One of the top questions we get from our Vermont home insurance clients is: "How do I know my home's replacement cost?" Here's why it's important and how we figure it out:
When it comes to insuring your home (or building) the replacement cost value is one of the most important pieces to consider. Insuring at the right value means that in the event of a loss there will be enough coverage to rebuild a structure in like, kind, and quality as well as make sure there are some funds available for debris removal. That's the ultimate goal with insurance... We want to put you back into the situation you were before the loss.
Typically one of the first question clients ask us is: "Is replacement cost the same as what I paid for the house?" No, not necessarily. Often times they can be close but Market Value can vary from replacement cost due to location and building size. An easy example to think of is a small camp on a lake front property. A significant amount of the Market value of the property is the value of being on the lake. With insurance we are looking at the cost to rebuild the building with new materials and we don't want to factor in the land value.
Another example: That great old Victorian home bought with a lot of unique features that was bought at a bargain price. The reality is that the custom work that gives that home it's unique feel is going to cost more to rebuild. Most of the time those unique features are the selling factors for homes like that and our clients would like to replace them if there was a loss.
So how do we determine a homes replacement cost? At our agency we utilize replacement cost estimators provided by various insurance carriers. We gather details on the home from each client on things like: Number of bathrooms, home finishing, construction quality, and unique features. We combine that with external measurements to verify square footage (when needed), home pictures, as well as appraisal info when it's available.
While at the end of the day a replacement cost estimate is only that, an estimate, we feel by taking the time to gather the needed info and putting one together our clients can be confident they are accurately insured.
If you're interested in having us review your home insurance, enter your info into our online quote tool linked below. We'll follow up and run you through our standard home insurance review process.