Q6. How much should I insure my home for?

When buying an insurance policy for your home, you want to insure your home for "replacement cost". Replacement cost is the cost to rebuild your home after a loss. Replacement cost is not the same as market value. You do not include your property value or any improvements not covered by your policy, such as docks or seawalls.

Years ago, most insurance companies offered "guaranteed replacement cost" policies, meaning if you had a total loss, they would replace it, no matter the cost. Today, only a handful of companies offer this type of coverage, and none in our area. In a total loss, insurers write coverage that limits payouts to a set dollar amount, the "replacement cost".

According to Marshall & Swift/Boeckh, a Wisconsin company that tracks rebuilding costs for insurance companies, about 64% of U.S. homes- 45 million- are underinsured. The average shortfall is 27%. So, if your home is insured for $200,000, rebuilding would cost nearly $275,000, leaving you to pay about $75,000.

Properly insuring your home is a balancing act. Underinsure, and you'll be caught short if you have a loss. Overinsure, and you pay higher premiums year after year needlessly.

Here are some things you might consider:

The state of Florida has seen a 20-40% inflation of replacement costs over the past three years, so chances are, if your policy is more than three years old, you may be underinsured. If you are concerned about your coverage amount, call us and make an appointment to come in and talk with us. We can use Marshall & Swift/Boeckh appraisal forms to determine your current replacement cost.

Report any improvements that you have made to your property. These improvements may increase your insurable value.

Opt for the "Ordinance and Law" coverage offered by all Florida homeowner policies. Although you must pay extra for this coverage, it provides coverage to bring your house up to current building code standards if you need to rebuild or repair your home after a loss.