073: Homeowner’s: Dwelling coverage calculation

We just looked at our homeowner’s policy and found out the amount of our Dwelling coverage.

Let’s say it’s $500,000. But you also know that the value of your home is let’s say $800,000. Why such a difference? The difference is allocated to the land the home is built on.

We also found out that in the cost to rebuild your home in your area runs $350 per square foot and your home is 1,700 square feet.

If you divide $500,000 by $350 (price per square foot to rebuild) you will get 1428 square feet. Now your property is 1,700 square feet. So, it looks like we are a bit short.

It might be time to talk to your insurance company to determine if you need to increase your dwelling coverer.

However, know that there are different options of Dwelling coverage:

  1. Replacement cost coverage- is not the market value of your home, nor is it the tax-assessed value. It is the cost to replace the damaged property, with no reduction for depreciation of the damaged property.

In the example above, if you have 80% of the replacement cost in place and in the total loss occurs, the insurance company will cover the total cost of replacing your home.

  1. Actual cash value - Actual cash value is the cost to replace the damaged property reduced by an allowance for depreciation
  2. Stated Value - a selected value is established by the insured, and this value is the limit of liability.
 
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