The value of your home for insurance purposes is not the same as the real estate value that the bank uses when it appraises your home for a mortgage or what your neighbors received when they sold their home recently.

In insurance, the value is determined by the cost to rebuild from the foundation up. That is the cost of materials and labor. The cost of the land, foundation and mechanical systems (wells, septic systems) are not included in the estimate.

Real Estate values have been increasing steadily over the last couple of years. We get calls from our clients, and they are confused as to why the policy is less than what the property is “worth.”

Many policies have inflation guards–that is, the policy is annually on renewal, increased to reflect the cost of construction in the area. If you haven’t changed companies in several years sometimes the cost to rebuild your home on your policy might not be enough. While we try to look at values as often as we can, we do not know the property as well as you do. Sometimes people upgrade kitchens and baths or put on additions and don’t tell us. The responsibility for having the property properly insured is yours.

We and the insurance companies make every effort to see that the coverage is correct when we have an opportunity to look at properties.

If you suspect that the value of your home might be too low or even too high, give us a call. We have computer programs that allow us to estimate the cost to replace your home. Our estimation of value is a best guess. A true, accurate appraisal would have to be done by a local contractor. Fortunately insurance companies are only looking for an approximate value and the computer programs provide that. Before you call us though, please measure the square footage of your home and then we can work with you on the other details to develop an estimated value. In some cases, because of the uniqueness of your home we may have to come out and see for ourselves.

Having a properly valued home is critical to receiving the full value of the policy if a loss should occur.