Home Insurance in Stratford>Question Details

Carmen Plaja, Home Buyer in Connecticut

When buying home insurance should the dwelling cover the purchase price of the home. We are buying a 1950 cape cod in connecticut.

Asked by Carmen Plaja, Connecticut Fri Mar 12, 2010

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Carmen,

You been given good information below, but there is more to consider:

Most homeowner insurance policies do NOT cover the amount you paid for the home. Rather, they will cover the amount necessary to rebuild/replace your home in the event of fire or other damage.
The purchase price of your home includes the land the home sits on. Your insurance will NOT cover the cost of the land, as the land will not be lost in a fire. Often, but not always, the coverage of the home is lower than a recent purchase price. (Assuming you just purchased the home)

Most insurance companies will send an adjuster out to view the home (either an interior or simply an exterior inspection) and then they determine the replacement/rebuild cost of the structures only.

Of course you will also want to consider policy add-ons, such as personal property coverage, liability coverage, etc.

Speak with a qualified insurance agent for more information and specific details for your own situation.
0 votes Thank Flag Link Fri Mar 12, 2010
The land and foundation don't burn so consider the cost of replacement of the structure when buying insurance. Any detached buildings (garages, etc.) are automatically covered for 10% of your homeowners policy. If you are financing a large portion of the ourchase price, the lender will require you to insure at a minimum of their loan amount.
1 vote Thank Flag Link Wed Mar 31, 2010
Carmen, the bank will require you to insure the amount of the re-building costs that are in your appraisal. Sometimes if you can prove that you are covered for 20% or 25% over the limit in rebuilding, they will allow that as well. The only problem I see is from your point of view, the appraisers often use a per square foot price that is lower than what it will cost you to rebuild. Do you want to take a chance that something happens and you do not have enough money to rebuild?
0 votes Thank Flag Link Wed Mar 31, 2010
It might be wise to include an addendum in any purchase offer that would say something like "conditional upon buyer obtaining necessary hazard insurance." Be sure to get quotes from several insurance companies for hazard insurance on your dwelling. The company will usually look at replacement cost of the dwelling, location and condition of the property before giving a quote for insurance..and they may deny coverage as well. You also may consider or need flood insurance if you are in a flood-prone area.
0 votes Thank Flag Link Fri Mar 12, 2010
As mentioned below the different types of insurance offer varying degrees of protection. If you buy a house and it burns down would you rather be able to see it replaced or just cover your mortgage? Also, make sure the policy covers your belongings. Even then they could depreciate your belongings so that 3 year old $800 couch you bought will give $150 to you if destroyed.
0 votes Thank Flag Link Fri Mar 12, 2010
Carmen
By far the best advice in my opinion has been mentioned by some of the answers already given.... and that is spring for the replacement cost. The dollar difference is not astronomical, especially if you take every precaution recommended by your insurance agent to ensure you receive appropriate credits. I know of all too many cases where people were under insured and regretted their short sightedness. I don't know where you are looking but if you're in the Fairfield county area my broker happens to be an insurance broker also. He would be happy to help you sort out this type of thing. Call the Gabriel Agency at 203 502-5000 and tell him Ted gave you the number.
Good luck.
Web Reference: http://TrustTed.com
0 votes Thank Flag Link Fri Mar 12, 2010
The information was helpful. Thanks everyone.
0 votes Thank Flag Link Fri Mar 12, 2010
Carmen it should not only cover your mortgage but the complete cost of rebuilding if something happens. Make sure they dont discount for age or prorate for age.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Fri Mar 12, 2010
When purchasing insurance for your home there are many options. Three common ones are as follows:

Replacement Cost. Most Expensive. This will cover the cost to rebuild your home today. Labor, material, and some additional coverages like loss of use will give you a home for the cost it takes to build it today.

Actual Cash Value. Less Expensive. This is exactly like replacement cost except they depreciate the value of the home by the age of the home. A home that is 50 years old my get a 25%-50% reduction in coverage in comparison to a replacement cost policy. Think of it like car insurance. A new car that has collision coverage may pay 20k if it is totaled today and will pay lets say 10k if it is totaled in 5 years. The value of the home or car goes down over time. The problem is you cannot rebuild a home today with that amount of coverage and if you decide to rebuild you will have to cover the depreciation just as you would if you totaled an older car and wanted to replace it with a new one.

Market Value. Less Expensive, Becoming much more popular today. Market value is the value of the home if someone were to buy it today. It will not be enough to rebuild your home but would give you what the house is worth on the open market. This is a great option for investment properties because most investors do not want to wait for a home to rebuild and with the high inventory levels will probably buy another home very quickly and move on with the business of renting properties.

I hope this helps.

The Home Insurance Specialists.
http://www.MyLandlordInsurance.com
Web Reference: http://www.getgliga.com
0 votes Thank Flag Link Fri Mar 12, 2010
Your home insurance should be insurance that covers your dwelling and has a replacement cost clause. It could cost much more than what you are buying your home for to replace it due to some unforeseen disaster. Talk to your insurance agent so that they can explain it to you in better detail.
0 votes Thank Flag Link Fri Mar 12, 2010
You should ask an insurance specialist (hopefully your agent). A good agent will advise you of the pros and cons of each of the options, and help you to choose what is best for your specific circumstances. If you don't trust your agent, ask friends and family for their recommendations.
Web Reference: http://www.danrossre.com
0 votes Thank Flag Link Fri Mar 12, 2010
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