Property taxes and homeowners insurance are two of the most common expenses homeowners face.
Regarding your home, three different types of values are essential to understand: assessed value, market value, and insured value.
- The assessed value is the estimated value of your home by your local government, usually based on the sales price of similar homes in your area. It is used to calculate your property taxes.
- The market value is the price your home would sell for on the open market. Several factors, including the location of your home, the size and condition of your home, and the current state of the housing market, determine it.
- Insured value is the amount of money your homeowner’s insurance policy will pay out in the event of a total loss (materials, debris removal, labor, etc.). It is typically based on the cost of rebuilding your home in the event of a total loss. It is often somewhere between the assessed and market values. Still, it can be higher or lower depending on different situations. Either way, this does not include the land value like the assessed and market values.
Ensuring your homeowner’s insurance policy is for the correct amount of coverage is critical. If your policy is underinsured, you may need more money to rebuild your home if it is damaged or destroyed. On the other hand, if your policy is overinsured, you will be paying more for insurance than you need to.
You can use a home insurance calculator to determine the correct amount of coverage for your home. These calculators can help you estimate the cost of rebuilding your home based on its size, location, and condition. You can also hire an independent appraiser to review your property if you prefer a more accurate estimate.
So, even if your property taxes go up, and so does the cost of your insurance, they are not necessarily directly related.
However, if you consider making any changes to your home, that could change any of these values.