Home Insurance Fire ClaimAs summer slowly phases out and autumn leaves begin to fall, our thoughts turn to the cooler days of winter. With that comes the need for heat, fires in the fireplace, space heaters, fire pits and such. The question is, how are you covered for the possibility of fire damage or total loss?

If your house is totally destroyed in a fire and you have $150,000 worth of insurance to cover the structure, will this be enough to rebuild your home?

If the cost of rebuilding your home is equal to or less than $150,000 you would have enough coverage. The Homeowners-3 (HO-3) policy, the most common homeowners policy in the United States pays for structural damage on a replacement cost basis. If the cost of replacing your home is, say, $120,000, then that is all the insurance you need. On the other hand if the cost of rebuilding your home is $180,000, then you will be short $30,000.

If you live in an area that is frequently hit by major storms, ask your insurance agent about an extended or guaranteed replacement cost policy. This will provide a certain amount over the policy limit to rebuild your home so that if building costs go up unexpectedly, due to high demand for contractors and materials, you will have extra funds to cover the bill.

If you choose not to rebuild your home, you will receive the replacement cost of your home, less depreciation. This is called actual cash value. You should make sure that the amount of insurance you have will cover the cost of rebuilding your house. You can find out what this cost is by talking to your real estate agent or builders in your area.

Do not use the price of your house as the basis for the amount of insurance you purchase. The market price of your house includes the value of the land on which the house is situated. In almost all cases, the land will still be there after a disaster, so you do not need to insure it. You only need to insure the structure.