has done this automatically over the years, like I thought they were required to.
Maybe not, but they did for me anyway. it might have to do with escrowing vs paying out of pocket?

CraigSmithAllen said:

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Independent agent here, reach out and we can look over your policy.

Some clients also don't understand that replacement cost and market cost are not the same thing. Insurance doesn't cover the dirt your house sits on, but you can bet that insurance companies will try and take advantage of certain zip codes where the lot may be worth more than the actual dwelling.

Craig@smithallen.com

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When I was quoted by Liberty Mutual is was well below what we paid for the property. I actually tried to get them to up the coverage but they kept reminding me that they don't insure the lot. Which makes sense as the lot is about 1/4 the cost of the home. They said they don't like to over insure due to insurance fraud.

That being said a year later I get a letter from my mortgage company stating that my insurance value is too low and needs to go up. Weird deal that I've never had to deal with.

62strat said:

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fka ftc said:

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This probably should get more people's attention.

In Denver a couple of weeks ago and had a discussion with a person who was rebuilding houses from the wildfires there last year. Over and over again the costs to rebuild exceeded the policy limits, sometimes substantially.

If your limits are more than a couple of years old and you are not otherwise covered from the huge increase in construction costs, its time to call your agent.

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Weird, i'm pretty sure usaa has done this automatically over the years, like I thought they were required to.
Maybe not, but they did for me anyway. it might have to do with escrowing vs paying out of pocket?

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Almost every home company will add a little bit of dwelling coverage to your policy at renewal for inflation, maybe 1-3%. That is not enough though, most people could use 10-20% and sometimes even more than that.

Adding a 25% dwelling extension endorsement is a relatively inexpensive way to give you a boost in coverage and will also not increase your deductibles. I try to add those on almost every policy we issue.

This is common with mortgage companies, at new purchase and renewal. Insurance just needs to send supplemental documentation to them using the software print out of the estimator they used to determine that dwelling coverage. While I would never encourage a client to under insure, a higher dwelling coverage limit doesn't necessarily equal a better policy. The obvious is that it results in higher premiums, but it also results in higher deductibles, particularly for wind/hail because 99% of the time, those are 1%/2% of the dwelling coverage limit. So by increasing the dwelling limit, it also results in increasing the cost of using your insurance. Some carriers are notorious for presenting really high dwelling coverage limits which seems nice, but then clients price themselves out of being able to file claims. It's definitely a balancing act of finding the appropriate amount while not over or under insuring.

I dont know how they can use their estimator as a valid price point. For roofing, that estimator is woefully low. I've done a lot of roofs this year that insurance priced at 22,000 dollars where I walked away with a 34,000 dollar check when I was done. Not a problem for RCV roofing but I have no idea how they do that for the whole house if they cap it. That pricing software is not up to date and generally lags behind market pricing by 6-10 months if not more.

The Silverback said:

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62strat said:

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fka ftc said:

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This probably should get more people's attention.

In Denver a couple of weeks ago and had a discussion with a person who was rebuilding houses from the wildfires there last year. Over and over again the costs to rebuild exceeded the policy limits, sometimes substantially.

If your limits are more than a couple of years old and you are not otherwise covered from the huge increase in construction costs, its time to call your agent.

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Weird, i'm pretty sure usaa has done this automatically over the years, like I thought they were required to.
Maybe not, but they did for me anyway. it might have to do with escrowing vs paying out of pocket?

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Almost every home company will add a little bit of dwelling coverage to your policy at renewal for inflation, maybe 1-3%. That is not enough though, most people could use 10-20% and sometimes even more than that.

Adding a 25% dwelling extension endorsement is a relatively inexpensive way to give you a boost in coverage and will also not increase your deductibles. I try to add those on almost every policy we issue.

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For reference when I bought my (new home), the replacement value was like $300.
Today 9 years later it's mid $500s. Definitely not incremental inflation bumps.