Protecting Your Most Valuable AssetKathy Delp, Vice President, Personal Lines Manager, Univest Insurance, Inc.
When it comes to protecting your home – how much coverage do you need? Homeowners insurance rates have been on the rise thanks to the unprecedented weather losses of the past few years. Some folks are trying to cut costs by reducing the amount of coverage on their homes, thinking a lower limit is still enough since the housing prices have yet to fully rebound. However, this could be a costly gamble.
Understanding the distinction between market value and reconstruction cost is very important when determining coverage for your home and it can make all the difference in how quickly and smoothly you can get back to your life after a property claim.
Market value, also known as appraised value, is simply what your home would sell for in the real estate market.
Market value is affected by:
- Current economic conditions and consumer confidence
- Prevailing mortgage interest rates
- Desirability of location, i.e. proximity to employment, transportation, good schools
- Size of lot and availability of public utilities
- Supply and demand
Reconstruction cost is the amount required to rebuild your home to its pre-loss condition, including demolition and debris removal.
Reconstruction cost is affected by:
- Cost of raw and processed building materials, including transportation
- Local labor rates and building code requirements
- Charges for permits, design/architectural fees and cost of hazardous material removal or remediation
Given these distinctions, it’s very common for a home’s market value to be significantly less than its reconstruction cost. This is especially true for vintage dwellings, whose unique features like plastered walls, elaborate moldings and solid masonry exteriors are costly to recreate.
Insurance companies now rely on sophisticated computer programs that break down the many construction components of your home, evaluate the type and quality of individual features, determine the cost of rebuilding each one, and then total those figures for a final estimate. Your dwelling coverage should be based on the reconstruction cost regardless of the market value of your home.
As independent insurance professionals representing more than a dozen homeowner carriers, we are well qualified to assist you in determining the right coverage for your home. We will research every option and discount available to secure the most affordable protection for your unique insurance needs.
Don’t take a chance on the wrong coverage. Let us help you protect what’s most important – your home. Call or email us today at 800-220-3077 or firstname.lastname@example.org.
Insurance products offered through Univest Insurance, Inc., a licensed insurance agency affiliate of Univest Corporation, are obligations of and underwritten by unaffiliated insurance companies. They are not insured by the FDIC or any other agency of the United States and are not deposits of or guaranteed by any bank. The purchase of insurance is not a condition of any banking product or service and will not affect credit decisions.