If you have a homeowners insurance policy, you’re probably confident it will cover all the costs of rebuilding your home if it is damaged or destroyed by a covered peril. But are you satisfied that you have enough coverage? Read about two common scenarios and the low-cost alternatives available to help you relax.
Extended dwelling coverage
Your current homeowner’s insurance may not accurately reflect the cost of rebuilding your property because costs differ from market value. Extended dwelling coverage can help you rebuild if construction costs exceed your policy limits after adding up to more than your existing limit.
To illustrate this concept, consider this real-life scenario. Your home is currently insured for 100% of its replacement cost, with the cost based on the value of your house when the policy was originally written. However, a wildfire sweeps through your area, destroying your home along with hundreds of others nearby. Due to the high demand caused by the natural disaster, construction materials and labor costs increase 20% in your area. So your $200,000 home will now cost $240,000 to rebuild. If you had 20% extended dwelling coverage, you’d get the $240,000. Without it, you get $200,000 and will have to make up the difference out of pocket or settle for less house than you originally had.
You may also consider buying ordinance and law (BOL) insurance in addition to comprehensive house coverage. The cost or liability coverage of BOL, a standard component of most homeowners insurance policies in the United States, covers the expense or responsibility for any damage caused by your home or its contents.
If your property is damaged by a covered loss and must be rebuilt or repaired, you must follow current building codes. And because building codes have gotten more stringent in recent decades, this might result in considerably increased costs to rebuild than you anticipate. That’s when a building ordinance policy, also known as law coverage, comes into play – and it may save
Again, let’s take the example from above and assume you have a $200,000 homeowners policy. With a 10% building ordinance policy, you would get an extra $20,000 to apply to the new building code requirements you must meet. Without this policy option, you’ll have to pay the difference to bring your house up to code.
Extended dwelling and construction ordinance rules provide significant protection from gaps in coverage in the case of an unforeseen covered occurrence, all for a low yearly price. Contact your Atkinson Isnruancr Group agent to learn more about how you can better understand your risks and avoid a catastrophe that may exceed your insurance limits.