What First-Time Homebuyers Need in Terms of Insurance Coverage
Joe Polyak May 17, 2019
Joe Polyak May 17, 2019
I’m back once again with Roger Heighton for part four of our insurance and real estate series. Today we’re going to focus on how much insurance coverage first-time homebuyers need.
As an example, let’s say you’re in the process of purchasing your first home for the average sale price here in San Mateo County—roughly $1.7 million.
First, you need to remember that the purchase price of a home (or what it would sell for) has nothing to do with what it costs to insure it. Most of a home’s purchase price is predicated on its location, and insurance companies don’t want to insure the land—they want to insure what it would cost to rebuild the home.
So, if you want to know how much coverage you need, you need to ask yourself how much it would cost to rebuild the home. Most insurance agents use digital cost calculators that use a home’s basic information (square footage, the number of kitchens and bathrooms, etc.) to come up with an estimated rebuild cost.
At the end of the day, it’s your responsibility to make sure your home is insured properly.
In the insurance world, this gives agents what’s called “coverage A” (also known as dwelling coverage)—that’s the amount you want to insure the home for. Keep in mind, though, that the insurance company is only providing an estimate. That estimate is the number you want to compare when you’re shopping insurance policies, and at the end of the day, it’s your responsibility to make sure your home is insured properly.
There are other factors that come into play when insuring a home, including building ordinances and extended replacement costs, so we’ll talk about that in our next video.
In the meantime, if you have any questions for Roger about the insurance process or would like to work with him, give him a call at (650) 692-1484 or send an email to [email protected].
If you have any other real estate-related questions, don’t hesitate to give me a call or send me an email. I would love to hear from you.
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