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Life is complicated, insurance doesn't have to be.
Read time: 3 min
You’ve invested time, energy and care into your home, and it shows. But if your insurance coverage is still in its starter phase, it may not reflect your home’s true value.
If you’ve done any upgrades to your home, from getting a new roof to installing marble countertops, it might be time to talk to your insurance agent. Your home’s value may have changed, and your policy could need an update.
What is replacement cost value and why is it important?
Replacement cost is the amount it would take to rebuild your home to its pre-loss condition in the event of a total loss, like a tornado or fire. The purpose isn’t to upgrade or improve your home after a loss, but restore it to exactly how it stood before.
For example, if your home is destroyed in a hurricane, replacement cost coverage helps ensure you can rebuild without the financial burden of covering the gap between your policy and today’s construction costs.
Let’s say you have replacement cost coverage on your fixer-upper home. Since you purchased it, you’ve remodeled the kitchen, added a three-season room and upgraded the siding. Life goes on, and you don’t think twice about your coverage until the unthinkable happens and a fire destroys your home. You assume your insurance will cover the rebuild, but here’s the catch: your policy limits still reflect the home’s original, pre-renovation condition. Since your policy wasn’t updated, there may be coverage gaps.
To avoid this type of situation, as you renovate or make upgrades, make sure that you review your policy each time with your agent to see if changes are needed to ensure your policy keeps pace with your home’s current value.
What home upgrades or changes require a policy update?
Let your agent know if you’ve made changes like:
Even if you haven’t made big changes, it’s smart to check in with your agent annually. As property values, construction costs and replacement values fluctuate, regular reviews help ensure you’ve got enough coverage to fully rebuild or repair your home if needed.
Use this checklist to keep track of your home renovations: Home Update & Insurance Review Checklist
Commonly asked questions about replacement cost value
How is replacement cost different than market value?
Replacement cost and market value both help determine the value of your home, but they serve different purposes. Replacement cost is what it would take to rebuild your home from the ground up, like materials, labor and construction, without including the value of the land. Market value is what your home would likely sell for today, including the land and is influenced by things like location, demand and the local housing market. Because of this, market value is often higher than replacement cost, but it’s not what your insurance is based on.
Read more about replacement cost vs market value: A Homeowners Guide to Replacement Cost and Market Value
Does replacement cost cover everything inside my home?
Your policy can include coverage for personal property, but it has limits, especially for high-value items. Things like jewelry, artwork, collectibles or high-end electronics may exceed standard limits and often need extra protection.
How do insurance companies determine my home’s replacement cost?
Auto-Owners independent agents often use a third party tool called a replacement cost estimator. This estimating tool is built into the quoting system and helps predict how much it would cost to rebuild your home based on detailed information. It factors in things like construction style, roof shape, shingle type, square footage and any recent updates or upgrades. When specific details are put into the estimate, the replacement cost will vary based on your home’s unique features and improvements.
The bottom line? Keeping your insurance agent in the loop about updates to your home is one of the simplest ways to make sure your coverage keeps up with your home’s value. Contact your local independent agent today to learn more about your home’s replacement cost.
Disclaimer: This article is not expert advice. The analysis of coverage is in general terms and is superseded in all respects by the Insuring Agreements, Endorsements, Exclusions, Terms and Conditions of the Policy. Some of the coverage mentioned in this material may not be applicable in all states or may have to be modified to conform to applicable state law. Some coverages may have been eliminated or modified since the publishing of this material. Discounts may not be available in all states. Limitations and conditions may apply. Premiums will be based on benefits chosen. Please check with your local Independent Auto-Owners Insurance Agent for details.
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