When determining the current value of your home for insurance purposes, it is important to differentiate between assessment value, market value, and replacement cost. These values usually are not the same and serve different purposes.
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.
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, value of the land, location, amenities, condition of the property, etc., are used to determine the market value.
When insuring your home, it should 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 (especially in recent times), it is important to evaluate your coverage periodically to make sure you have adequate protection.
Make sure you’re properly insured
Have you reviewed your home insurance coverage recently? Gaps in your insurance coverage may leave you financially exposed. Ask us about our Guaranteed Replacement Cost coverage—if you have a home insurance policy with Member Benefits and your home was built during or after 1950, we will pay the full cost to repair or replace your home with materials of like kind and quality without the limits imposed by other insurers.
We can assess your current home insurance coverage to make sure it is appropriate for your situation. Contact one of our personal insurance consultants for assistance.