Is $225,000 insurance too much for this house?

From your description of the house, I wouldn't be shocked if $225,000 was too low for that house. I copied and pasted the information below from the Nationwide web site. It should give you some insight as to why insurance companies want to insure your house for more than you think you should.

Is reconstruction cost the same thing as market value?

No. Reconstruction costs for your home may differ considerably from market value, particularly for older homes. Market value is what a willing buyer would pay for your home, including the lot. Location is a major factor in determining market value. Homeowners should also not assume that coverage matching their mortgage balance is sufficient to rebuild their home. The amount of insurance you buy should be based on rebuilding costs, not the selling or purchase price of your house.

What are some factors that affect reconstruction costs?

- Access to home site limited because of trees, lawns, other homes, and fences.

- Sometimes building code changes that occur after the initial build.

- Inflation is generally greater for building materials than other commodities.

- Unusual materials are required that are expensive to locate or duplicate, particularly for older homes.

- In a partial reconstruction, there is also extra cost in matching and aligning the undamaged part of the structure with the reconstructed part of the structure.

- In partial loss situations, the removal of undamaged contents to put elsewhere for safekeeping.

- New home builders schedule their work for a building season and work most efficiently in a “factory-line” approach, which saves on both labor and material costs. Your reconstruction will be a “custom” job.

- There are more new build contractors than reconstruction contractors. With an easier task of building a home, and a greater supply of those doing it, new build contractors charge significantly less for a job than a reconstruction contractor does.

- If the damage to the home is as a result of a catastrophe, or at the same time as a catastrophe, demand surge pushes the price higher for labor and materials for all construction.

- Extra costs to tear out damaged materials or demolition and debris removal.

- Repairing a partially damaged home often means working from the top down, while new construction is usually from the ground up.

OK, are you insuring the house for MARKET (aka, appraisal) value, for PURCHASE value, for LOAN value, or REPLACEMENT value?

If you want the insurance company to fix your kitchen, for a kitchen fire, that's replacement value. That's the cheapest insurance.

If the square footage is 2600 (you're not insuring LIVING space, you want those WALLS covered, right?) then you're looking at a cost to rebuild at about $90 a square foot.

Honey, if you call any contractor today, and ask them to build you a house at $90 a square foot, they'll hang up on you. I think you are WAY WAY WAY underinsured, at $225,000.

That's why you need an AGENT. The AGENT will help you calculate the cost to rebuild that house - which, IMO, should be closer to $200 or $225 per square foot.

If you UNDERINSURE the house, what that means, is you only get PART of the claim paid. If your house is insured for half value (value meaning, cost to rebuild), and you have a $50,000 kitchen fire (the average kitchen fire cost), you'll get $25,000, less your deductible - and then you'll be complaining that your insurance company screwed you. But they didn't - they pay what YOU BUY. Buy low, regret later.

That's about normal. I know it's totally weird to have insurance coverage over the appraisal value. But those are separate. The cost to rebuild would be higher.

If you believe that you can replace your total living area for under 96 dollars a square foot then go ahead. The insurance compnay is going to have an inspector come out and lok anyway. If you under insure and have a loss they are only going to pay 80% of it. Go witht he 225000 you will be much better off.

You might look into a "replacement cost" rider on your homeowners policy. That way you can have less coverage but they guarantee to pay whatever it costs to rebuild to previous standards. It's usually a lot cheaper than being over insured.

no.