We often hear people say that the dwelling coverage of their home is way too high compared to a recent appraisal or market value. It is important to understand that these values are not related. There are many different factors used for a home appraisal and/or value determination when selling. Some examples are how much land is included, what school district is associated with the property, the geographical location, or simply the view. When calculating a home’s insurance value, the insurance company calculates cost to rebuild your home if a claim or catastrophe would happen. Insurance companies take into consideration building costs, including material and local labor prices, new building codes in historic areas, the type of building materials used and the home’s characteristics (i.e. square footage, flooring types, number of bathrooms, etc.)
Standard homeowners insurance policies require that you insure your home at full replacement cost. That means if your home is insured for less than 100% of it’s replacement value, you may be assessed a penalty in the event of a loss. This also means that you may only receive partial payment. We want to be certain you are never caught in this type of situation. Please contact your insurance agent if you make renovations to your home as it may drastically change your home’s value.
– Michelle Cummings, CISR, Personal Lines Agent