A common question from clients to any broker is about the value placed on their home. This is a very important question to ask your broker as you want to make sure that you’re properly insuring your largest asset.
The rising house values in the real estate market will only fuel this question more. Depending on where you live, the value on your home in your insurance renewal could be significantly different than your real estate value.
For example, the real estate market is valued higher in Toronto than it would be in our hometown of Port Hope. It would not be absurd if your house value on your insurance package is lower than your local real estate market in Toronto. In Port Hope, the opposite could happen. Your house value on your insurance could be higher than your real estate market.
Understandably, this causes a lot of confusion about what your home should be valued at on your insurance package. Hopefully we can shed some light on this phenomenon today.
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Why are the Real Estate Values and the Insurance Values Different?
When you are trying to sell your home, you will most likely be getting the advice of a Real Estate Agent. That agent will then compare your home to the other homes selling in your area. Using this information, the condition & age of your home, and how fast you want a sale, they will value your home to sell so that it is in line with other comparable houses in the area.
When it comes to insurance, the insurance company puts a completely different type of value on your home. Your broker should be calculating the rebuilding value of your home by square footage, materials used in construction, construction methods, debris removal, and rebuild ability.
To put it simply, your insurance broker is going to determine how much it may cost if your home were to burn down completely. These costs should include the removal of debris from your lot, as well as the cost to rebuild your home. This should be the value on your homeowner’s insurance policy. There will also be calculations for putting your family in a temporary location such as a hotel while the house is being rebuilt.
Should I Increase the Value on my Insurance Package?
If you feel that your rebuild value on your homeowners insurance is low, you can always ask your broker to put together another evaluation on your home, or ask to review their evaluation for errors. This way you can be sure that your home has a recent evaluation and that you are insuring your home to the proper amount.
As stated above, your real estate value and your insurance dwelling limit will be different. If your insurance value is higher than it needs to be, you are simply just paying more for your insurance without any extra incentive to do so. The insurance company will rebuild your home as it was, and they will not add any extras due to the extra value you were insuring.
Should I Ask to Decrease the Value on my Insurance Package?
If you believe that the value for your home (dwelling) is too high, you can ask your broker to do an updated rebuild evaluation on your home. It is not uncommon for the dwelling amount to slowly creep up over time. In some cases, the insured value may actually be higher than it should be. Your broker should pick up on this and redo the rebuild evaluation, but if they have not, you have the right ask them to redo the rebuild evaluation to ensure your home is insured to its proper value.
What if I Don’t Have an Insurance Broker?
If you don’t have an insurance broker and your direct to consumer insurance company won’t talk to you about your rebuild evaluation, maybe it’s time you talk to an insurance broker.
The insurance broker is there to be your advocate with the insurance company. Insurance is complicated and full of legal terms. It is important to have a studied professional on your side who is willing to help guide you in your insurance endeavours.
The Final Word
If for any reason you think that your value on your home insurance is wrong, ask your broker to redo the rebuild evaluation to confirm it’s the correct price. Don’t be shy about telling your broker what your home is constructed with and the special touches that makes your home different. All of this information should be a part of your rebuild evaluation to ensure that you are insuring your home to its proper evaluation.