How much would it cost to rebuild your home?  Answering that question is the first step in securing the appropriate amount of home insurance.

People sometimes assume that their home insurance coverage should equal the amount they paid for the house or the amount they owe on their mortgage.  This is a common mistake.  Since the purpose of home insurance is to protect you financially in the event of a loss, it is important to make sure you are “insured to value.”

Insured to value means securing coverage equal to your home’s replacement cost --- how much it would take to rebuild it at the same location today with materials of similar kind and quality.  It also takes into consideration items that may be more expensive to replace, such as hardwood floors or granite counter tops.

How Much Is Enough?

The Home Rebuilder Tool, provided by your insurance company, can help you to determine your home’s replacement cost.  After you answer a few simple questions, the Home Rebuilder Tool will estimate how much it will cost to rebuild your home.  You can also visit your local Insurance agent’s office. A licensed representative can answer your questions and help you to complete an evaluation form that will help to determine if you are adequately covered.

Regular Reviews Are Key

It’s very important to review your policy at least once each year to make sure it reflects changes in your home’s replacement costs.  Several factors can influence this, including:

• improvements or additions made to your home
• changes in local building codes or constructions costs
• inflation

This is a three-part series – look for part two in the December 2006 issue of The First Time Home Buyer.

This article was reprinted with permission from Liberty Mutual Group. For more information please call Amy Ortzman at 860-659-4111, ext. 248 or toll free at 800-245-5558, ext. 248.