Person holding hands over drawing of house and rainPerson holding hands over drawing of house and rain


By: SunnyHill Financial

Natural disasters including fires, earthquakes, floods, and tornadoes have been in the news regularly lately.

Many homeowners are wondering how to effectively insure their homes against a natural disaster and how much insurance coverage they should own on their home.

This article should help you organize your thoughts about your home insurance options. To begin, there are three primary types of value that property holds.

Replacement Value: This is the estimated cost to replace a home and rebuild it from scratch. Replacement value can be influenced by several variables. If construction costs have risen in your area due to high demand and limited supply of construction labor, building supplies and contractors, the replacement value will increase. Also, if you improve your home via renovations, remodels, and enhancements, the replacement value will increase.

Market Value: This is the estimated current selling price of the home. Market Value is derived from buyer demand. More competitive housing markets / locations will command higher market values. Factors like school districts, safety, walkability / access to transportation, trends in the local real estate market, land value, and national economic trends will effect the market value of a property.

Personal Value: Sentimental value and ease of replacement value are subjective values. Personal value is not measured by markers like real estate market fluctuation nor US economic health.

Two easy measures to calculate when making a decision to boost home insurance.

If you renovated or added expansion projects to your home, you should look into increasing your home insurance.

Also, if construction costs have risen significantly in your area, you should look into boosting your home insurance.

Conversely, if land values have increased, but construction costs have remained stable, you do not need to increase your home insurance. This one is important to consider because it can feel counter intuitive.

In this example, your home may be located in an area full of new development and gentrification. This can cause the land value to increase. However, if construction costs and therefore replacement costs of your home have not changed, you do not need to increase your home insurance.
If you have questions about home insurance, and how it relates to your mortgage or re-financing contact SunnyHill Financial at 844-648-5512.