Homes all across the nation have been decreasing in value – in some areas up to 30% in the past 3 years!
Meanwhile, the cost of labor and construction materials have increased dramatically due to increased global demand for lumber, steel and concrete.
What does this mean for your insurance plan?
With your home likely being one of the biggest assets, you want it adequately protected.
What is adequate protection? Do you insure it for the amount you paid for your home? Do you insure it for the (shrinking) resale value?
The answer is, neither. Think of it this way: Your insurance serves to restore your home to its pre-loss state. That means, if your house burns down, you want a policy that pays the cost to replace your home, taking into consideration any increases in construction costs.
In other words, you want a policy that offers “replacement cost” (as opposed to “actual cash value.”)
Keep in mind that rebuilding after a major loss actually costs more than new construction, because you also have to account for demolition and debris removal expenses. (Think about the cost of your last trip to the dump…)
If building costs continue to rise, it means that your homeowner’s policy should be reviewed regularly to make sure that it’s “limits” still provide adequate protection.
The same is true if you have made substantial additions or improvements to your home. When in doubt, just give our office a call.
FUTURE INSURANCE AGENCY, INC.
(989) 799-8808
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