Those of us who received their property assessment this month from the City of Calgary probably noticed a drop in the value of their property. This does not mean, however, that you should call your home insurance company to make changes to your plan. Many do not realize that property assessments have very little to do with how home insurance values are determined. Property taxes, however, are based almost entirely on the City’s calculation of your home’s market value. Let’s go through each to determine their differences.
For your municipal property assessment, city officials use the sales comparison approach to establish market value. The June property assessment documents all residential property owners received are based on the City’s estimation of market value as of July 1, 2019 as well as the characteristics and condition of the property as of Dec. 31, 2018.
A complete list and detailed analysis of all the factors the City uses to determine the value of your property can be found here, and includes such considerations as:
- Total finished living area above grade
- The state of the structure
- The age of your home
- How many renovations have been done
- What type of home it is (standalone, condo, duplex, townhouse, etc.)
- Any views that can be enjoyed from your property
One question many have is why property assessments do not match the amount paid for a home. This is because property assessments are based on the amount a property most likely would have sold for, not what it actually did sell for. The City compares numerous sales to figure out the typical value of each of the factors used to assess your property, and then applies those values to the factors of your particular home to come up with the property assessment.
A way to simplify it is to think of the process as basically coming up with an average value for a home like yours, although the formula is a lot more complicated than that. The thought is that the mass appraisal process helps keep the process fair and equitable.
Home Insurance Value
Although the speculative real estate market drives property assessments, insurers generally don’t consider it when determining the value of a home for insurance purposes.
Instead, insurers evaluate:
- The amount of money it would cost to reconstruct an identical home
- Site improvement costs, such as landscaping, that would compare to those currently in place
- Demolition fees
In essence, insurance companies are mainly interested in how much it would cost to demolish the existing structure, remove all the debris, and rebuild an identical or near-identical home on the site. This represents the maximum amount of money they would be responsible for covering if your existing home were to be wiped out by a tragic event, such as a fire.
Possessions and valuables are considered and insured separately from the structure of your home.
It is inexpensive and easy to get an insurance appraisal for your property, and it could possibly save you some money. This is especially true if you live in a high-demand area of the city where speculation and bidding wars are common elements of the real estate market.
You could also perform a comprehensive home evaluation to ensure you are getting the most you can out of your insurance dollars.
The 2019 property tax rates were set by Calgary’s Property Tax Bylaw 13M2019, which put the municipal tax rate at 0.0042108, the provincial tax rate at 0.0024432 and the total tax rate at 0.0066540. The rates are based upon the amount of tax to be paid for every $1 of assessed value.
As you can see, not all property taxes go back to the municipality. About a third goes to the Province of Alberta, an amount that is determined by dividing the revenue required by the province by the total assessment. The City of Calgary then collects this amount for the province. Some of that money is then given back to cities through a series of grants and approvals.
Property taxes are determined by multiplying your property assessment by the tax rate for that year. So, if your property was assessed at $500,000, the formula would be: $500,000 x 0.0066540 = $3,327. Taxes may be paid all at once or monthly.
Home Insurance in Calgary: Get the Lane’s Team Working for You
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