Rice on the Side

       I speak with clients daily about the difference between what their home is currently appraised for, versus what their home should be insured for. Depending on who you’re speaking with (whether it be your loan/mortgage broker, your real estate agent, or your insurance agent), the “value” assigned to your home will differ slightly.

        For the sake of argument, I’ll stick to my specialty, as an insurance agent, when looking at your Washington home insurance policy, my goal is to make sure that you have adaquate coverage for your home as well as any attached and detached structures, were there to be a disaster such as a fire. This means we’re looking at how much it would cost, in the very worst case scenario, to rebuild your home, from the ground back up. Thus titled the “replacement cost” of your home.

       This differs from your homes appraisal, because that value includes any land that your home is located on; and a lot of times in the current real estate market, the property your home is on may actually be worth the same amount, if not slightly more, than the home itself. And, of course, the sale price of your home, is going to be what the current market value is if you were to looking at selling your home.

       I recently read an article that explained that nearly half of the homeowners in the US were unaware of the difference between these three values. Thus making the common mistake of requesting to lower the coverage provided for their home (because the market value has decreased), in hopes of lowering their annual premium. This is a risky move, and a much better idea is to entertain the option of raising your deductible. Many time, raising your home insurance deductible from $500 to $1,000 can save up to 25% on your annual premium!