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Ask Dave

Replacement Costs On Homeowner's Insurance?

What should one look for when shopping for homeowners' insurance?

Question: Eric and his wife are refinancing their home.  What should they look for when shopping for a new homeowners’ insurance policy?

Answer: First, make sure you have your 3-6 month emergency fund.  That will allow you to have a higher deductible and lower premiums on the insurance. 

Secondly, don’t buy a homeowners’ insurance policy that does not have guaranteed replacement costs.  If something happens to your home and you have a policy without guaranteed replacement costs, you will only be covered for the value of your home at the time you took out the policy.  That’s bad news if your house has increased in value.  Pay a slight amount more to get the guaranteed replacement costs.