One of the most frequent questions that we are asked about regarding your home’s insurance coverage is the difference between market value and insured value. So, why is there a difference between the two?
Market Value is what a new buyer would pay for the property including the cost of the land in its current condition. Market Value is influenced by many factors that go beyond the construction and materials that the house is made of such as– proximity to good schools, local crime statistics, taxes and the availability of similar houses for sale in the area that lead to more competitive pricing in the area. On Long Island, and in the 5 boroughs—most often your market value of the house lays far beyond the insured value of the home due to NY’s highly sought after competitive housing market which has inflated the value of land in these areas.
Insured value is also known as the replacement cost value of your home. Replacement Cost Value is the cost necessary to repair or replace your home in the case of a total loss. This is what your homeowner’s policy insures—the rebuild value of your home—not the resale value. This replacement cost is based on several factors such as square footage of the home, structure, associated systems, fixtures, finishes, materials, and labor costs. Land value is included in a home’s market value but not in its insured value. To further simplify it, replacement value is the price or cost it will take to rebuild your house in the same spot, same size and same quality of construction, at today’s costs.
Most carriers use computer replacement cost rating estimators to determine your Insured Value based off the home details you provide to your insurance agent. Recently completed any major renovations? Please reach out to our agency so we can determine if your insured value should be increased!