Estimating Your Home's Value

Do you have enough insurance on your home to rebuild it if it is destroyed? Do you even know how to calculate the amount of insurance you need?

“You need to have enough insurance to cover the cost of rebuilding your home at current construction costs,” says Loretta Worters, Insurance Information Institute (III) vice president. “The cost of rebuilding could be more or less than the price you paid or could sell it for today. Don't include the cost of the land, and don’t base your rebuilding costs on the price you paid for your home.”

If the bank holding your home mortgage requires you carry enough insurance to cover the mortgage amount, make sure it’s enough to cover the cost of rebuilding, says Worters. And, once your mortgage is paid off, don't cancel your homeowners policy. Homeowners insurance protects your investment in your home.

Here’s how to estimate your home’s value for insurance purposes.

  1. Start with the square footage of the structure
  2. Multiply this figure by local construction costs (Call your local real estate agent, builders association or insurance agent to learn construction costs in your community.)
  3. Factor in other aspects that will affect the cost of rebuilding your home:
    • The type of exterior wall construction–frame, masonry (brick or stone) or veneer
    • The style of the house (ranch, colonial)
    • The number of bathrooms and other rooms
    • The type of roof and materials used
    • Other structures on the premises such as garages, sheds
    • Fireplaces, exterior trim and other special features like arched windows
    • Any custom-built areas (such as a kitchen or even the entire home)
    • Improvement to your home–adding a second bathroom, enlarging the kitchen or other additions that have added value to your home