Replacement cost is very different from market value. Insurance premiums are not based on the current resale value of your home, but on the cost to rebuild and / or replace it. Replacement cost factors can include material costs, fuel and energy costs, cost and availability of skilled labour, debris removal, site accessibility, winter heating of the construction site and changing construction codes. Market value factors look at desirability (location), land value and market value of surrounding homes. These factors have no direct association to your home's replacement cost.
It is very important that your home be insured to its accurate replacement value. The purpose of Insurance To Value (ITV) is to determine the replacement value of your home if it was severely damaged or destroyed. It is a good idea to re-evalute your home's replacement cost every 5 years to reflect any changes in the cost of construction, building materials and labour in your region. In addition, new replacement cost figures should be established after any renovations, upgrades or alterations to your home.
When was the last time you had your house properly evaluated?
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