My Home is Insured for what I think is to much. Why?

You get your Home Insurance renewal notice and you are astounded at the amount of coverage the insurance company has on your home.

Let's break this down. The first line you see is "Dwelling Coverage". This is the amount of insurance you have on your home. Depending on the type of insurance policy you have this figure will be the "Reconstruction Amount". Reconstruction amount is what it would cost to Rebuild your home if it was ever destroyed. Today insurance companies want your home to be insured to the Reconstruction Amount. You ask "Why so much because I can't get that amount of money if I was trying to sell it?"

Again this is the Reconstruction Amount. If you were to sell your home that value is the "Market Value Amount". Two very different figures. Why? Because the insurance company doesn't give you the Market Value of your home if it's destroyed. They give you what it costs to Reconstruct your home amount. If your home is lying in a pile of ruble what is the market value then? Nothing! But since your home was insured to Reconstruction Value then you can rebuild your home with the money your insurance company insures you to.

So depending on the Economy, if it's a poor economy then your market value of your home may be quite a difference between the Reconstruction Value. But be careful in good economy times because if your market value is higher than your Reconstruction value then that means prices are high. That means that costs to rebuild your home if it's destroyed have gone up. If you get your home insurance renewal and the coverage for your home hasn't increase for a few years then call your agent and make sure you are insured to the Reconstruction Value of your home. You don't want to be $30,000 or so short when it comes time to rebuild your home after a fire.