We made it through another long winter and signs of summer are bursting around Duluth!  The lawns are being tended to, Garage Sale signs start appearing on every corner and the House For Sale signs begin to populate the roadside.  Ahhh…summer is coming!

A year and a half ago, I went through the process of buying a home through 
J.S. Realty (I highly recommend them!) and I thought I’d share some insight.  During the buying process, I saw two different value amounts for our new home: one value from our appraisal and one from our insurance estimate.  I wanted to know why I had to insurance my home for more than I paid for it...because what I paid for it was what it was "worth" to me, right????  WRONG!

If you are financing your new home, your lender will require an appraisal before lending you the money.  This report supposedly answers the question “What is your new home worth?”  Here is the important distinction…this is a Market Value Appraisal, which by its nature means "what your home or property will sell for in its current market".

Nearing the end of your home buying process, yet BEFORE your closing date, you will need to buy Homeowners Insurance.  As you review your Insurance values with your local agent, you may notice that your home’s insurance value is higher, if not extremely higher, than your appraised value.  This is because insurance companies deal in Replacement Cost (RC), which is "what it will cost to replace or rebuild your home" in a total loss (example: if your home burns to the ground).  Therefore, insurance companies need to insure your property for the value (amount) that it will take to do so.  This is why it is very important to always insure your home to its RC value.

I hope this helps…we get this question a lot in our agency and it seemed like the perfect time to address it.  If you are in the market for a new home…happy house hunting and keep 
Young & Associates in mind for all your Homeowners Insurance needs!

~Jessica Betts, Business Manager

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