Getting an insurance for a home is the best thing one can do for the family. This is because a lot can happen in the future. Accidents occur leaving everything in ashes. Very few people have enough savings to buy a new house without the help of a bank to provide them with a mortgage plan. This will not be possible for those who are not working because they have retired already. It is also not a good feeling being chased around by property owners demanding their money when renting apartments. In order to avoid all these, it is important to take insurance cover for the house in order to be on the safe side. Below is how to calculate the value of that house for insurance purposes.
Market value and insurance costs
In economics, it is said a house does not depreciate. However, it is important to take care of that house and ensure that it is in good condition. The market value is the value that is prevailing in the market for the same type of home. A contractor, who is aware of the trends in the market, can calculate the value. This is because they work with these materials on daily basis and therefore know their market prices. It is also important to get a good contractor who will provide realistic information and not the one who is there to please their clients’ ears. It is better getting the hard truth than being lied to on the face only to incur great losses in the future.
Calculating the original price
It is easy calculating the original price of the house if the house was complete before purchasing it. This is because the only thing added was probably furniture and other things that are needed in the house. For those who build their own home, they have to involve their contractor to calculate the cost of their house. Alternatively, estimations can be done from the payment made to the contractor. This is done by deducting the service fee from the total contractor costs; the balance will be the amount used to build the house and includes the cost of buying the land to building the roof of the house. The original home value for insurance is needed in order to determine how much the house has appreciated with from the time it was built or bought.
What you need to know about mortgage loan calculations
When calculating for the home value for insurance purposes, it is important to disclose all information regarding mortgage payment if still paying at the time. This is important for the insurance company to use in calculating the premiums that should be paid and the period. Depending on the mortgage payment, the premiums have to be less but a longer period in order to avoid constraining the homeowner. The mortgage payment can also be used to determine the home value. This is achieved by calculating the amount paid to the bank, and then subtracting interest on the loan.