For most people, this is an easy one: because you can’t get a Scottsdale home loan without it. Banks would have a bad day if they lent you $200,000 and the house burned down. Chances are you don’t have $150,000 lying around to rebuild your house so that would leave the bank with nothing if you decided to stop paying (I’m sure you’d get over sticking them with the bill and having nothing to show for it but that’s not how banks roll). Now even if you did have that kind of cash lying around Breaking Bad style, you could probably find something much cooler to spend it on than a home rebuild (a Tesla Model S or every family vacation you want to take but haven’t are just a couple things that come to mind) but I digress.
Now some of you may be wondering where the $150,000 number came from and no I am not that terrible at math as you will see when we enter the math zone. You see, when you buy a house, you are paying for the house, the land, the location, etc. which makes up the market value. We here in Scottsdale insurance land don’t much care about the market value of the home; there are realtors and mortgage brokers for that. What gets us up in the morning is thinking about the replacement cost of your home. Just like it sounds, replacement cost is what it would cost for the insurance company to rebuild your home including labor, materials, etc. To understand how an insurance company comes up with a replacement value, check out this article (replacement value, what you don’t know might mean living in half a house). Depending upon the market, your replacement value might be less than, equal to, or more than what you bought the house for. The replacement cost isn’t what changed, the cost of your home did, and hopefully it went up for you.
So now that we know a little about replacement cost, let’s say that you’ve paid off your mortgage and are living the high life. Why would you buy Scottsdale AZ homeowner’s insurance? Answer: because it’s so much cheaper than paying for a rebuild if something happens to the house. Make sure to check out that math zone if you haven’t yet to see what I’m saying. Sure that extra $600 a year might be nice in your pocket today, but tomorrow you might find yourself eating your Cheerios in a tent. For you, no mortgage guy/gal, homeowner’s insurance is a cheap way to have peace of mind on what is most probably the most expensive thing that you own.
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