How do I calculate the dwelling coverage I need from the information I have?

Question

I have just finished ratifying a contract for a home purchase. Our timeline for getting everything done is fairly tight and I'd like to start getting the homeowner's insurance squared away as soon as possible, especially since I want to shop around for the right mix of a good deal and good service. Getting estimates requires providing an estimate of how much dwelling coverage I will need.

I know our purchase price from the contract as well as the current county assessment. They are fairly close - a few thousand dollars apart. Because I live in a high cost of living area, much of the assessment is the land value. I don't believe my insurance will need to cover that. I have read, however, that it needs to cover demolition and rebuilding, which will likely be more expensive than the assessed structure value.

I already have a rough home inventory for my belongings in my rental, but know I will need to potentially add in things like appliances (my inventory is also only guestimates at value in writing, no pictures...oops).

So how do I calculate this reasonably and quickly. I assume most people don't go out and actually ask builders. I know that some insurance agents will give me that information based on a program with information about the house - should I skip the places that require me to do it for myself or use the quote from the first agent who will give it to me?

Answer 1

This is where an insurance agent is very useful. They will help you choose appropriate coverage, based on local rebuilding costs, the build quality of your house (higher quality or historic/semi-historic construction requires a different type of coverage), etc. They can also help advise you on things like the need for flood insurance, etc.

Local rules can vary, and the local agent will know about them. For example, we found out that my home was in a semi-historic district, which requires using higher-cost materials for reconstruction. Also, our city separately licenses tradespeople, who tend to be unionized and thus more expensive. Had I just picked default coverages, I would have been in a pickle in the event of a loss.

Answer 2

Never take the first quote. Consider what it would really cost to replace the house -- to rebuild and pay for living while you do so (including demolition, etc.) and/or pay off the mortgage and return your equity if it is a financed property. Most insurances will have a limit on how much coverage you can get based on the property value and your goods value estimates. Shop around for a company that will give you a good price but also good customer service and a smooth claims process. They should be solvent (able to pay your claim if, say, a tornado hit the whole neighborhood). And they should cover your reasonable replacement costs. And remember, insurance is about the big losses like fires. Know what you are comfortable self insuring (higher or lower deductibles, optional coverages, etc.) and you will have an easier time getting the coverage you need for the price you want to pay.

Answer 3

You can't compare the different quotes unless they have the same numbers to work with.

The big companies should use similar models to come up with values for the contents. In many cases they will assume some standard values for things like appliances. Yes you have a stove, but unless it is commercial grade they won't care when giving you a quote. If you have very expensive items you may need a rider to cover them.

There is not relationship between the county assessment and the cost to rebuild. The insurance doesn't cover the land.

You have to make sure that all quotes include the same riders: cost to put you in a motel, flood insurance... and the same deductibles.

Your state may have an insurance office that can help answer your question. Here is the one for Virginia.