What valuation method does your flood insurance use?

Flood insurance uses five different options for home value determination and which you choose for your policy decides how much you will get for your house in the event of a flood. This blog explains those choices and how they affect your repairs or rebuilding if a flood occurred.

Your insurance policy from Alliance Insurance Partners serving Scottsdale, AZ 

might include one of four different types of valuation for your property and home. This valuation determines the reimbursement you would get if you had to file a claim to rebuild due to loss. The common valuation models are:

  • functional replacement cost,
  • market value,
  • replacement cost,
  • actual cash value.

Policies rarely use functional replacement cost, but you can request it. You would receive the appropriate amount of money to rebuild with different, cheaper materials such as drywall instead of plaster. Your new building would resemble, but not replicate the original.

Market value also rarely gets used, but insurance companies may use it to determine the appropriate valuation method for the policy. This refers to the property estimate it would fetch at a sale. This refers to the same things as open market value, fair market value, and fair value. This could use the basis of a home appraisal.

Most policies use replacement cost as the property insurance valuation method. It comes closest to reimbursing you for what it actually costs to rebuild your home.

An actual cash value policy pays who the current value which may be much lower than you paid for the home. If the neighborhood declined while you resided it in it, the home lost value. You get the lower value.

You can purchase a warranty that insures your home for the actual cost to rebuild including any changes to local building code that would cause you to spend more money. You must request this and the premiums are higher.

Contact Alliance Insurance Partners serving Scottsdale, AZ to learn more about flood insurance and protecting your home. Let us help you keep your property safer.