Insuring your home in Reading, Sinking Spring, Wyomissing, Wernersville, Myerstown, PA, and the surrounding areas is important to prevent a catastrophic financial loss should the worst happen, but what happens when you go to replace and/or rebuild? There are two options for your home insurance when it comes to replacing or rebuilding: market value or replacement cost. At Stubbs Insurance Agency, we have many clients that are using one or the other with their homeowners insurance, but before you choose one it is important to understand what each choice means in a practical sense. This has become much more important over the last few years as home prices have jumped, and the cost of replacing the things inside your home has also gone up. Reviewing your homeowner’s policy annually to ensure that you have the right coverage is important so that you don’t end up having a gap between what your policy will pay and what the cost actually is. Contact us today to schedule your home insurance review and understand the difference between replacement cost vs market value.
Which Option Is the Right One
Market value might seem like the right choice, perhaps even the obvious choice, based on the term. But, what market value really means is what would the cost be to purchase your home from a realtor if it were on the market today. However, the price between buying your home existing, and having to build it new are not the same. This is where replacement cost as an option comes in, as this option is based on the cost to rebuild or repair your home with like materials.
While the market value of your home may be $250,000, the cost to build your home could be $300,000. If you have market value in your home insurance policy, you would be left with a gap of $50,000 that your insurance would not cover. However, replacement cost would account for this difference, and you could rebuild your home with the $300,000 build cost if your home were completely wiped out.
Protecting Against a Future Risk
It can be hard to visualize future issues, especially large and catastrophic issues, and how we would react to them. Because of this, many are looking at the immediate costs of each option and may choose the option that saves them money today rather than saving them tens of thousands of dollars when the event comes through and takes out their home. Working with an experienced independent insurance agent can help to explain the differences so you make the best decision for your situation.
Home insurance is designed to mitigate the risk of a major loss or damage to your home in Reading, Sinking Spring, Wyomissing, Wernersville, Myerstown, PA, and the surrounding areas, and understanding what each part of the policy means is important. Working with Stubbs Insurance Agency will provide you with unbiased information that you can use to make the best decision for your family. Contact us today to review your home insurance policy and coverage types.
