2019-07-29
By: Advocate Brokerage
When you think about the value of your home, chances are what comes to mind first is how much you could receive if you put a for sale sign in your yard tomorrow. However, when it comes to insurance, the value of your home should be looked at a bit differently.
For the purposes of insuring your home, you need to consider how much it would cost to rebuild the home in the event of a total loss. Most of the time, the value of your home for insurance purposes is higher than what you could get if you sold it in today’s market.
Let’s consider a few examples of the real world of insurance.
Real-World Examples:
The MARKET VALUE of the home as estimated by Zillow was $1,888,594 however after the fire, the cost to REBUILD the
home was $3,270,888.
Luckily the homeowner had received two appraisals from her insurance carrier that accurately estimated the replacement and coverage had been adjusted annually to keep pace with the increasing cost of construction. Although the homeowner chose not to rebuild, they would have been able to do so easily within their policy limits.
The MARKET VALUE of the home as estimated by Trulia and homes.com ranged between $402,000 – $499,950, however after all was said and done, the cost to REBUILD the home was approximately $709,684.
In this case, the homeowner had received an appraisal from her insurance carrier that accurately estimated the replacement cost back in 2007 and coverage had been adjusted annually to keep pace with the increasing cost of construction.
The MARKET VALUE of the home as estimated by Trulia and Zillow ranged between $907,700 – $1,640,000, however after all was said and done, the cost to REBUILD the home was approximately $2,036,000.
Again, the homeowner had received an appraisal from her insurance carrier that accurately estimated the replacement cost back in 2007 and coverage had been adjusted annually to keep pace with the increasing cost of construction which had outpaced market value.
In each of these examples, the homeowner was insured with Chubb at full replacement value and as a result, when a tragedy occurred, they were able to rebuild within the limits of their policy. Fire, water damage or windstorm are difficult enough to face without the fear of inadequate insurance coverage.
How Are Replacement Costs Calculated?
There are many factors that go into the calculation of adequate replacement coverage. If your home suffers a total loss, in order to rebuild you need to consider:
Establishing The Value of Your Home – A few words from Chubb
Making certain that your home is insured for the full cost of reconstruction is part of Chubb’s commitment to their clients. To support this commitment, they establish an annual Construction Cost Adjustment Factor (CCAF) to maintain adequate coverage. To do so they will:
Click here for more information from Chubb.
Advice From Advocate
You don’t want a house fire that results in a total loss of your home to be the reason you discover you are underinsured. Having adequate coverage makes all the difference!
If you have any concerns regarding your homeowner’s insurance or are worried that perhaps your home may currently be underinsured, don’t hesitate to get in touch with us at 914-723-7100. We would be happy to offer a no-obligation review of your homeowner’s insurance.