Understand the value of your home
Your insurance
policy should
cover your home
to the full
replacement
value of the
dwelling It self
without the land
value included.
If your policy
has not been
updated in years
you may be
dramatically
under insured.
Over the past
several years,
several
weather-related
catastrophes
have highlighted
the importance
of knowing the
appropriate
replacement
value of your
home. Many
factors such as
hurricanes and
increased world
demand have
caused the cost
of building
materials and
labor to
dramatically
increase. This
in turn has
caused the
replacement
value of your
home to increase
faster than the
general rate of
inflation.
If your home
were declared a
total loss due
to a hurricane
and the home was
insured for 70%
of the actual
current
replacement
cost, what would
you do? In most
cases your
replacement
house would have
to be smaller or
of lesser
quality than
your previous
home. This can
be avoided by
having an annual
policy review
with your agent.
Your home is
your single
greatest asset
(other than
you), it needs
to be protected
with the correct
amount of
insurance.
There is a
difference
between Market
Value and
Replacement
Value
- Market value includes the value of the land. This is what a buyer is willing to pay for your home. This may actually be more or less than what it would cost you to replace your home. This value is primarily determined by market conditions, including available home on the market and interest rates.
- Replacement value is simply the cost to replace you home taking in to account many different factors. Typically, replacement value is less than market value (with some exceptions). The cost to rebuild your home is based on:
- Local construction costs
- Square footage of the structure
- Type of exterior wall construction -- frame, masonry (brick or stone) or veneer
- Style of the house (ranch, colonial)
- Number of bathrooms and other rooms
- Type of roof
- Attached garages, fireplaces, exterior trim and other special features
