Immediately after the October 2003 fire, many people asked me "How much insurance do I need?" It has taken awhile for the 300+ families who had a total loss--including my family--to learn the answer to that question. The following may prompt discussion, follow-up dialogues, and likely some disagreements from insurance industry representatives. But, here is what I would do.
Get at least $150/sq. ft., or probably $175-200/sq. ft., for Part A, to rebuild just your house itself. The rest of your insurance coverage usually is calculated as a percentage of "A," so getting "A" high enough helps other losses, such as replacement of personal property. If the premium is too high, consider raising the deductible.
Like car insurance, however, I would think twice before filing a claim for even a $5,000-$10,000 loss. The insurance industry keeps track of these claims and shares information with other insurance companies. The number of claims is a major item used to deny insurance.
If the insurance agent says you don't need this much insurance, have them write you a letter stating that; then mail a copy of the letter to your mom in Nebraska. It may be worth a couple hundred thousand dollars to you. When I asked the deputy state insurance commissioner why so many people in Scripps Ranch were underinsured, he said, "Companies don't insure total losses." Be forewarned.
Part B is for outside structures, and many folks will take a financial loss on that because they have extensive concrete or patio work. Part B is typically 10% of Part A, so a $400,000--2,000 sq. ft.--house will only have $40,000 for everything hard outside. Vegetation is commonly 5% of Part A, and so on the same $400,000 house, the insurance will cover only $20,000 of vegetation. Inadequate coverage on Part B and vegetation is common in a total loss.
Part C is contents and often is 75% of Part A. Many people find that if Part A is set correctly, Part C is remarkably correct. Note, Part C needs to replace contents, so the total cost will surprise people, even those who think they don't have much. Garage sales will not replace everything unless you have a huge amount of time.
Note, this amount of insurance is to pay for a total loss, meaning you start over with a vacant lot. Obviously, this is much more expensive than a kitchen or garage fire, or even smoke damage from a wildfire.
If the person wants to gamble on not having a total loss, which is rare except in fire and hurricane areas, then the typical coverage, which is about 60-80% of what you need for a total loss, will be fine. In many ways, a person can self-insure the deductible, or just know that in a total loss, you will take a $100,000-$200,000 hit in net worth.
There are many insurance companies with many different policies. Check yours. There are basic similarities, but some important differences. Price per square foot is a Pandora's box of multiple, conflicting definitions; be careful.
People should check the limitations, in particular for jewelry, computers, art, and other collectibles. It often is possible to get increased coverage for these, and you may be able to adjust Part B, C, etc. to fit your needs.
Most insurance companies use a computer program by Marshall and Swift to calculate policy limits: the Quick Quote part of the program undervalues homes, but the "contractors" part can do a good job, if you take about 15 minutes.
As so many of us are aware, we are fortunate to live in Scripps Ranch. We have a community that looks out for one another and supports each other. So I am perplexed by the attitude of some parents that the required community service for our 5th graders is perceived as "illegal."
If we had stopped to think of the "legality" of giving clothes, household items, money, and time to our neighbors after the fire, where would our community be? Where would Scripps Ranch be without the Scripps Ranch Civic Association, Old Pros, Women's Athletic Club, Children's Hospital Auxiliary, or Hidden Valley House? Where would our schools be without parent involvement? All of these groups make a difference.
As parents, we must all give of our time and money to the betterment of our schools. If we rely solely on taxes to educate our children, it will not happen. Educators and parents need to work together in the goal of raising intelligent, well-rounded adults.
Think of a time when you have given of yourself and what you received in return! Think of that joy for your child--the look on a child's face when they give of their time to sell newspapers for a hospital fundraiser or work at the Book Fair helping younger kids. Whether it is at school or out in public, they learn that being civic minded has many rewards. Sometimes, being out in the world is a better education than in the classroom.
Community service for our 5th graders should not be a question of being "legal" or not. It is another tool to expand our children's horizons. Let us all strive to work together with our schools, neighbors, and children, to continue to make Scripps Ranch a great community.