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Understanding the Difference Between Market Value and Replacement Value

IHome in Florida with for sale signn years past, most homeowners purchased their homeowner's insurance when they bought their home. Rarely, if ever, was the policy renewed, since the premium was usually paid by the bank or savings & loan association holding the mortgage.

When the hurricanes came, insurance premiums skyrocketed and homeowners started looking at their policies.

You should examine your coverage annually. When you do, be aware that although property values have decreased, the cost to rebuild or replace your home has probably continued to increase.

"Market Value" is the price at which your home would sell if you were to sell it today. It is based upon the physical characteristics and location of your home. It is what a bank is willing to pay for your home.

"Replacement Value" or the "Insured Value" is what it would cost or rebuild your home with comparable construction materials.

Be aware that if your insurance policy's replacement value is too low, you may not be able to duplicate your current home without including significant out of pocket expenses.

We encourage you to contact your insurance agent today to review your coverage.

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