Farmowners insurance is a package policy intended to provide owners with a wide variety of options while providing essential protection for their buildings and liability exposures. This article will concentrate on information relating specifically to the amount of insurance on the residence and address replacement cost vs. market value.
In order to have the most coverage for your home, you should always insure to replacement cost. (Out buildings may be insured for replacement cost or actual cash value.) Why, you may ask, if my home’s market value is higher, why can I not insure for full market value? And conversely, you may ask why can I not insure for market value since it has decreased in recent years?
Since market value takes into consideration not just the house but the land and location, it stands to reason that the land can not be insured and the desirability of the location, which affects market price, is not insurable. Replacement cost, on the other hand, is the cost to replace the house or building should it suffer a total loss. Some of the factors included in establishing replacement cost include:
• Original building-type construction is a consideration, especially when rebuilding an older home
• Architect’s/designer’s fees, permits, engineering fees, etc.
• Building codes and regulations may have changed since the original construction and that would affect how the new structure is to be built.
Blue Bridle uses established, reputable systems to provide you with an estimate of the replacement cost of your buildings. These estimates are updated annually for policy holders in order to stay abreast of construction costs. As always, you are encouraged to call with any questions about your Farmowners insurance policy or for information on any equine insurance products.