This regularly-scheduled sponsored Q&A column is written by Val Sotillo, Northern Virginia-based Realtor and Falls Church resident.
Question: My mortgage lender told me a homeowner’s policy was the last thing needed to fully approve our home loan. I want to shop around and make sure I get the coverage I need. What should I know before deciding on a home insurance policy?
Answer: It’s important to understand the basics of homeowners insurance so you can purchase a policy that meets your needs. It primarily covers your home and the stuff inside of it in the event of theft or some disasters (fire, windstorm, hail, lightning, smoke, explosion, theft, vandalism, riot and vehicle collision).
If your house is destroyed by a covered peril, a standard homeowner’s policy will go a long way toward repairing or rebuilding your home.
I’m not an insurance expert, so I talked to Matt Deadrick, with DDM Insurance, and he provided great insight that will help you understand basic insurance coverage and choose additional coverage that will fit your needs.
Dwelling Replacement Cost Coverage On Your Homeowners Policy
The value of your home may vary and this may cause concerns when you think about the amount of insurance you carry on your homeowner’s policy and whether it’s enough or too much. But the bottom line is that what your home can be rebuilt for versus what you can sell it for are two completely different things.
With Market Value, location, school district, distance to shopping and public transportation, etc. go into the calculations.
With Dwelling Replacement Cost, a completely different set of parameters is taken into account. The location is much less of a factor than the square footage of the house. The construction of your home and its features are what count.
When a new application is taken, your agent should ask questions about your home and it’s features such as square footage, age, number of rooms, if there is a finished basement, etc. This will be used to calculate an estimate of what your home can be rebuilt for, and determine the “Dwelling Coverage” on your policy.
Because there is no way to know exactly what a house costs to rebuild until it actually has to be rebuilt, it is imperative to include some coverage that takes into account that the “Dwelling Coverage” may need to be increased in the event of a catastrophic loss such as a fire.
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