Calculate the Proper Amount of Homeowners Insurance and Protect Yourself From Catastrophe

Calculate the Proper Amount of Homeowners Insurance and Protect Yourself From Catastrophe – You have made a very large investment in purchasing your home, so it only makes good sense to make sure that it is not only protected, but for the protection to be adequate in case there should be a catastrophic loss. Most mortgage lenders will require you to provide proof of insurance before they will close a loan.
However, they usually only require proof of insurance and not a particular kind of insurance. In addition, it is left up to the individual states to make a determination on minimum coverage required and the kinds of losses that can be insured. Therefore, any decision that you make on insurance will largely be determined by where you live.
Nonetheless, a home insurance policy can actually cover a dwelling in two ways. There are policies where there will be a price placed on your house in case there is a total loss. The price that will be place on your house is more often than not the fair market value of the home at time of purchase. You can also buy a home insurance policy that will pay you the replacement cost of the house when the loss occurs. The insurance policy will consider how much your house has appreciated from the time it was bought to when the loss occurred.
The first policy is less expensive, but most people would rather pay a bit more so that the full replacement cost of the house will be covered. Imagine living in an area where homes sell for $500,000 when you purchase your insurance policy. Now imagine if homes appreciate to around $700,000 in ten years and a catastrophe occurs. Where are you going to get an extra $200,000 to replace your house?
In any event, in order to determine the amount of insurance that you need, you will have know what the value of your home is, but without including land value and your personal property inside the house. There are things that will come into play in determining the amount of insurance such as whether your home is made with a wooden or brick frame, number of rooms and square footage, among others.
You will then have to inventory your personal property within the house. Go through each room and write down what is in it and how much it is worth. Household Inventory Schedules provided by insurance companies can be quite handy for this task. It will include beds, televisions, refrigerators, beds, tables and an assortment of other items too numerous to mention in a short article.
As you build your personal property inventory, take pictures of each item. In addition, write down purchase dates and include receipts. Whatever you do, do not put it away and forget about it because it needs to be updated whenever you buy anything that will replace something on your list. Place your list and accompanying photographs and receipts in a safe deposit box, if possible. If the unthinkable should occur, you can go and show proof of what was in your house.
Insurance companies will generally go and inspect your home to estimate its replacement cost. However, if you already have a good idea of what the home and its contents are worth, you will also know how much insurance you are going to need. There is no sense in overpaying and it makes much less sense to underpay.