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Appraised Value is not the same as Replacement Value.

I recently insured a home which appraised for $100,000 but had an insurance replacement value of $150,000.  The new homeowner didn’t understand why I had to insure the home for 50% more than the appraised value.  I see this on a regular basis but a new home buyer or a refinancing homeowner might not understand the difference between insurance replacement value and purchase price, especially in our current real estate debacle.   

Obviously, the purchase price of a home is what a willing buyer agrees to pay to a willing seller.  The insurance carrier though, wants to know what it will cost to rebuild this one home at today’s prices for construction materials and labor costs. 

All insurance companies utilize an estimator to determine this value using detailed information about your home gathered through your insurance professional.  It’s in your best interest to take the time to be specific with your agent so that the proper valuation can be established.  No two replacement estimates are the same. 

There are several online estimators you can use, some of which charge a fee.  You can try Building-Cost.net which is free.  Or, try AccuCoverage.com which is a fee based estimator.  These are just a few choices, of many, that are available to you. 

If it’s been awhile since you’ve had your insurance agent estimate your home’s replacement value, give your agent a call.  Or, if you’re in Arizona, request a quote through my agency and I’ll make sure your home is properly valued for replacement.

Author: Richard Morris

Richard Morris, an independent insurance agent in Chandler, Arizona, has been serving and helping Arizona families with all their insurance needs for over 23 years. Visit his website at http://www.southwestpremierinsuranceagency.com to see all the ways he can help you with your insurance needs or call the office at (480) 336-2707 or toll free at (888) 907-9349. Connect with Rich on Google+ and Twitter.
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