Why is the market value on my home going down but my replacement cost on insurance going up? This is a very common question and a difficult concept for some of my clients to understand - let me explain:
The market value of a home, in general, has nothing to do with the cost to rebuild. In most cases, your home is built wholesale- meaning that the builder probably received an awesome rate per unit by purchasing materials (like lumber) in bulk. The cost re-build your home without the wholesale rates on material will be different than what it was originally built for. Many callers say that the coverage is too high, that they paid almost half of the replacement cost for their home. This is understood and is normal in some areas. Most insurance companies will re-build your home at a set price per square foot depending on where you are in the country; a good rule of thumb is that your coverage should be around $100/sqft. I know in California that number is above $150/sqft and here in the south it may be as low as $90/sqft.
I recommend shopping with me every 3 years or so, to see if your carrier is giving you the best rate for the replacement cost of your home. Some carriers will calculate the replacement cost to be lower than others and you can get a better rate based off of those numbers alone. The other side to that would be that sometimes you can get more coverage for a lower rate! My office number is 877-50-MyHome Ext 8481, call to see what replacement cost I can come up with for your home.
No comments:
Post a Comment