Determining the value of your home for insurance purposes

Last updated: 11/20/2009 3:42:09 PM

How much is your home worth?
When determining the current value of your home for insurance purposes, it is important to differentiate between the assessment value, the market value, and the replacement cost. These values usually are not the same and serve different purposes.

Assessment value
The assessment value is the dollar amount placed on your home by your local government for taxation purposes (i.e., property taxes).
Factors considered when calculating your home’s assessed value may include the selling price for similar properties in your area, the replacement cost, and the land value depending on where you live. The higher the assessed value, the more you pay in taxes.

Market value
The market value is how much you could expect to get for your home in the current real estate market if you were to sell.
The listing and selling price of comparable homes in the local area, square footage of the house, location, amenities, condition of the property, etc., are used to determine the market value.

Replacement cost
When insuring your home, you want it to be insured for 100% of its replacement cost. This is different from both the assessed value and the market value.
The replacement cost reflects how much it would cost to rebuild your house in the same spot, with materials of like kind and quality.

Because the cost of materials and labor fluctuates, it is important to evaluate your coverage periodically to make sure you have adequate protection. If you have remodeled or added on to your home, your insurance coverage should be adjusted to reflect the improvement

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