Home value is different from replacement cost

Home insurance covers how much it would cost to rebuild the home, while the value of a property generally includes intangible things, such as the land and the quality of the school district, says Mike Walsh, a State Farm agent in Bellmore.

Insurance companies use a tool that estimates only how much it would cost to rebuild the home, Walsh says. For example, if you buy a home for $500,000, it might cost $400,000 to replace, he says. So, he says, you do not need $500,000 in insurance — and higher premiums — if the bank asks for it. “Some banks will push you to insure it for the value,” Walsh says. “Many times, I have to fight with the bank on my customers’ behalf.”

Homeowners can also consider a replacement cost guarantee, which provides up to an additional 25 percent of insurance coverage in case there was something that was missed and the replacement cost is more than the homeowner is insured for, says Bob Platin, the owner of Supreme Agency in Holbrook.

Consider bundling

Bundling is not just for cable TV, internet and phone, and most insurance companies will give you a better deal if you take out both home and auto insurance policies with them.

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