Homeowners Coverage vs Tax Assessment

“Why is my house covered for $X when my tax bill says my house is worth $Y?  Shouldn’t we change my coverage?” This is one of the FAQs we receive on a regular basis. Quite often (but not always,) the tax assessment is less than the homeowners coverage, which is based on home replacement cost, and customers feel that they are insuring their home for too much, and they are wasting money on their premium.

home replacement costWe determine the coverage you need by using calculations that are based the cost to rebuild your home if you suffer a total loss.  It also covers the cost to clean up the damage that is left behind. With inflation and the unpredictability of building supply costs, this number could be significantly different than the price you paid to buy your home.

Your tax bill is based on the market value of your home, that is, how much you would get if you sell it.  It’s also based on other factors like the market value of your neighbors’ homes and businesses in your community, and the operating costs of your town government.

A real estate appraisal for the purposes of selling or refinancing your home may end up a completely different number. This is because it is based strictly on the sale value of your home. It does not take into consideration the money needed by the municipality to fund services in your community.

Contact us if you have questions about your coverage. Now is a good time to review your coverage, especially if you’ve made changes to your home by upgrading.  We can easily calculate your current replacement cost.

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