Blog

An issue we encounter time and time again is that when a homeowner purchases insurance, it is not even close to being enough. Although many big insurance companies have policies and procedures in place that require insurance agents to exercise their judgment and diligence in making sure you have enough insurance should something happen, we find this is rarely done, leaving the homeowner on the hook for hundreds of thousands of dollars they don't have if they wish to rebuild their home following a total loss.

Inside of every insurance policy is a policy limit - that is - the most amount of money your insurance company will owe in the event of a total loss, such as when a fire burns down your home. It is important for consumers to understand that the policy limit is not a substitute for the "Replacement Cost Value" of your home. In today's economy, the costs to rebuild homes from the ground up have increased substantially. The price of lumber, labor, and other materials used to build homes is much more than it used to be. We find that most of our client's do not have enough insurance to rebuild their home from the ground up if they chose to do so following a total loss.

To give you an example, imagine you purchased your home for $400,000 in 2020 . You purchased an insurance policy that insures the home for at least $400,000 that has renewed each year without increase. However, in 2023, the house caught fire and was a total loss. The quote to rebuild the home from the ground up is $500,000. Thus, if you were hoping to rebuild, you would be on the hook for the $100,000 extra that your policy doesn't cover.

Most larger insurance companies offer free replacement cost estimates when purchasing a policy to better assist you in obtaining enough insurance, though many agents do not offer those services unless you ask. When it comes to insurance, the difference between a few hundred dollars a year in premiums could be the difference in hundreds of thousands of dollars later.

If you are looking to purchase a new home or your policy is up for renewal, consider increasing your coverage to account for what it would take to rebuild your home from the ground up in today's economy