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Understand How to Select the Coverage Limits Right for You

Understand the Basic Homeowners Insurance Coverages from Norm Foster Insurance in Lakeville MN
1.The building structure coverage limit you need:

  • Is NOT based on original purchase price.
  • Is NOT based on assessor’s property tax value.
  • IS based on the estimated costs for material and labor at today’s prices to rebuild your home.

2. Understand the policy’s settlement terms:

  • Actual Cash Value: Generally means replacement cost less deduction for depreciation.
  • Replacement Cost: Actual material/labor cost to replace damaged property with like kind and quality without deduction for depreciation.

3. Extended Replacement Cost (ERC): Increases the amount of insurance on the home up to an additional percentage of the limit of insurance you have chosen as a cushion against unexpected increases in reconstruction costs. Most insurance policies do not offer ERC unless the home is insured to at least 100% of its estimated reconstruction cost.

No one can predict with certainty what actual reconstruction costs will be. Thus, reconstruction costs estimates may differ from the actual costs to rebuild for a variety of reasons, such as rising costs of building materials and labor. In addition, multiple losses from a single event (e.g., tornado) may cause local shortages in material or labor driving up the reconstruction cost for the home.

If you have any questions regarding the content of this article or any other insurance related need, please contact Norm today at 952-929-8922, or at

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Norm Foster Insurance
Norm Foster, LUTCF • Agent
16372 Kenrick Ave, Suite 130
Lakeville, MN 55044
Phone: (952) 929-8922
Fax: (952) 223-2233