Many factors are considered in determining your home insurance premiums and one of them is the value of your home. The value of your home for insurance purposes is not the same thing as your home’s market value. Essentially, insurance providers are mostly concerned with how much your home, and its possessions, would cost to replace if it was destroyed. They are not worried about the value of the land or the market conditions of your neighbourhood. What most people don’t know is that the replacement value changes based on several factors and it is important to reassess the value of your home every few years to ensure you have proper coverage if the worst were to happen.
So, what are the factors that determine the replacement value of your home?
- Age of your home
The age of your home is an important factor in determining your home’s value because some older homes have features that would cost more to replace or re-produce if damaged. Things like crown moulding or stained-glass features could be taken into account.
- Cost of building supplies
The cost of building supplies changes on a yearly basis. So, if the cost of lumber has gone up since the last time your home’s value was assessed, you’ll want to re-evaluate your home to ensure that if something did happen to your home, you’d get full coverage. Other costs to consider: your roof, exterior features (siding, windows, etc.), flooring, cabinets, and appliances. The quality of goods used to build your home are also a factor.
If you’ve done renovations recently, you’ll want to tell your insurance company. Since your home’s value is determined by how much it would cost to replace, if you’ve upgraded your home in any way, your value would have changed. For example, if you recently installed granite countertops where before you had vinyl countertops, the cost to replace those would be more significant than before.
- Meeting Code
If building code has changed since your home was built, the cost of bringing it up to code if it were destroyed needs to be factored in.
- Value of your possessions
Replacement value often includes the value of your possessions. If you’ve recently bought art, jewellery, or expensive electronics, you’ll want to inform your insurance broker so that the loss of those items can be factored into your home’s value.
While it might be tempting to avoid telling your insurance provider about upgrades or new purchases to avoid paying higher insurance premiums, it is important that your insurance company knows the value of your home. Not only will this speed things up if you need to make a claim, but it safeguards against the possibility of not being able to replace your home to its current standards.
Contact us with any questions you may have about your home insurance.