An insurance company is NOT going to pay you more than what the house is worth. They really dont care what you or I paid for a house its all based on the model home, style, things like designer kitchens or high priced add ons and Primarily Square Footage.
It is just like you insuring a Diamond ring and you paid $3000 for it..you get an appraisal for $6000. Do you insure it for $3K or $6K??? Believe it or not the price you paid or the appraisal price in particular is irrevlant..what is critical is the description of the item being insured (ie 1.10 carat D color VVSi Clarity as wel as the setting being 14K or 18K etc). MOst likely the insurance company will give you the going price for that description or if that would not satisfy you give you a new ring that fits the description. If you lost the ring and you insured at $6K you most likely are above the insurance offereing..but in all likelihood you will be getting the wholesale value of the description that is less than $3K
Bottom line: When it comes to home insurance, a good insurance company/agent should be able to provide you a replacement cost formula for your house that is tailored to the specific geographic area....and he or she should be able and willing to help you fill it out. The insurable value all comes down to a cost per Square Foot of the building being insured (no land cost) plus any extras identified in the description. An Insurable value is much different than an appraised value of your property.
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