One popular question for Homeowners insurance is “How much should I insure my home (Dwelling) for?” The Dwelling part of your Homeowners insurance policy is for your actual home and anything attached to it like a garage, sunroom, or back porch. Every insurance company may calculate it a little differently because they all have their own Replacement Cost calculations built into their algorithm.
What you actually need to find out is what the cost is to build in your area. Here in DFW, it’s a rough estimate of about $125 per square foot to build a home. Keep in mind, that’s just for a basic home. When you start adding other things like granite countertops, crown molding, etc, the cost goes up. So if you’re buying a $1 million home, you probably want to do closer to $250 per square foot.
Some Things To Keep In Mind
The Dwelling (Coverage A) for your home is ONLY for the house and not the land value; the land will still be there if something happens to the home. Also, debris removal is calculated by the insurance company in the Replacement Cost estimate.
Some Homeowners companies offer what’s called Additional Replacement Cost, which is an additional amount on top of the Dwelling Coverage. For instance, if you’re home is insured at $250,000 and you have a 25% Additional Replacement Cost, you’ll get another $62,500 if for some reason the $250,000 isn’t enough to rebuild your home. Think of it as an inflation guard for cost of materials, not a way to lower the amount of coverage you have on your home, basically it’s there if you need it type of coverage.
Be sure to contact an agent to go over this with you. If you don’t have an agent and need a policy in Texas, please reach out to me:
Brad Harrell — Texas Insurance Guy
Owner at TWFG Harrell Insurance