Why Is My Home Insured for More Than It’s Worth?

You may have noticed that your home is insured for more than its market value, which if you stop and think about it, actually makes sense.

While the market value of your home is commonly based on tax assessment records, real estate appraisals, or the recent selling value of homes around your neighborhood, your homeowners insurance policy limit is based on the cost it would take to replace your home if it were destroyed. This is frequently an amount greater than what your home could be sold for.  There are many factors that affect your home’s reconstruction value; here are a few that could do just that and why your insurance coverage is so much higher than what your home is worth.

Factors That Affect a Home’s Reconstruction Value

Many different factors affect how much it would cost to reconstruct your home entirely, but here are the main ones:

  • The local construction costs
  • The home’s square footage
  • Any improvements or additions made to the home
  • The materials used in the interior and exterior construction
  • The style of the house
  • Any unique or custom-built features like fireplaces or exterior trim

It’s important to note that it’s common for a house to have a significantly higher homeowners insurance limit when it’s an older home. The reason for this being that building materials common to older homes like plaster, hardwood floors, trim, and full-dimensional lumber come at greater costs than a modern home of the same size and style.

For all of your homeowners insurance needs to ensure your home is fully covered for a complete reconstruction, contact Miller Insurance Associates in Carlisle, Pennsylvania.