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Homeowner's Insurance

Should the limits on a homeowners insurance policy be at least equal to the fair market value of the home being insured?

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2005-11-20 02:54:42
2005-11-20 02:54:42

The dwelling coverage (coverage A) should equal the amount necessary to rebuild your house. Market value has nothing to do with it. However, if your house can be rebuilt for say, $150,000 and you have a $200,000 mortgage your mortgage company may require additional coverage beyond the estimated replacement cost. Remember the market value of your house also includes the dirt it sits on. There is no need to include the value of your dirt in the insurance policy unless required by the mortgage. Or due to a depressed market there might be a house that is only worth $65,000 on the market but would cost $125,000 to rebuild. This happens a lot in small rural communities.

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