Your home may very well be one of your largest financial investments, so it’s important to ensure that it is fully protected in the event of a fire or other extreme weather incident where your home may be unsalvageable. When evaluating the coverage options provided by your insurance provider, it can be hard to navigate the insurance options available and to know exactly just how much insurance coverage you will need in the event of a loss. In this blog, we evaluate the most common home or dwelling values and how they differ from one another.
What is Insurance to Value (ITV)?
To put it simply, insurance to value is to ensure that an insurance policy adequately covers and protects the value of a property or dwelling in the event of a total or partial loss. It is the calculated cost to replace a building or structure, as close as possible to its original state by an insurer and ensures that premiums adequately cover the value of the improvements located on the property. Alternatively, it can be viewed as full disclosure that the building being insured is to the value agreed upon.
There are three ways to estimate “home values”
There are 3 main home or dwelling ‘values’ used to determine the “value” of a residential structures:
- Market Value
- Assessed Value
- Replacement Cost
Replacement cost is a term used in the insurance industry to reflect the estimated actual cost to replace a home in the event of a loss. For example, in the event of a fire completely destroying your home, a replacement cost claim would be used to cover the cost of labour and materials needed to rebuild your house. In this instance, the lot on which your home is located is not included in the “value” of your home, only the physical structure itself. Replacement cost is based on:
- Material & Labour
- Site Supervision Requirements
- Architect Services
- Contractor Fees
- Building Codes
- Class of Dwelling
- Dwelling Size
A home’s market value is an estimate of the current price that a residence, along with other improvements and including the land/ lot it is situated on could be sold for in a specific real estate market. This is based on a variety of factors that do not necessarily reflect only the physical attributes of the dwelling but also includes factors such as the home’s location, the current real estate market and other external factors such as:
- The desirability of the school district
- The condition of the house
- Scenic views and landscaping
- Lot size and location
- Economic factors
The assessment value of a home is based on the home’s market value and is generally used to determine property taxes. The tax assessment value is usually estimated by a municipal property tax assessor and is based on market value. This may or may not be the same as your current market value depending on when it was assessed.
A tax assessment is based on factors such as:
- Geographic location of the house
- Lot size
- Number of bedrooms
- Number of bathrooms
- Square footage of the dwelling
- Age of the home
- Exterior condition of the home
- Added features such as a deck or garage
Understand Your Home’s Rebuild Cost
To ensure the cost to replace your home is fully covered by your insurance company in the event of a partial or complete loss, it’s important to know the replacement cost of your dwelling. Your insurance company may provide you with an estimated replacement cost for your home. However, if you are in the market for a new insurance provider, or are concerned about your insurance coverage, you may want to consider using an independent replacement cost calculator.
The Douglas Cost Guide: Trusted by Canadian Insurance Professionals
Douglas Cost Guide is the most comprehensive independent residential replacement cost calculator in Canada. It’s an essential tool for acquiring an accurate replacement cost for your home and is used and trusted by leading insurance professionals.
The Douglas Cost Guide evaluates a number of specific elements and components of your home and the rebuilding process in order to provide the most accurate replacement cost available. The costing data combines actual construction costs and estimates for residential dwellings in Canada.
In the event of a total or partial loss of your home, ensure that you are properly insured so that your home can be replaced with little out-of-pocket expense. Trust the Douglas Cost Guide to acquire an accurate home replacement cost.