Get an Accurate Assessment of Your House's Value

An insurance agent can help you determine the amount of coverage you need, but be wary if the agent simply assesses the value of your home using a formula based on square footage and number of rooms. That's not precise enough. Replacement costs vary widely depending on where the house is located and the materials used in construction. For example, the average cost of building a house in most parts of Alabama is about $65 a square foot, while in southern California it can run as high as $150 a square foot. A custom-built home with top-of-the-line materials can cost $200 to $400 a square foot to replace, because plaster walls and hardwood floors are much more expensive than drywall and carpeting.

To make the most accurate appraisal, an agent must thoroughly inspect the house and the neighborhood, and plug the information into home-valuation software that crunches the data against regional variations in labor and materials costs. Remember that the final figure will likely be less than the resale value of the house, because the land the dwelling sits on is not insured. To double-check your agent's assessment, you can get an independent evaluation by an appraiser, who usually charges between $200 and $300 for this service. A less expensive alternative is to ask a local contractor to provide an estimate of what it would cost to rebuild your home.

MSB has developed an online tool that helps homeowners combat underinsurance by allowing them to calculate the current replacement cost of their homes. A report is then generated that details the estimated value of a home using information provided by users and the same reconstruction cost data used by the insurance industry.

If after a thorough assessment you have to ratchet up the insured value of your home, expect premiums to rise between $3 and $5 for each $1,000 increase in coverage.

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