If you had to create an exact replica of your home today, do you know how much it would cost? Perhaps you built your home several years ago and property values have doubled in your area. No doubt the prices of labor and materials have increased since the original purchase. If you insured your home for the original purchase price, chances are, it is not enough.

The True Cost of Home ReplacementMany home insurance policies include a home replacement cost coverage that is similar to the amount on the mortgage. Mortgage lenders require homeowners to insure the home for at least the value of the money you borrowed. This is so that banks can ensure that the insurance company will pay only up to this amount to have your home rebuilt. If you purchased your home for $200,000 ten or twenty years ago, $200,000 from the insurance company will not even start to pay for the rebuilding process.

This is an indication that you may be underinsured and a home replacement cost policy may be necessary. The rise in labor and material costs, coupled with changes to building codes, will certainly add to the overall cost of rebuilding; ultimately exceeding your initial insurance coverage amount. For this reason, there are three things you can do to get the coverage you need.

First, an extended replacement cost coverage plan provides you a higher level of protection by paying a specified percentage over your insurance limit to rebuild your home. For example, if the cost to rebuild your home increases 30 percent, you can purchase an extended home replacement cost policy for 30 percent above the limits of your policy.

Second, a guaranteed replacement cost plan is a rare option, but extremely beneficial. This option guarantees to pay whatever it costs to rebuild the home, period. It doesn’t matter how much local construction costs have increased or how long it takes. This plan is not intended to rebuild bigger or better, but an exact replica as it was. This is not offered by all insurance companies, but when available, it is a valuable option.

Third, having and maintaining a current home inventory is the best way to win the fight against insurance company coverage. A complete home inventory is an easy way to hand your home insurance provider an exact record of everything that was lost. When creating a home inventory, include the specific model number, manufacturer information, original cost receipt or assessed value of items wherever possible.

Rebuilding and moving on after a devastating accident can be a very difficult process, but having the adequate coverage you need provides the reassurance that rebuilding is possible. The amount you will receive to rebuild your home depends on the type of homeowners policy and/or replacement cost insurance you have. It is important to understand the different policies and the options they provide to get you and your family back on your feet as soon as possible.