How much insurance do I need for my home?

How much insurance do I need for my home?

Generally, there are 3 options available:

Guaranteed Replacement Cost:

If you have a loss, you will be covered for the full cost of replacing damaged property, with no deduction for depreciation and no dollar limit. Guaranteed Replacement Cost is not available in all states, and most companies limit the coverage to 120 percent of the cost to rebuild your home. If there are increased construction costs, you will be protected with this type of coverage.

Replacement Cost:

If you choose replacement cost coverage, it will pay for you to replace damaged property without factoring in deductions for depreciation, but payment will be limited to a maximum dollar amount.  Note that in some cases, you will be paid the full replacement cost in two (2) payments; first, you will be paid the actual cash value (see below) and then once the work has been done and the full cost has been incurred, you will receive the depreciation amount.

Actual Cash Value:

Depreciation plays a role in this type of coverage.  Actual cash value will pay for the cost to replace damaged property while factoring in depreciation amounts. For homeowners insurance policies, Actual Cash Value applies unless a policy states that Replacement Cost or Guaranteed Replacement Cost has been chosen.

What would it cost to rebuild your home? 


Local building costs per square foot x total square footage of your home = cost to rebuild your home.

(Check with a real estate agency or your local business association for building cost estimates in your area).

By Craig Bruno

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