We prepare a lot of insurance quotes here at Insurance For Texans and a lot of those are for Grapevine homes.
How do we do this?
The first step is determine how much money it would take to rebuild your home if a terrible situation happened and your house was destroyed.
Since home insurance is about restoring you back to where you were before something negative happened to your property, we want to make sure your policy would do exactly that.
The dwelling amount is this value and we aim to get it right EVERY TIME.
However, we often get questions we the dwelling amount isn't equal to the market value of the home we are insuring.
It usually goes, "How can you insure my home for more than it's worth?"
That's a fair question and it has a good answer!
In all fairness, it is more of a complex answer but we'll try to simplify it for these purposes of not making you run away from this blog with information overload.
Your home insurance policy exists to make sure you can rebuild your home in a total loss, and there are three values you should be aware of.
Market Value
Simply put, market value is the amount of money you could expect (within reason) to sell it for if you were to put your home on the market.
Real estate prices have soared in Texas in recent times. You could take a look online at a service such as Zillow and get a decent estimate of what your Grapevine home would command.
This and working with a local realtor to perform a comparative market analysis would be our recommendation. While there is a lot of information at your finger tips these days, a realtor will understand your home's value, and in your case, you want that to be high!
Appraisal District Value
You have an annual tax assessment in the state of Texas and from this comes an amount known as your appraisal district value.
There are a couple things in play here which help to determine this value. You want this value, unlike your market value, to be as low as possible since your tax bill is generated from this amount.
There has certainly been scrutiny of late on how this amount gets calculated. Politicians in Austin and local, tax assessors have certainly gotten "creative" with state budgets and how the money is collected.
You don't only want a low value for your tax relief purposes, you want it to keep state politicians in check.
Dwelling Amount
You want this value as precise as possible for it determines what you would be paid to rebuild your home. It's the source of rebuilding your life after your claim. It will influence your deductible since what you pay is usually a percentage of this amount. You want to strike the balance of having enough coverage without sending your deductible amounts to the moon!
So Why Should I Care?
Here are two very important reasons to care.
- You want to make sure your value of your largest asset is maximized by knowing the correct market value
- You want to make sure you have enough coverage in the event of a catastrophe leveling your home
Stuff does hit fans around here in Texas. Nobody is immune. For a dwelling amount to be larger than market value, we usually find that in situations involving homes with massive square footage and usually built by builders of tract homes.
It's important to remember many of the homes constructed between 2000 and 2010 had the luxury of a healthy supply of materials and labor. Homes were built pretty inexpensively.
The equation looked like this:
Major companies + larger homes + smaller home sites + bulk + low price point = bad business when the housing market collapses
It's a different world today. It is a challenge for any builder to construct at $50 to $60 per square foot.
A 1-off case for building will be expensive. To summarize, if your home as a $75/sq. ft market value, you will find the amount of money you need to rebuild will need to be higher than the home value.
Insurance For Texans is no stranger to this evaluation. We can help you navigate the nuance. If you want to talk through some uncertainty you have, we're glad to help. As a local, independent insurance agency, we have access to carriers across a wide marketplace to bring great options to the table.
