We love quoting homeowners’ policies! When we go over the final figures with the customer and show the amounts of coverage breakdowns, this may be followed by an exclamation of, “My house isn’t worth that!” Sound familiar?
There are many values for one particular property. The first one people think about is MARKET VALUE. This is the value that someone would agree to pay for the property. Another value is the ASSESSED VALUE by your local county tax office. This can be close to the market value, especially if the property has recently sold, as well as others like it in a similar area, or it can be really different. The assessed value gets put into the equation with local mil levies to determine the amount of tax money collected and used for schools and other municipal expenses. Neither of these factor into insurance.
Insurance by definition is to make someone whole again after a covered incident, like hail, wind, fire, or tornado. Depending on the condition of the property and how much of the risk an individual wants to take (or if there is a mortgage involved), the coverage will need to be able to REPLACE or rebuild the property. When we throw around terms like REPLACEMENT VALUE, or EXTENDED REPLACEMENT VALUE, that is exactly what we are talking about. It is not uncommon for a house that might have a market value of $100,000 to cost $175,000 to rebuild if lost in a fire or tornado. When we do a cost estimator, we take into account the materials that were used to construct your house. (That’s why we ask SO MANY QUESTIONS, lol!) If you have some lovely granite countertops and custom kitchen cabinets, you would want to make sure you were able to replace those!
Agent Mike Spohn does a great job of explaining some of the challenges that factor into the replacement value of your homes in the video below.