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Insurance to Value

Getting insurance for your home is a basic part of homeownership, and a decision that most don’t think twice about during the closing process.

However, considering the surges in material, labor and building costs, it’s worth taking a moment to review your policy limits for what is most  likely your most valuable asset– your home.

Based on current inflation alone, most homeowners are not adequately covered. They could find they are responsible for a sizeable portion of the rebuilding cost after a total loss such as a fire.

Insurance to value (ITV) is a concept used by insurance companies to determine how much would be paid out after a total loss. The full cost to rebuild a home in the insurance world is known as Replacement Cost.

Unlike market value, Replacement Cost does not include the cost of land, and is based on the cost to rebuild the home using today’s cost of materials and labor.

If you are insuring your home to 100% of its rebuild value and have a replacement cost policy, the insurer will pay up to the policy limit (minus the deductible) to rebuild. There are endorsements that can be added to homeowners’ policies that extend or guarantee the rebuild beyond the policy limit. These endorsements offer peace of mind since there are components of reconstruction that are challenging to quantify.

Just as important, the estimated replacement cost value on your policy must be accurate to help you avoid under-insuring your home. Many of the available endorsements that extend or guarantee rebuild costs require that the home be insured to 100% of its value for the provision to apply. Depending on the specific policy contract, there can be penalties if the home is underinsured by a certain percentage of its replacement cost.

While we always advise clients insure their home to its full value, there can be room for adjustment based on individual needs for limits related to personal belongings or detached outbuildings. Depending on the insurance company, some components of your policy can be customized.

For high-value homes, coverage provided by standard carriers rarely provides a level of adequate protection. Avery works with elite premier insurers who understand the unique needs of these homes.

Talk with an Avery personal risk advisor about the appropriate amount of coverage for your home and the best way to structure your policy.


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Avery Insurance Agency
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