What is Replacement Cost and Market Value?

Hello everyone out there!! This is Chris Cook.   Thank you for taking the time to learn more about our agency and insurance!

Today I wanted to discuss the difference between the insurance replacement cost and the market value of a home.

A common question when discussing the home policy with clients is “My house isn’t worth $300,000, do I have too much coverage?” I try to explain the coverage, and where the coverage amount comes from, to help the client understand their coverage amounts.

Replacement Cost

My answer usually sounds like this….Your home has replacement cost coverage on it, and it is insured to a coverage amount equal to the cost of rebuilding the home if it was totally destroyed plus debris removal. Then I remind the insured that I asked a bunch of questions about the house when we started the policy.  Questions like square footage of home, roof year, how many bathrooms etc.  I explain that I used that info to determine the replacement cost of the home us a replacement cost estimator that calculates the cost to rebuild the home.

Market Value

Then on the flipside, I explain that what your home is worth, is usually what it can be sold for, or what a buyer is willing to pay.

The two amounts can be very close in value depending on the location of the home and how hot the real estate market is.  We are currently in a good market for selling homes, and the values are getting closer to the replacement cost of a home.  I think that is why we are seeing so many new homes being built.


Thank you again for visiting our blog, we appreciate it!!  I hope you have learned about the differences in coverage.  If you have any questions, please contact me at my office at 517-351-9117 or email me chris@mllins.com


Would You Like Us To Review Your Policies?

Request Your Proposal Here

Are you ready to save time, aggravation, and money? The team at Meiers Lombardini Insurance is here and ready to make the process as painless as possible. We look forward to meeting you!

Call Email Claims Payments
SUMMER HOURS: Our office will be closing at 4:00PM on Friday's from Memorial Day thru Labor Day. If you have a claims emergency please call 517-351-9117.