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by theoh
2746 days ago
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I don't know about "market rate", but I believe that items are typically insured for their replacement value. There may not be a requirement to insure a protected structure at all, but it's plausible that such a measure could be introduced because of the perceived externalities (i.e. heritage value to society) of a protected building. |
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I live in an inexpensive area, and purchased my five(-ish) bedroom home for ~$125k. It would cost about $240k to rebuild, exclusive of the cost of the land.
When buying homeowner's insurance, my interest is that I would not lose value in the event of my home's destruction; I want to be able to buy another home of similar value and not owe more money than I already did. However, my mortgage requires that I insure the home's replacement value, and no insurer that I could find would cover me for only $125k.
This results in what I believe to be a negative incentive: assuming no equity, I currently owe $125k and have a home. If my home were to burn to the ground tomorrow, I would have a check for $240k. I'd then use that check to pay off my existing mortgage and buy a home of similar value outright - leaving me a profit of ~$115k in the process.