A Note About Homeowner's Insurance

This was included in the most recent Long and Foster e-newsletter to all agents and I thought it was good info to share:

MARKET VALUE VS. INSURABLE VALUE

When your client, who you have helped negotiate an amazing deal on a new home, asks how much insurance they need; what do you say? Knowing the difference between Market Value and Insurable Value can help you correctly advise your clients.

If you suggest the price paid, then your buyer will be including the land value in their insurance limit and possibly pay too much for their insurance. You cannot rely on the appraisal value, since most appraisals are a reflection of market value. Even tax assessments can be up to three years old and outdated.
The correct answer is to insure their home for its replacement cost; which is the actual cost to rebuild the house with an equivalent structure. Insurable value is the home’s replacement cost.

Example: Your client purchased a 3,000 square foot home for $300,000. But even though the purchase price is $300,000, construction costs in the area average $150 per square foot, so this structure has a replacement cost value of $450,000. This means that the home’s insurable value is $450,000 and not the $300,000 purchase price.


Use your resources. Allow Long & Foster Insurance to assist you and your clients with professional insurance expertise. By partnering with Long & Foster Insurance; you will stand out in a crowd of competitors.