When considering the value of your home, it is important to understand the difference between
📈 Market Value
💰 Assessed Value
💸 Insured Value
Although all three can impact the sale price, each is calculated differently and serve a different purpose.
The market value of a home is the price a buyer is willing to pay in its current condition. The value is determined by the local real estate market and can be affected by location, amenities, and current demand, among other things.
The assessed value of a home is the value determined by the local government for tax purposes. It is usually based on market value, location, size, condition, age, and more.
The insured value is what an insurance company uses to determine the amount of coverage it will pay in the event of a catastrophic event. It includes the cost of materials, labor, and ease of access, unlike market and assessed values, the land value is not considered for insurance purposes.
A property owner usually wants their market value as high as possible and the assessed value as low as possible. In many cases, the insured value will fall somewhere in the middle. There are instances when market conditions and other factors push this value above the market or below the assessed value.
It is important to review the insured value regularly.
Insurance agents have tools available to assist in providing a minimum suggested insurance limit. There may be endorsements available to the policy that help to mitigate or buffer fluctuations in these values or inflation.
If there is uncertainty, we suggest obtaining a professional appraisal.
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