USAA makes a good point. How many homeowner’s actually understand that the re-build value of their home is not market value?
I just finished reading a little blurb in the Winter 2010 USAA member guide about making sure you know your values when it comes to homeowner’s insurance! They make a great point: just because your home’s market value is $550,000, it doesn’t mean that is how much you would get if your house flooded today (goodness-let’s hope that doesn’t happen) and you had to totally rebuild the house. Your home owner’s insurance covers the cost it would take to rebuild your home, not the cost it would be to purchase the home. Make sense?
The example they give is a house of the same size built in the same area, in two totally different neighborhoods. Maybe market value would be $300,000 and the other house in the other neighborhood (remember- same size, same year of original construction) they would both cost the same thing to rebuild- they assume a cost per square foot price point! That is pretty interesting to think about. If you’re wondering if you have enough coverage, make sure to contact your home owner’s insurance policy program and request a review of your current insurance coverage. USAA mentions to make sure that you do a review of your policy if you make improvements that are valued at $25,000 or more.
If you have any questions about your home and it’s market value, I’d be happy to discuss that with you!