Replacement Cost Homeowners Insurance
The term replacement cost comes in to play mostly in two parts of homeowners insurance.
1. Structure - Usually the replacement cost on a structure refers to the dwelling but could possibly be about other structures as well. When considering what amount of coverage you will need on your house, a good agent must take into consideration what it would cost to rebuild your house. This is the amount that is needed to completely rebuild from the ground up after a total loss such as fire or tornado. It includes removing what is left of the old structure, preparing the sight and then rebuilding the entire structure. If a mistake has been made or you choose not to have the house insured to replacement value, you may suffer great financial setback when a loss occurs that results in a reduction of your loss settlement due to the penalty applied in this type of situation (Coinsurance Penalty.)
2. Contents - From furniture to appliances to socks and shoes, when you think about all the things your house contains and how much it would cost to replace each item new at the store, you will start to understand the importance of replacement cost. Most people never consider how much stuff they have in their homes but if you ask someone who has had a house fire, they can tell you it is a lot and that you want to make sure that you are property insured. It is never a convenient time to have an insurance claim. More than that, no matter how good of a bargain shopper you are, not all your contents will be on sale at the exact same time when you need to replace them all due to a claim. If you don’t have replacement cost for contents coverage on your homeowners insurance policy you will be forced to depreciate (reduce) the cost of each content item by an amount relative to its age. Imagine this reduction on every item in your house all at once. This is why replacement cost on contents is essential in our opinion.
Your home is most likely your biggest asset, protect it correctly. Make sure you see a professional independent insurance agent to help you get the correct coverage for you and your family.
Even if we are not your agent you can contact us by email or at 937-962-2123 to set up a free consultation about your homeowners insurance.
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