You may have scored a great deal on that foreclosed home, but that doesn’t mean you can skimp on insurance coverage. In the current real estate market, it is important to remember that the purchase price of your home is not equal to the cost to rebuild.

Consider this example of a HUB International private client. Earlier this year he purchased a 13,500 square foot home in Kenosha, Wisconsin for $1.1 million after the owner drastically slashed the price for quick sale. The client thought insuring the home for the purchase price would be adequate, but an appraiser assessed the value of the home to be $3.3 million. Sandy Leon, a private client advisor at HUB International, recommended her client insure the home for the appraised value to ensure that in the event of a total loss (e.g. fire) he could receive reimbursement for the full replacement cost. Had he not heeded Sandy’s warning, the client would have been assuming 66% of the risk of owning his home, rather than transferring that risk to the insurance company.