Today, I have Mike Reilly from Farmers Insurance with me to touch on a common question that comes up often in the mortgage business: “Why is the amount of coverage on my homeowners policy different from the purchase price or the value of the home?”
California is a unique marketplace. The difference in the numbers comes from something that’s pretty simple. The home’s value and the materials needed to build it are two different stories, and location is also a driving factor. If I had a four-bedroom home in San Francisco, it might be worth $2 million, but if I moved to that same home somewhere in the Central Valley, it might be worth $500,000.
The difference is only in where the home is located; it takes the same amount of lumber, the same number of roof tiles, and so on. The reconstruction cost is oftentimes different than the market value because we don’t insure the dirt that the home sits on.
If anyone has any questions specific to their situation, feel free to reach out to Mike at Farmers Insurance.
And if you have any other real estate questions or you’re thinking about buying or selling a home, don’t hesitate to reach out to us as well. We’d be glad to help you.