Residential Insurance Home-Renters

Residential Insurance: Homeowners and Renters 14 What LimitsShould I Set onMyPolicy? The “dwelling” limit should be the amount it would cost to replace your home. This may have nothing to do with the purchase price or the current market value of your home, as homeowners insurance does not generally cover the value of the land upon which your dwelling sits. Therefore, when determining the appropriate amount of coverage to purchase, you should consider the cost of labor and materials necessary to rebuild the dwelling, not fluctuations in the real estate market. Insurance companies have formulas that they use to evaluate the replacement cost of your home. Since the formulas developed are unique for each company, different insurers may suggest or require different limits of coverage for your dwelling limit. If the insurer or broker-agent communicates an estimate of replacement cost to an applicant or insured in connection with an application or for renewal of a homeowners insurance policy that provides coverage on a replacement cost basis, a copy of this estimate must be provided to the insured or applicant that agrees to purchase coverage. The following information can assist you in determining if the limit set or suggested by your company accurately reflects the price it would cost to rebuild your home in the event of a total loss: • Contact your agent or broker for assistance in evaluating your dwelling limit. In order to prevent a “he said, she said” situation from arising in the future, you should document your discussions and inquiries in writing. • Review your dwelling limit initially and upon renewal. Discuss any modifications to your home, in writing, with your agent, broker, or insurer that may cause the replacement cost of your dwelling limit to increase or decrease. • Know the replacement cost of your home. Be familiar with the building materials that make up your home including the construction type and any special features.