Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
Home prices do not reflect the cost of reconstruction. Insurance is there to rebuild your home if it is damaged. Most claims are not total losses. It is always the rebuilding process that is expensive. It is expensive to make a kitchen that has been damaged by fire look like it never happened.
A lot of factors go in to the cost of insuring a home. The market value of a house is not one of them.
Some of the major factors of the cost of insurance are:
1) the cost to rebuild the home in the event of a total loss. (Building materials, labor . . . ) Although home prices have decreased in much of the country the cost of building homes has not necessarily decreased.
2) the likelihood of a loss in that area (proximity to brush fire and fire departments, likelihood of a natural disaster, number of break-ins . . . )
3) prior claims filed on that house or by the person seeking insurance
4) value of the contents inside the house.
Branch Owner, TWFG Insurance Services, Fremont California and the Greater Bay Area Representing Dozens of Insurance Carriers
Market value has no bearing on replacement cost to rebuild your home. In many areas of the country with the hit on the economy homes can actually be purchased for less then the cost to build. If insurance companies only paid on market value many people would find themselves tens of thousands if not hundreds of thousands dollars short if there was a total loss.
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Some of the major factors of the cost of insurance are:
1) the cost to rebuild the home in the event of a total loss. (Building materials, labor . . . ) Although home prices have decreased in much of the country the cost of building homes has not necessarily decreased.
2) the likelihood of a loss in that area (proximity to brush fire and fire departments, likelihood of a natural disaster, number of break-ins . . . )
3) prior claims filed on that house or by the person seeking insurance
4) value of the contents inside the house.