The Difference Between Replacement Cost And Market Value In Your Home Insurance Policy

The market value of your property, that is, what you could sell it for is not important to your insurer. Rather, the replacement cost, which excludes land value and other factors is of primary concern. Why? Because replacement cost is what it would cost you to rebuild your house from the ground up, in the event of a total loss.

According to a recent Hanover Insurance Group article, Understanding your home’s replacement cost, factors affecting the real replacement cost of your home include:

• Roof and shingle style and quality, which can vary widely from home to home

• Exterior features like porches, decks, and breezeways

• The age and quality of your heating and cooling systems

• The materials used in your kitchen and/or bath

• The style of your garage, and whether it is attached

• Present-day costs of building materials and labor

• The costs of debris removal, which are not included in new home construction

Because of these variables, it is estimated that half or more of all homes insured in the USA are underinsured in regard to adequate replacement coverage. This statistic proves the value of working with a knowledgable insurance agent.

A Pearson Wallace agent can review your existing policy carefully with you to determine whether you truly have 100% replacement cost coverage in place, or if you need to re-write your policy. The other major advantage of working with Pearson Wallace is that we can shop our pool of insurance carriers to see which company offers the best rates and coverage options for your situation. Connect with a Pearson Wallace agent now for a complimentary review of your current home insurance policy.