As a homeowner, you want to make sure your home is protected adequately. After all, this may be your biggest investment. However, some things aren’t what they seem when it comes to your home’s value especially with home values continuing to rise over the last few years. If you are a homeowner or planning to purchase a home, you need to know the difference between dwelling coverage and market value to ensure your home is insured for the right amount.
Dwelling Coverage Versus Market Value
Dwelling coverage is a very important concept when referencing your homeowners insurance coverage. Let’s say your home catches fire and can’t be salvaged. This coverage is the estimated cost to replace your dwelling/home due to a covered peril.
Market value, on the other hand, is the amount you could buy or sell your home in the market right now. Realtors make a market analysis of homes in your location based on sale price and square footage most similar to yours and thus, establish a market value. What this does not take into consideration is the replacement cost should a covered peril destroy your home.
So, you may be asking yourself how much insurance protection you need and should it be based on dwelling coverage or market value.
Why Dwelling Coverage is Optimum
Let’s say your home catches on fire and is totally destroyed. You currently have market value-based homeowners insurance protection. The market value is established at $200,000 yet when you get quotes to rebuild your structure, that amount doesn’t come close to the cost to rebuild. It is essential to have your home insured for the rebuilding cost versus what the real estate market establishes your home’s worth. Do you have the right type of Alabama homeowners insurance protection?
Key Factors Impacting Dwelling Coverage
Covid-19- When Covid-19 hit, many production/manufacturing sites were forced to shut down which meant no product was being made or sold. With more businesses shutting down, many people were faced with working out of their homes which lead to many homeowners moving to other locations while others renovating their homes. This pandemic created an entire shift of the world how you once knew it.
Supply and Demand Struggles- As a result of the shutdowns, there was a significant supply shortage while people had a huge demand for materials. In fact, this struggle between supply and demand drove up the cost of building materials, especially lumber. Lumber prices skyrocketed 135% higher than pre-covid times.
Shortages of Workers- Many businesses have felt the impact of the struggles and continue to experience a lack of laborers and skilled workers. Without enough workers, the manufacturing plants simply can’t make up the momentum for market demands. These obstacles have continued to drive up dwelling values and market values.
Contact Burkett & Associates Regarding Dwelling Coverage Versus Market Value
It is recommended you assess your dwelling value with us every three to five years to ensure your home is adequately protected. Dwelling coverage includes the cost to rebuild, along with the demolition of the undamaged areas and debris removal. Contact our offices today at 256-704-7400 and we will assist you with all your Alabama homeowners insurance needs.