Valuations for insurance. It’s definitely better to be over than under insured however there is no point paying excess premiums to insurance companies – it’s just not good financial sense.
Here’s an example relating to a valuation for insurance purposes on a residential home.
Mary has her house insured for $600k believing that it’s better to be over insured. However, the true replacement value of her place may be only $500k. What happens in the event of total loss? The insurance company won’t rebuild Mary’s home for $400k and give her $100k change.
Underinsuring is another reason a valuation is a good idea as insurance companies can penalise home owners if they have been underinsured in the past.
When comparing the price of a valuation against the gains made from these scenarios ‘how much is a valuation?’ is the wrong question.
In some case spending as little as $400 could save or make you thousands. But also the peace of mind that comes from a professional valuation is … priceless.