One of the most frequently asked questions when it comes to home values is “why does the insurance value on my home show higher than the fair market value?” and to answer it, we spoke with an expert in property and casualty insurance.

Home Values Are Independent of One Another

The first thing that many homeowners do not realize is that each of the three areas where property values are determined is independent of the other.  Though they can be mixed together in some scenarios they each serve a different purpose, are determined based on varying parameters and largely do not impact each other.

Appraised /Fair Market Value

This value is based on a professional appraisal. Lenders will use this figure to determine the amount of financing to approve and one supplement to the appraiser’s assessment is area comparable sales of like-kind properties that sold in the preceding six month time period.  This value is somewhat impacted by market conditions and will fluctuate accordingly. Market conditions, whether the market is buyer-controlled or seller-centric will impact the fair market value, for example an area with fewer homes and more buyers for instance would reduce the market value.

Insurance Value

At one time, particularly prior to the 2007 housing market crash, insurance values fell right in the middle of appraised and assessed values but today that has changed dramatically given the subsequent economic conditions affecting the housing market.  Since insurance value refers to the amount it would cost to replace the entire home, the assessment is heavily impacted by the cost of materials and labor to replace or repair areas of the home.  Though market values have gone down since the market crash, insurance values are still seeing the inflationary increase as a result of increasing rebuilding costs.  One thing to keep in mind is that many insurance claims are partial – again affecting the costs to repair or rebuild and consequently impacting the insurance values on properties.

Assessed Value

Each local municipality has its own system and formula to determine the value of your home as per the amount of taxes you will owe on it.  The assessed value of a home will be used for the purpose of a tax base and it is typically reassessed every six to seven years in most locales with an increase as much as forty to fifty percent.  Homeowners that feel the assessed value is too high for their property may submit a tax appeal to their county board of review once or twice per year, depending on the county.  A tax appeal demonstrates to the board through comparable sales (obtained through Realtors) and other supporting documentation that the assessed value is too high and should therefore be reduced.


Prior to the market crash of 2007, appraised values were the highest, insurance values next and assessed values were at the bottom of the scale.  Today, due to changing market trends and conditions there has been a shift to insurance values at the top in order to keep up with increasing costs, followed by market value and then finally assessed value.

If you would like to learn what your home’s market value is or want to explore options to sell your home – contact us today and we’ll share with you what we think you would get for your home today if you were to sell in today’s market.