Insurance reimbursement from a homeowner’s policy may be based on either the fair market value of a home or the replacement value of a home, and that distinction can be devastating if you don’t choose carefully. While each type has benefits, it’s better to go with replacement value if you want the best chance of getting a reimbursement that covers your needs. Companies like Mutual Insurance Partners in Follansbee, WV, can help you choose the right type of homeowner’s insurance that will cover you when you need it most.
Comparing the Current Cost of Your Home to the Cost to Rebuild It
Basing what you get on the fair market value of your home means that if, say, your home was damaged beyond repair in a disaster and you had to rebuild, you’d get an amount of money that covered the current fair value of your home when it was intact. It would not cover the actual cost of rebuilding the home. Basing what you get on the replacement value means you’d get an amount that could cover rebuilding the house so that you had something similar to what you had before.
It’s true that the fair market value is often higher than the replacement value. However, there are many times when the housing market is in bad shape, and the replacement value is actually higher than the market value at that point. Plus, if you pay for fair market value coverage, and the fair market value is higher than the replacement value, you’d be paying for coverage you didn’t need and higher premiums than you really had to.
Contact Mutual Insurance Partners in Follansbee, WV, to discuss which type of coverage is best for your situation. Remember stability: Replacement value will always cover the cost of replacement.
