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Buy the Right Amount of Homeowner's Insurance for Maximum Comfort

Contrary to popular belief, homeowner's insurance is not a luxury. In reality, it's a necessity if want to own your own home. These days, the home insurance industry is huge. Not just because it protects your belongings against theft or damage but because the best mortgage companies require you to have insurance cover for the overall value of your property.

Whilst it is essential to take out home insurance cover, many buyers don't know how much will prove enough. The fear of not buying enough cover is very real and so are the consequences. In the event of that wild fire taking your precious home not only do you want to be able to rebuild, you do not want to be left paying a mortgage for a home you can’t live in. You’ll also need to replace your belongings, pay for any medical expenses and put a roof over your head.

So many people have absolutely no idea they are underinsured now that construction and labor costs have risen. Those who unwisely choose to take less cover to save money on premiums are risking being homeless with few belongings and heavily in debt if the worst happens. It is true your monthly premiums depend on the cover you require, but there is a false economy in being underinsured just to save the little extra cash. A good policy means you can pick yourself up right away and carry on with life as planned. With a low level policy it could take years or may never happen.

How much should you buy then? Enough to replace the total cost of your house! In other words, you should get enough to build yourself another home of equal value in the same location. Now, the question of how much cover to buy becomes more complicated. The real market price is not the same amount you would need to rebuild a house. So, how does a homeowner calculate the overall replacement cost of this property? You can do it in many ways and even ask experts to come and value your property and assets for you. However, the following two steps may also help you determine a starting point for the replacement cost of your property.

  • Start by taking the square footage of your home. Now, find out about local construction costs, plant hire, materials and labor and multiply the square footage. Some construction companies have their websites updated with these costs, so you can refer to those or work with an independent insurance agent too.
  • Get a second reasonable estimate by using an online calculator. Many online calculators can now help you get a reasonably accurate replacement cost estimate by checking your home's number of rooms and building materials, and among other factors, the square footage.

As mentioned already, you can always work with an independent insurance agent or assessor to ensure you're not underinsured, but many online sites are now available to follow the same process for assessing on a company's behalf. Just be sure to conduct thorough research, be as accurate as you can and use several resources so you can compare results before you decide on the cover you need.

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