Many people are buying houses at discount prices these days. Did you realize that you may not have enough insurance to cover rebuilding your house if it is destroyed in a calamity? When a bank asks you to place insurance on your house it just wants to cover its mortgage in case you don't rebuild or you don't have enough insurance to rebuild. The costs of buying houses these days have been going down over the past two to three years. Meanwhile the costs to build them have risen along with the costs of everything else. So, much like an upside down vehicle you may have an upside down home.
For instance, if you buy a home that costs $250,000 to build for $200,000 and only insur it for the $200,000 and it burns down six months after you build it then who do you think has to come up with the extra $50,000? Not only the rebuild costs have to be kept in mind but also the deconstruction and cleanup of the old site. That can add tens of thousands on to the bill. Now for those of you that think that can't happen to me, think of the tornado in Hugo this past Summer or all the hail storms that destroyed houses in North Branch and Harris last year.
It can happen and you can be underinsured so unless you want to end up in a temporary structure for a period of time make sure your agent explains how he came up with the price of reconstruction on the house. Make sure that you feel comfortable with the product you buy.
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