Florida Homeowner Insurance - How much coverage do I need

That’s an exceptional question that you should always ask your insurance agent, “How much coverage do I need?” And the reason that’s extremely important is because, what ends up happening in a lot of cases, people assume that the market value of their home, what they paid for their home, is how much they need to insure it for.

And unfortunately, what you're trying to insure your home for is the cost to repair or replace it if it’s damaged. In 2004, all across the state of Florida, people suffered significant damages from hurricanes, and, as a result, the cost of building materials absolutely skyrocketed.Shortages, too.

Shortages of building materials, and you have no control over that. It’s a completely variable cost. You have no control over it. And what that does is it increases the cost to replace the house that suffered damage. So, for example, a house that you bought 3 years ago could cost significantly more to replace today than you paid for it 3 years ago.

Oh, we heard stories about people that paid $5,000 for a screen enclosure, and now it’s $15,000.

Absolutely, and you hear those stories all the time, and that’s why using the market value as the replacement value-- you have to learn how to separate the two. It’s very difficult to do that because replacement cost is based on so many variable factors, and the way that we always recommend that you determine the replacement cost of your home is to talk to an insurance agent that has up-to-date cost estimation software. 

They have insurance companies that have cost estimation software that will help you determine, hey, what is it gonna cost to get this house back? If I lose this house what is it going to cost me to get this house back today? That’s why this question is extremely important.
How much coverage do I need? Part 2 

One of the big questions people have when they call up and buy homeowner's insurance is, “hey how much coverage do i need?” because it’s a very confusing issue. One of the things, especially if you think about a guy that buys a house on the beach, he’s paying a million dollars. Well, the land was probably $800,000, and the house is $200,000. So, you don’t wanna insure the land and pay premium for the land because it’s not going anywhere. The second thing is, you really wanna make sure you have an accurate replacement value because if you're too low, and in the event of a loss, you're gonna be penalized. And second thing is, if you buy too much, you're gonna be paying more than you should, and you’re raising your hurricanedeductible, and you're gonna pay a lot more out of pocket. So, it’s very important that you do get the right amount.

Absolutely, and it’s extremely important that you check the replacement cost of your home at least annually. Often, it’s important to do that more than annually, and here’s the reason why. Because according to the wall street journal, people in this country love to upgrade their homes. We spent $40-billion in this country upgrading our homes last year. And whether it be that you want to sell the home for more or whether it be because--

Your wife wants to remodel again!

That’s the kitchen that she had to have. Whatever the reason might be, you spend $40-billion upgrading your homes in 2007, that adds a significant cost to the replacement value to the home, because now, you’re replacing those mahogany doors. You’re not getting the fiberglass anymore. Ok? You’re getting back the house that you lost, and the only way to do that is by having adequate coverage at the time of the loss, and that’s why it’s extremely important you meet with your insurance agent, go through the estimation process with them at least once a year, if not more often.