Insurance to Value

Home Replacement Cost Vs. Market Value

As a homeowner looking to buy home insurance in Ontario, you may be told by your insurance provider to consider insurance to value. But exactly what does ensure to value mean?

First, let’s look at the difference between home replacement cost and your home’s market value as this will affect how you determine the insurance to value amount required to best meet your needs. If you prefer to speak with one of our home insurance brokers, please call us at 1-866-955-8386.

Home Replacement Costs

To determine home replacement costs (the amount of money it would take to replace or rebuild your insured home) a builder would multiply the total square footage by whatever the current rate is for the “cost per square foot” to build. So if your home was 2,000 square feet and the cost of building was $120 per square foot, the home replacement cost would be $240,000.

Many people who buy home replacement cost insurance are surprised to learn that this is not insurance to value. They soon discover that the insurance they initially bought is not enough to cover the current insured loss. Since replacement costs will vary with time, it’s a good idea to do an annual review of your home replacement cost insurance policy. This is especially true if you have done any major additions or renovations to your home.

Home replacement costs only covers the building itself and the value of the land or property is not included. As of this writing, the national average for building costs in Canada was about $150 per square foot.

Talk to our Huronia home insurance brokers about adding an inflation clause or a “guaranteed replacement cost” to your insurance policy. This will adjust for any changes in construction labour and materials costs and cover the full cost of replacing your home, regardless of the insurance policy limits.

Home Market Value

The housing market fluctuates according to supply and demand and is directly affected by other influences like proximity to transit and schools, and availability of employment or other similar type homes in the area.

In a city like Toronto, the average cost of a home in the early 1950s was around $50,000. By 1974 it had risen to over $250,000. By 1989 it was worth around $470,000 and by 2016 it had risen to $750,000!

However, in a city like London Ontario, the average home price for 2016 was still only $330,000. Therefore, the market value of your home would really depend on your home’s location and the housing market trend for your area. The home market value includes the home in its current condition as well as the value of the land the home resides on.

Underinsured Homes

Here’s another reason why insurance to value is so important. Just as the value of homes in Toronto and other suburban areas of Ontario have gone up exponentially, so too has the cost of construction. Because of this, it’s important to regularly update your home replacement value, especially for the area in which you live. Otherwise, if your home is destroyed or badly damaged by an unfortunate event, you could be faced with an underinsured home. Your insurance premiums may go up accordingly but do not base your decision on just premiums alone.

High Value Home Insurance Ontario – Insure to Risk

In hot housing markets like Ottawa and Toronto Ontario, market values for single-family homes can exceed $700,000, which can make insurance to value even more complicated. Many of these non-average homes also include high-end extras, including additions and finishing, so it’s important to work with a home insurance broker that can accurately calculate insurance to value on your above average home.

Huronia home insurance brokers work with Canadian insurance providers like Chub and Aviva since they specialize in high end home insurance coverage, as well as high limit jewelry coverage and other elite claims services.

About Huronia Insurance Group

Huronia Insurance Group is headquartered in Barrie Ontario. For more than two decades we have been helping southern Ontario residents find the right homeowners insurance including seasonal dwelling insurance and rented dwelling insurance. Huronia services many communities between Barrie and the Greater Toronto area.

For more information on insurance to value or how to buy home insurance in Ontario, please contact our Huronia home insurance brokers at 1-866-955-8386 or send us an email.

If you prefer to contact us online, please complete our online contact form.

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