Like this article? Find more great tips by subscribing to my blog here.
A common misconception regarding homeowner insurance is that the dwelling coverage should reflect the market or tax-assessed value of the home.
Click here to see my detailed guide to home insurance.
In a depressed real estate market, the dwelling coverage can be the same or even higher than the market value. However, in a red-hot real estate market like Austin, Texas, the dwelling coverage is usually less than the market value or loan amount, as buyers are paying more for an existing home than the cost to build.
Market value includes the value of the home and the land, whereas the dwelling coverage on a homeowner policy does not include the land or dirt that the house is built upon. If there is a loss, the responsibility of an insurance company is to restore the structure of the home to the condition prior to the loss, whether by fire, water, hail, or other peril covered by the homeowner policy.
Related article: Protecting Your Roof From Hail Damage
Sometimes older homes have architectural details and other features that are not reflected in the market value.
It is important for homeowners to inform their insurance company about the specific features of their home, especially when the insurance is initially secured and after any renovations are made.
Requesting a Homeowner Insurance Quote
When requesting a quote, homeowners should not assume the dwelling coverage will be the same from one insurance company to another, nor should they assume that an insurance company has the correct dwelling coverage listed on their policy. It is the responsibility of the homeowner to ensure the dwelling coverage is correct on their policy.
Related article: 3 Factors That Increase Home Insurance Rates
People tend to compare apples to apples, and often request a quote for a certain dwelling coverage amount. However, a good insurance agent will not try to match coverages, but instead will ask for the details of the home before providing a quote, in order to calculate the correct dwelling coverage and replacement cost.
In addition to insuring the home structure, insurance companies may cover other structures, such as:
- detached garage
Usually the coverage for other structures is 10% of the dwelling coverage, but this amount can be increased.
Homeowners should review the dwelling coverage on their homeowner policies annually to ensure their home is adequately insured and protected in the event of a total loss. Click here to see my detailed guide to home insurance.