A homeowners insurance policy is designed to ease the financial burden of dealing with certain types of damage to your property. To provide sufficient coverage and determine appropriate payout amounts, insurance providers need to know the value of your insured property. For this reason, the answer to whether or not homeowners insurance is based on property value is “yes,” since this is what determines premiums and how much you’ll receive when a claim is filed.
When you first purchased your home, you likely received a purchase appraisal. Performed by a licensed appraiser, this is a type of appraisal that may also be done to determine your home’s fair market value if you opt to refinance or sell. Mortgage lenders and real estate agents typically use results from purchase appraisals. Your insurance provider considers appraisals of this nature as well to set your premiums when you obtain a policy. A purchase appraisal is usually based on current market value.
If there’s a need to file a claim, it’s common for an insurance provider to request an appraisal, referred to as an insurance appraisal. The reason for taking this step is because it’s possible that the value of your home and applicable insured property changed since the initial purchase appraisal was done. During the claims process, either the insurance provider or the policyholder may request an appraisal of property value. An insurance-based appraisal, whether it’s requested by you or your insurance provider, often involves:
• An inspection of your home
• A determination of the value of your personal belongings
• A combined total of the assessed value of your home along with its property and your belongings
The results from this type of appraisal are used to determine how much it will cost to replace or repair what was damaged. Because of the potential for disagreement, an appraisal of this nature may be done by an independent appraiser.
Figuring Out a Fair Property Replacement/Repair Value
The value of a homeowners insurance policy becomes evident when something, such as a severe storm or theft, causes damage to property that’s insured. When a claim is submitted, you’ll receive a payment considered fair for what needs to be replaced or repaired. With personal belongings insured by a homeowners policy, depreciation is accounted for in the appraisal. This is done to allow for decreased value due to age and wear.
The “Appraisal Clause”
It’s not unusual for the parties involved to disagree about what’s considered “fair” for the purposes of replacement or repair. Most homeowners policies have an “appraisal clause.” Essentially, what this does is allow disputes over property value to be settled without legal involvement. In this instance, an impartial third party acts as a mediator to determine a reimbursement amount that’s considered acceptable for both parties.
It’s essential to make sure to buy your homeowners insurance from a trustworthy, experienced provider. For reliable, affordable home insurance, San Diego homeowners know they can trust Altra Insurance Services. We also provide renters, commercial, motorcycle, and auto insurance. San Diego residents can receive a free quote by calling one of our friendly agents today at (800) 719-9972.