Dean Graziosi states that it has become more common for homeowners to track the value of their home. This can partly be attributed to the recent housing crisis, in which many homeowners saw the value of their home decrease dramatically. With this extra knowledge, many homeowners are curious as to whether they should increase their home insurance as their values increase. If you are one of the homeowners who are wondering the same thing, I thought you would benefit from my experience.
To help you understand how real estate prices and home insurance values relate, I thought it would be a good idea to explain each one. Real estate prices are primarily established by the demand in that particular market. The higher the demand is for a home, the higher the price a seller can ask. The price of the home also depends on a number of other factors, such as, location. In the real estate market, location is probably the most important factor that goes into deciding the price of a home. If you are selling a home in an up and coming neighborhood, this popularity can affect the price of a home in that area. If a home is located in a great school district, this can also be a factor for buyers who have young children. But just as with all fads, popularity and the demand for homes in a particular area can decrease. When this happens, the value of homes in that area can decrease dramatically.
When it comes to purchasing home insurance, homeowners typically base the amount of coverage they purchase not on what was paid for the home, but by purchasing sufficient dwelling coverage. This will allow you to rebuild your home in the case that it experiences damage from fire or other natural disasters that are covered by the policy. Insurance agents decide on this amount by taking certain information into account. Some of the factors that are used are known as replacement value of your home. This includes the size of the house and what it would cost in your area to rebuild the home.
Insurance companies will also take into consideration how big of a risk is presented by the home and the homeowner. Once again, location is an important factor in deciding the insurance coverage you should purchase on your home. The area in which your home is located can determine the most common types of threats that your home is vulnerable to. If your home is located near a forest or a tornado prone area, you will likely end up paying more for insurance than in other areas.
The best way to determine if you should purchase additional home insurance is whether there has been a change in the replacement value of your home. This can be determined by finding out if there has been an increase in building costs in your area; and if you have made any recent renovations to your home, states Dean Graziosi. If either of these factors relate to your home, you should consider purchasing additional home coverage.