There are several types of valuation for a home, which I think will help.
Taxable Appraised value is what the county estimates your home to be worth by assigning a “value” to your home based up on the sale amounts of similar homes in the area. Obviously for the purpose of determining property taxes. These figures can be all over the place, are often out of date, and overall just not very accurate…especially for the purpose of insurance.
Market Value is the amount someone is willing to pay for your home in the free and open market at a particular time. (no foreclosures, etc..) This value can fluctuate quite a bit depending on the economy, area jobs, schools, features, and more. For example: a small one story home may have an estimated insurable value / replacement cost of $100,000. Place that home in an average neighborhood and it may be worth $70,000. However, place that same home lakefront at a popular lake and the market value could be five times that or more. Place it in San Diego, and well….you get the idea!
The insurance on your home is based on an estimated replacement cost. This is calculated using factors such as style and quality, number of bathrooms, kitchens, foundation type, building materials, zip code, labor rates, and many other details. It is meant to represent the amount of money required to rebuild a particular home in the event of a total loss. This figure also includes other costs such as demolition, debris removal, and added time to work around other surrounding structures. For the purpose of insurance this is the “correct” and most consistent valuation method to go by.
You should notify your agent when your home undergoes any updates, additions, or alterations. Here at Beck Insurance we also re-evaluate and update replacement calculations on a routine basis to ensure continued accuracy.
Hope that helps!
Joe Beck, Certified Insurance Couselor