When your home is destroyed your insurance company may pay the cost of rebuilding it. This cost can be much lower than the actual market value of the house. The opposite can also happen where an insurance company will pay the market value of your house, but the amount would be less than the cost of rebuilding especially when you have an older home or specialty features. Additionally there will be a limit on the amount that you can receive for personal items that were lost. The value that an adjuster may assign to your property may also be inaccurate, outdated or have not taken into account certain property enhancements. This is why it is important to know the difference between replacement cost coverage and stated value.
Replacement cost coverage is when an insurance company assigns a dollar value for your house and what it would take to rebuild or repair it in the event of a disaster. On the other hand, stated value is when you give your insurance company a number which will cover your house and the possessions inside. When you ask for insurance on the value you give, your premium will be higher, possibly by a significant amount. You still want to make sure you read your policy careful for limitations and exclusions from coverage.
If you have an existing insurance policy and feel you need more coverage due to changes in the market, inflation, or added value to your home, ask for a new appraisal at the time of renewal. It's also a good idea to take an inventory of your possessions including pictures and appraisals where applicable so that you know exactly what you have and what the estimated cost of replacement is, especially for jewelry, antiques, artwork, and collections. Also, if you have specialty materials in the construction of your house, make careful note of those and talk to your insurance company to make sure that if your house has to be rebuilt you can have the same type and quality of materials used.
Questions for Your Attorney
- What can I do if I disagree with the valuation of my house by an insurance claims adjuster?
- What are my options if my insurance company doesn't want to pay the cost to restore my home exactly as it was?