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5 Reasons to Increase Replacement Cost Coverage for Your Home

For most, your home is one of the most-valuable assets that you own, and you worked hard to be able to purchase and maintain your house. This safe space offers comfort and holds many memories with your loved ones. Losing a home is always a shocking and devastating event. It’s not something anyone ever expects to happen. No matter how prepared you may be for things like severe weather, disaster can strike at any time. Replacement cost coverage is the safety net that catches you and gets you back on your feet when tragedy strikes. But do you have enough coverage?

According to CoreLogic's Residential Cost Handbook, 64% of homeowners are underinsured by an average of 27%. For a $500,000 house, this means there’s $135,000 missing in coverage. Avoid this situation and be aware of the reasons you may need to increase your coverage.

Five Reasons to Consider Increasing Your Replacement Cost Coverage

1.The Replacement Cost of Your Home Is Likely Different from the Market Value of Your Home

The market value of your home is calculated by your real estate appraisal and the economy. Market value determines the worth of your home and has nothing to do with what it would cost to rebuild your home. Your home’s replacement coverage is the part of your overall home policy that sets the amount it would cost to completely rebuild the house at the current price of construction and labor. This type of homeowners insurance coverage pays you the full amount to repair or replace your damaged or lost possessions, regardless of depreciation. Your agent will work with you to make sure your replacement cost matches the cost to rebuild your home so that you’re covered should the unexpected happens.

2. Home Improvement Projects Need to Be Protected

Things like kitchen remodels, adding on a bathroom and updating spaces are great ways to add value to your home. Your agent can work with you to calculate the added value and determine the appropriate increase in coverage to make sure your investment is covered.

3. Inflation Can Affect the Cost of Repairs

When home reconstruction costs such as labor and materials increase, your coverage needs to account for that. This is why it’s a good idea to re-evaluate your coverage frequently. Your agent can help you evaluate your coverage to make sure you are protected in the event of a total loss on your home. The replacement cost coverage limit on your policy should be equal to your home’s replacement cost, or the amount it would cost to completely rebuild your house at the current price of construction and labor.

4. Other Buildings on Your Property May Require Additional Coverage

If you have additional structures on your property such as unattached garages and storage sheds, you may need to consider adding coverage for those buildings. Additional structures like this on your property may be subject to a modest limit on your core policy, such as $10,000 or perhaps a percentage of the coverage limit on your home. If the value of the other buildings on your property exceeds this amount, you can protect your investment by requesting additional amounts of protection be added to your policy.

5. Additional Peace of Mind

Guaranteed Replacement Cost Coverage pays repair and replacement costs up to 125% of the amount of insurance shown on the policy for your home. This can be useful if, for example, a tornado does extensive damage to your home and due to inflation, the cost of repairs is higher than you anticipated to completely rebuild your home. When catastrophic events hit, there is comfort in knowing you’re prepared.

Coverage When You Need It

Choosing policy options and coverage amounts can feel overwhelming. You want to know your home is protected. Working with a Farm Bureau agent helps take the guesswork out of purchasing the homeowners insurance you need to protect your future. And if you should have a claim, our claims team is ready to help!