As an insurance professional, the homes you cover likely run the gamut from the higher end of the real estate value spectrum to the lower end. Whether you're determining replacement costs for a mansion or a one-bedroom condo, accuracy is critical to providing sufficient coverage. However, a new report in The Wall Street Journal states that more expensive homes are often most likely to be insured with an insufficient replacement cost.
Experts say this is because homes may incorrectly be insured for the market value rather than the actual replacement cost. Jim Fiske, senior vice president at Chubb Personal Insurance, a Warren, N.J.-based insurer, says that older homes sometimes carry the most inadequate coverage. He estimates that historic houses, with hard-to-replace features like intricate woodworking, can cost "2, 4 or even 10 times the market value of the home" to rebuild. Sometimes those additional costs pertain to the specific wiring and plumbing needs that go along with older building styles.
Robert P. Hartwig, president and economist at the Insurance Information Institute, told the Journal that homes in "jumbo-mortgage territory," or financed at $417,000 or higher, depending on the area, "face a far greater likelihood of inadequate coverage in case of a total loss." Because these jumbo mortgages are such a sizeable investment, it's arguably more important than ever for those homes to be insured properly.
"What you need to do is insure for the replacement value of home, not the value of the mortgage," he says.
To determine an accurate and reliable replacement costs, insurance professionals must depend on a streamlined valuation solution to ensure an accurate valuation, whether for a high-value or Mainstreet home. At e2Value, we provide a suite of solutions that can be integrated into your existing valuation workflow. Contact us today to learn more.