When insuring your home, it is very important to understand the valuation method that your policy uses to insure your home and the personal property. This will determine how much a company will pay you in the event of a claim.
For most homeowners, we recommend that the dwelling and personal property be insured on a Replacement Cost basis. This means that the house and its contents would be repaired or replaced with the same type of products and materials based on current day prices (no depreciation).
How is Replacement Cost Calculated?
Agents and insurance companies utilize software that takes the information about your home (construction, finishes, # of bedrooms and baths, zip codes etc.) and derives the replacement cost value of your home.
Replacement Cost and Market Value
It is common for consumers to confuse Replacement Cost and Market Value. Market Value is the selling price of a property at a particular time. Market Value includes the home and the location of the property (land). The location of the property and the land it sits on are not considerations for the Replacement Cost of the dwelling and contents. Market Value is a best suited for the real estate side of owning a home.
Actual Cash Value
Finally, on rare occasions, it may be appropriate to insure a property on an Actual Cash Value basis. The major difference between Replacement Cost and Actual Cash Value is depreciation. If your home is insured on an Actual Cash Value basis all claims assessments will be subject to the depreciated value of the dwelling and personal property. This will substantially reduce the amount of monies you would receive for a claim. Homes that are insured on an Actual Cash Value basis typically have lower premiums since the payout of a claim is typically much less.
Our staff would love to talk with you about you Homeowners" insurance and help you decide what coverage is best for your home. Just give us a call at (806) 763-7311.
We can also save you money on your auto insurance when we bundle it with your home. Also, if you work from home or have your own business, our business insurance products are tailored to provide a broad range of coverage and very competitive prices.
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