Home Insurance Value vs. Home Purchase Value
This can be a very confusing topic for both the homeowner and the banks. Here at Eagle Harbor Insurance we unravel the mystery.
Essentially, the insurance you place on your home is to cover the amount it would cost to rebuild the home to like quality , size, and style. This amount is determined from the square footage of home, build quality, and location.
This is where the confusion lies. Many folks and banks think the purchase price of the home dictates and should mirror/ match the amount of insurance coverage. This could not be more inaccurate!
Here are two prime, yet very contrasting examples:
You purchase a waterfront home on Bainbridge Island for 1,800,000. Home itself is 2800 sq. ft. and of superior quality. Using an industry standard calculation of 250.00 a sq. ft. to rebuild, your homeowners coverage amount would be: 700,000
You purchase a home at a great deal in Winslow for 385,000. Home itself is 2450 sq. ft. and of average build quality. Using an industry standard calculation of 185.00 a sq. ft. , your homeowners coverage would be: 453,250
As you can see if we had used the home purchase prices, one would be ridiculously over-insured and the other would be woefully under-insured.
Moral here is:
Do not ever let your lender / bank dictate your homeowners coverage amount . That’s is our job as insurance brokers.
We use the latest cost estimators and access risk guides to determine the values. Just another real life reason to trust and use Eagle Harbor Insurance!