It is best to insure your dwelling or home based on replacement value. This means that if there is structural damage to your home, you are entitled to receive funds to repair or rebuild your home to what it was previously.
Your mortgage provider will require you to obtain insurance based on the appraised value or purchase price of your property. However, you may decide on a different value depending on the location and age of your home. If your house is near a coast or in a low lying land, find out whether additional insurance can be obtained to cover against floods. Some insurers provide flood cover. Others will refer you to the National Flood Insurance Program.
Having your property insured for replacement value does not by default mean that the contents of your home is similarly covered. Insurance providers normally quote “cash” or fair market value for contents. In the event of a claim, you receive the initial price you paid for the item after providing for depreciation or wear and tear. For a higher premium, most insurers will change the cover for contents to replacement value. Even then, there will be a limit placed on the amount you can claim against contents damage.
If you have high value items such as jewelry, furs, or special collections, include a special endorsement to protect them. Your insurer will require a list of such items along with their value supported by an appraisal or purchase receipts.
