One of the most frequent issues regarding homeowner’s insurance that we as agents have to address with a client is how much should you insure your home for in the event of a partial or total loss. This can be confusing for the homeowner because they see so many different “values” for their homes and trying to understand what each “value” means is difficult.
The three primary home “values” are the market value, tax appraisal and replacement cost. All three values are used for very different purposes and it is important you understand their intent.
A home’s tax appraisal is the tax assessor’s value placed on the home to determine property taxes. This is almost always below market value and replacement cost on the home. Tax appraisal depends upon:
- Location of the Home
- Number of Bedrooms
- Number of Bathrooms
- is there a Fireplace?
- Lot Size
- Square Footage
- Age and Condition of the Home
- Is there a Garage? Deck?
A home’s market value is an estimate that reflects the probable price a residence will bring in a specific market. Market value depends upon:
- Quality of the School District
- The Condition of the Home
- Scenic Views
- Weather Patterns
- Size of the Lot and Location
- Economic Condition Factors
A home’s replacement cost is the total cost required to replace the dwelling with “like kind and quality” materials and workmanship. Replacement cost includes:
- Material and Labor
- Site Supervision and Architects’ Services
- Contractor’s Profit and Overhead
- Building Codes
- Class of Dwelling
To determine how much you should insure your home for, you must look at the replacement cost of the home. To assist you with this, we complete an insurance to value form. This is a very up-to-date residential cost estimator which using the specific information on the home with very current reconstruction costs.
It might seem like a good idea to keep your replacement cost low to save a few bucks on your premium; however, in the event of a total or partial loss of your home, you will want to make sure you have insured your home adequately so it can be replaced. Let us at Evans, Ewan and Brady help you in this process.