Q:What Value Do I Insure My Home?
The thing to remember when determining the value for your homeowner’s insurance is that the replacement cost of your home and the appraised/market value are two different things and are not interchangeable. Where as the market value is based on what comparable homes in the area are selling for, which has gone down all across the country, the replacement cost to insure a home to be rebuilt has actually gone up with inflation and other building costs. You also need to be careful since many companies no longer offer guaranteed replacement cost on their policies which means that if you are under insured, then in the event of a loss you may not receive enough money to rebuild the damaged portion of the house. The replacement cost is usually calculated on the per sq. ft. building costs in your area along with the specialty features of your home. The insurance companies, years ago, put the responsibility on the insured to determine the value of their home instead of relying on them so the risk of underinsuring has grown over the years This is why Dave so strongly recommends either guaranteed replacement Cost or Extended Replacement Cost on your homeowner’s policy.