Homeowners Insurance - Replacement Costs vs. Market Value

Are you planning to purchase a home insurance policy but still confused about the decision of which policy terms to buy? Most policy buyers are often caught up in choosing between the replacement cost and the fair market value provision within a policy. The difference between the two determines how the dwelling, structures and/or the contents of the home that were damaged will be replaced.

Let's suppose a property burns down in a fire:

• If the owner subscribes to a replacement cost provision, he or she will get the total payment for the house to be rebuilt as well as all the personal properties based at today's construction price.
• On the other hand, if the property is covered by the market value coverage, the insurer will only pay the policy holder the price of the property and the personal belongings based on its market value at the time of the policy's creation.

The gap between replacement cost and the market value can be huge when building costs vary over time and the costs of materials change over a period of time. From demolition to the costs associated with an entirely new construction, the market conditions, technology and consumer demand will dictate the rise and fall of prices in any housing market. The amount to which the insured paid for the market value of the house in the 1980's may not be enough to cover the new construction costs should your home be rebuilt 30 years later.
Homeowners seeking property insurance are attracted by the lower premiums associated with policies that use market value provisions within their terms believing that a tragedy like fire will never happen to them. Those policies with actual replacement cost provisions of course carry higher premiums.

Technology is ever changing therefore TV sets, computers and kitchen appliances will depreciate and become obsolete faster than most household goods. A market value policy may no longer cover the cost of a component that has been deemed obsolete and certainly not cover the cost to replace the lost item with the latest flat screen TV on the market today.

A replacement cost home insurance in Gloucester County would certainly be a better choice than market value coverage in today's more depressed housing market conditions. The truth is that home prices could not get much lower than they currently are today and insuring a home must consider that prices of homes and the cost to rebuild homes will certainly rise in the coming years.
After deciding which home insurance provision to take, buyers need to know how to decide on what type of perils they may encounter, the level of liability coverage that is appropriate and the coverage for personal goods or extra riders that may be required for jewelry and other more expensive possessions. Seeking the help of an inspector for homeowners insurance in PA would certainly make the task of evaluating replacement costs for your home much easier.

An inspector would usually look into:

1. The age, construction type and location of the property
2. Provide estimates should you have to rebuild portions of the home.
3. They can also look into your insurance claim history (if there's any)

Buying additional home contents insurance in Bucks County is usually handled as a rider to an existing policy. You can purchase affordable property insurance in Southampton PA that would cover the majority of your home's value. A broker will usually compare Penn National insurance with perhaps Travelers or Hartford Insurance and provide you with the results of those comparisons.