Unfortunately, the only time most of us find this out is when a fire or some other event occurs that makes us pull out that insurance policy or you speak to your insurance agent and discover your policy didn’t “cover that”. Ugh!
How to be sure you are up-to-date on your policy and know what is and is not covered? Review your policy with your agent and asks all of your questions.
When the time comes to renew or purchase your homeowners policy, keep in mind the numbers count. The most important question is “How much will it cost to rebuild my home? The best way to answer that question? Get on the phone and call a few local builders and ask for the price of construction per square foot. Once you have that number ask your current insurance holder about it or if you don’t like what they’re saying, shop around until you find the best policy.
Don’t let the terms Guaranteed Replacement Coverage, Replacement Coverage, Modified Replacement Coverage, Luxury Home Policies, Building Code Upgrade Insurance or Inflation Guard Endorsements throw you. They mean very little and something is usually lacking. For example, Guaranteed Replacement Coverage may be the best policy, however, many insurance companies are reluctant to issue and fulfill these type of policies because of the constant increase in cost. That’s why you have to consider cost from the outset and the professional input of a builder will help. It is all about the numbers — so begin with the numbers.
Don’t forget to review your policy regularly because numbers will change and you need to stay on top of your numbers. You won’t want to find out that your policy will not “cover that”.
Source: Leslie Jay, Ladies Home Journal -Money Matters- May 2005