Understand How Much Homeowners Insurance You Need

"I'm Ronnie Brown on behalf of Expert Village I'm here to discuss with you you tip and tidbits on how to buy homeowners insurance. In this clip we're going to discuss how much coverage should one obtain when buying homeowners insurance. There are a couple of schools of thought. It all depends on your lender. Most schools of thought are that you need to cover the loan amount. In my humble opinion I believe you need to cover the rebuild value of that home. Now if that encompasses what the loan amount is for then that's great. If it doesn't the we need to adjust up coverage accordingly. Let me explain. You live in a house that's 2,000 square feet. There's a $150,000 mortgage but to rebuild that house costs $20,000, well the bank or mortgage company wants you to insure it for $150,000 at least but if that house burns down, you can't rebuild that house for $150,000. The bank would be satisfied because they'd get their money but you're out of the house or you're at least $50,000 short on rebuilding your home. That's why it's important to get rebuild value for your home. When you talk to your insurance professional, make sure you ask, "Is this enough to cover the mortgage and the rebuild value of the home"? Now again, that cost will go up every year as the materials go up, cost of labor and so on and so forth. So don't be surprised when you look at your statement year in year out that your homeowner coverage is increasing. And that's just to keep up with inflation of costs to rebuild the home. Another thing is market value. People get confused about insuring a home for the market value versus the repayment value. Your house might have sold for $150,000 but market value might be $175,000. Again, my clients, I advise them to insure the house for the rebuild value. Market value fluctuates so much it goes up and down. For one thing is that, you spent a lot of time picking out that house. You probably want to stay in that house as long as you can so if something were to happen to it you want to make sure that you can rebuild that home back to the same specs that it was prior to the fire or loss that you have incurred."