When it comes to purchasing a homeowners policy consumers must realize that the current market value of their home and the replacement cost on the dwelling are not the same. The market value of a home may decline or rise depending on a variety of factors (primarily market conditions), whereas the cost to rebuild a home changes as the cost and availability of materials and labor change. A decline or increase in a market value does not necessarily affect the availability or cost of building materials or labor. The insurance coverage on your homeowner’s policy is based upon the cost to rebuild your home not the market value of the property. Since most home insurance policies contain a replacement cost endorsement the insurance carrier will require that the home is insured at the correct replacement value.
If your home is not properly insured, you may run the risk of not having enough coverage to replace it with one of similar size and quality in the event of a total loss. The cost to rebuild can vary, depending on the zip code, type of construction, square footage, and quality of materials, type of roof, and whether the home was custom built or a basic tract house.
It is important to talk to your insurance agent periodically about the replacement cost on your home, especially if you have made any improvements or additions to your house since you last discussed the policy with your San Diego Home Insurance agent.
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