Getting the replacement cost right on a homeowners policy is one of the most important jobs for an agent. Get this wrong and you could eventually end up in court. This is also one of the most difficult things to explain to your client. They seem to have a hard time differentiating between market value and replacement cost.
The industry has some tools that are pretty universal and standard for calculating replacement cost. Marshall Swift/Boeckh is the company that developed a program that most companies and agencies use. their RCT Express program allows you to input all the aspects of the home and calculates what it would cost to rebuild it. With this program, you can print out questionnaires that help you to gather the tight information to get an accurate replacement cost. Some of these criteria are:
Square footage of the living area
Configuration(1 story, 2 story, bilevel, etc.)
Foundation(basement, crawl space, slab)
Type of heating and cooling
Roof construction
Wall construction
.....and on and on. Way too many to list.
To accurately estimate a replacement cost you need to get all these questions answered. It's important to use a method like this that is recognized in the industry. You don't want to find out after the claim that the home cannot be rebuilt with the coverage on their policy Remember that whole "you could end up in court" thing?
Be smart, find a good agent that has experience in doing this. You may pay a little more as many agents will underestimate this to show a lower premium, but it's worth it at claim time.
I generally agree with David's answer . But I would add a few more items to consider. What your agent is developing in a Replacement Cost Calculator is only an estimate. The actual replacement of home depends on a number of factors that might change by the time loss occurs. For example we can identify that building one hose back in the instance of a total fire loss will likely cost more than the original building costs were when the builder may have building an entire subdivision. Yet losses to insured homes can be substantially more than expected if an entire city shares the same loss. That is what you get in some tornado or hurricane events.The fact that so many are affected increases do to shortage of materials and labor.
So, here is what I recommend : Get as close to a number that you and your agent think represents the total replacement cost. Then buy an Extension of coverage. Many companies sell this at increments of 25 % ,50% or even 100%. What the extension does is move the limit to a higher level of protection at the time of loss if needed. An example would be to take the estimated replacement cost of 300,000 up to 375,000 in the event more coverage is need on the home at time a of loss and a 25 % extension has been purchased.
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The industry has some tools that are pretty universal and standard for calculating replacement cost. Marshall Swift/Boeckh is the company that developed a program that most companies and agencies use. their RCT Express program allows you to input all the aspects of the home and calculates what it would cost to rebuild it. With this program, you can print out questionnaires that help you to gather the tight information to get an accurate replacement cost. Some of these criteria are:
Square footage of the living area
Configuration(1 story, 2 story, bilevel, etc.)
Foundation(basement, crawl space, slab)
Type of heating and cooling
Roof construction
Wall construction
.....and on and on. Way too many to list.
To accurately estimate a replacement cost you need to get all these questions answered. It's important to use a method like this that is recognized in the industry. You don't want to find out after the claim that the home cannot be rebuilt with the coverage on their policy Remember that whole "you could end up in court" thing?
Be smart, find a good agent that has experience in doing this. You may pay a little more as many agents will underestimate this to show a lower premium, but it's worth it at claim time.
So, here is what I recommend : Get as close to a number that you and your agent think represents the total replacement cost. Then buy an Extension of coverage. Many companies sell this at increments of 25 % ,50% or even 100%. What the extension does is move the limit to a higher level of protection at the time of loss if needed. An example would be to take the estimated replacement cost of 300,000 up to 375,000 in the event more coverage is need on the home at time a of loss and a 25 % extension has been purchased.