When purchasing condo insurance, it’s important to know how much rebuilding your Vermont condominium would cost. Without an accurate replacement cost estimate, it’s difficult to know how much replacement cost coverage you should include in your condo policy. Here are some ways to estimate your condo’s full replacement cost, so you can select the right amount of coverage for it. (Replacement cost coverage usually determines how much an insurer will pay to replace a damaged or destroyed condo after a covered incident.)
When Purchasing Condo Insurance, How Can Condo Owners in Vermont Determine the Replacement Cost of Their Units?
The Balance Due on Your Mortgage
Start by checking the remaining balance on your mortgage (assuming you have one). This amount won’t reflect your Vermont condo’s full value, but it provides a minimum amount of coverage that you should look for. In most cases, lenders require condo owners to carry enough condo insurance replacement cost coverage to fully insure the bank’s interest in the unit -- which is the outstanding mortgage balance.
The Purchase Price You Paid
Next, review the purchase price you paid for the unit. This also won’t be a complete picture of your condominium’s current value, because it doesn’t take into account any appreciation, depreciation, or post-purchase upgrades. It does, however, include both the bank’s interest in your condominium and the amount you initially invested in your unit.
To include any post-purchase investments you made, add the costs of any renovations or upgrade you made to the purchase price. Be sure to include an hourly rate for your own labor if you did a lot of work yourself. (Adding renovation costs is especially important if you purchased a condominium that was in poor condition and then rehabbed it, as the purchase price in these situations doesn’t affect the current fair-market value.)
Between your mortgage balance, purchase price, and any post-purchase upgrade costs, you can get a more accurate idea of how much has thus far been invested in your condominium.This may be a good base amount of coverage to begin with -- but it must be compared with a couple of other figures.
An Appraised Value
Once you know what’s been invested in your condominium, get a third-party appraisal to see how much your condominium is currently worth. A local real estate agent should be able to pull up sales of comparable condominiums near you and check how much they sold for. From these, a real estate agent can probably give you a fairly accurate appraised value.
An appraised value may be higher or lower than your purchase price, because an appraisal takes into account appreciation and depreciation.
If the appraised value is less than your purchase price, you’re probably still required to purchase at least enough condominium insurance replacement cost coverage to cover the balance on your mortgage. You may also still want to get enough coverage to fully cover your financial investment, or the purchase price.
If the appraised value is higher than your purchase price, it may be wise to get condominium insurance replacement cost coverage equal to the appraised value. If you don’t get additional coverage and something happens to your unit, you might not be reimbursed for the condominium’s current fair-market value.
Finally, ask a couple of contractors in the area to provide estimates of how much it would cost to rebuild your condominium from scratch. In some situations, the materials and labor required to rebuild a unit actually exceed the condominium’s fair-market value.
If your condo would cost more to rebuild that you’d get from selling it, you should probably get enough condominium insurance replacement cost coverage to cover all rebuilding costs. In fact, you might even want to set your policy’s replacement cost limits higher than your condominium’s rebuilding costs in case labor and material costs increase in the wake of a disaster.
Talk with a Condo Insurance Agent in Vermont
For help going through each of these steps and assessing how much replacement cost coverage you should select, contact an independent insurance agent who specializes in condo insurance. They’ll be able to help you determine how much coverage is appropriate for your Vermont condominium, and then find a policy that affords that amount of protection.
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