Is your home over or under-insured?
by Heather Mosher

Is your home over or under-insured?

So I’m in Minnesota visiting with some friends and the insurance discussion comes up.  It usually does because my husband and I both work in the industry and our friends think we must have a lot of interesting table conversation.  Our friends live in a beautiful home – circa 1932, stucco on the outside, sprawling lawn and gardens, antique fixtures, lighting, and hardwood floors on the inside….you get the idea.  And when you step outside, every home in their neighborhood looks more beautiful than the next. When the home was purchased three years ago, it was a foreclosure – therefore, the mortgage value is set at a number that reflects the market price of the home at that time (let’s say $199,000.)  But what would it cost to rebuild this beautiful turn of the century property?  And why does it matter?  Below, I’ll explain the difference between market value and replacement cost.

We all understand that market values of homes fluctuate drastically and can differ block by block depending on your view, proximity to downtown, acreage, or quality of neighborhood.  This is what often throws people off when we discuss the insurance value of homes.  Your homeowners insurance is generally going to insure you for replacement cost not market value.

What is replacement cost and how is it defined when it comes to reconstruction of a home?  Easy!  Your insurance advisor will help you determine this number by running a replacement cost estimator.  These programs are designed to put a rebuilding value on your home based on its unique features which would include square footage, number of bathrooms, exterior siding type, etc.   So in my example from above with the market value of the home at $199,000 – the replacement cost is more like $300,000.

Again, when it comes to insuring the correct value on your property, we want to protect our clients so that if they suffered a total loss and had to rebuild their home from the foundation up, they wouldn’t be left with out of pocket costs.  Review your home insurance coverage with your advisor today to make sure you are properly covered.

For more information or to find out if you have replacement cost on your home, contact Heather Mosher | 906.315.7235 |

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