Most people understand that the goal of a homeowner policy is to restore a home and possessions to the way they were should a natural or not-so natural disaster strike. If the coverage is too low, the homeowner may not have enough to fully cover the losses incurred.
Although protecting homeowners is the primary reason Insurance to Values (ITVs) or structure replacement coverages should be as accurate as possible, there are other potential impacts of getting ITV wrong:
Today’s best practice for reconstruction cost estimating or Insurance valuation uses information specific to each home and its location along with detailed and extensive construction knowledge to create an estimate—a method similar to those used by builders. Current localized costs of labor and building materials are applied to create a cost estimate that is unique to the specific home at the time of the estimate. This produces objective estimates without the inaccuracies that are introduced by subjective quality judgments or unsophisticated estimating tools.
Accurately estimating reconstruction costs requires an estimation tool that was designed upon a thorough understanding of construction techniques and the interplay of building characteristics as well as up-to-date, localized material and labor costs. It requires a solution that is widely considered the prevailing benchmark for reconstruction cost estimating.
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