That’s a question that is not quickly answered.\u00a0 In the property insurance business we try to avoid the word “worth”.\u00a0 It’s too nebulous.\u00a0 When my clients question the amount of coverage on their home I always start my explanation by clarifying the difference between “market value” and “replacement cost”.\u00a0 “Market value” is what your home would sell for.\u00a0 This value is determined by many factors e.g., square footage, amount of land, location, school district, mortgage market, waterfront or not, etc.\u00a0 “Replacement cost” is a reflection of how much it costs to rebuild your home, specifically, a contractor’s cost of labor, material, and profit margin.\u00a0 These two values are worlds apart.\u00a0 Suppose we take a typical 2,000 square foot colonial and put it in\u00a0the inner city area.\u00a0 It would sell for maybe $70,000.\u00a0 Next we place it in a typical suburban neighborhood.\u00a0 Now the selling price or “market value” for the same house becomes $180,000.\u00a0\u00a0 Lastly, we now locate our home at a nice lake nearby with\u00a0200 feet of frontage.\u00a0 Yikes, now it’s selling for $350,000.\u00a0 However, the “replacement cost” is still\u00a0the same, no matter where it’s located within the same general region.\u00a0 The cost of labor and materials does not change.\u00a0<\/div>\n
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Most typically an insured will call and question why we are insuring his\/her home for $200,000. when he\/she can only sell it for $140,000.\u00a0 But occasionally the question is reversed.\u00a0 Just yesterday a client called and wondered why we insured his home for only $180,000 when he just paid $250,000.\u00a0 Well, it’s because his home is a waterfront property.\u00a0 This factor, or course, pushes the “market value” way beyond the “replacement cost”.<\/div>\n
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Therefore the\u00a0most accurate and economical\u00a0way to protect your home is to be sure you are insured on a “replacement cost” basis.<\/div>\n","protected":false},"excerpt":{"rendered":"
by agent and partner Ron Kadey \u00a0 That’s a question that is not quickly answered.\u00a0 In the property insurance business we try to avoid the word “worth”.\u00a0 It’s too nebulous.\u00a0 When my clients question the amount of coverage on their home I always start my explanation by clarifying the difference between “market value” and “replacement … <\/p>\n
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