Replacement Cost Is Not Market Value

One of the most common insurance questions is, “Why is my home insured for more, or less, than what I could sell it for?”

The answer is simple: replacement cost is not market value.

Market value is what someone may pay to buy your home. It includes location, land, school district, views, demand and the real estate market.

Replacement cost is different. It is the estimated cost to rebuild the home after a covered loss. That may include materials, labor, debris removal, permits, code updates and current construction costs.

The value of the land is not included in the cost to rebuild the home. Your insurance company is not insuring the land. They are insuring the structure.

That number can feel confusing, especially when home prices are changing. But insurance is not based on what your home may sell for.

The goal is to help you rebuild. Give us a call to discuss your options.

We love insurance, so you don’t have to.