It’s so important to make sure your home is insured for at least 100% of its estimated replacement cost.

Determining your home’s estimated replacement cost is important because this will ultimately determine which policy options are available to you for home owner’s insurance. You want to be completely covered in the unlikely event of: weather (storms, fire, wind, hail, lightning, freezes, snow, ice and sleet), non-weather (theft, vandalism, riots, aircraft and vehicles), and accidental direct physical loss (accidental or abrupt plumbing issues, heating or A/C system, tearing/bulging of heating or cooling).

It’s also important to understand the difference between Market Value and Replacement Cost.

Market value is the amount that a buyer would pay to purchase your home and its land in its current condition. Unlike your home’s estimated replacement cost, its market value is influenced by factors beyond the material and labor costs of repairs or reconstruction, such as proximity to good schools, local crime statistics, and the availability of similar homes. Also, the land itself will be included in the home’s market value, although it will not be covered by the homeowners policy.

Replacement cost is the cost necessary to repair or replace your entire home. When you insure your home for its estimated replacement cost, your insurer will reimburse you (subject to your policy limits) for the cost of rebuilding or repairing your home, based on the size and structure of the home that was lost or damaged. Replacement cost does NOT include the outstanding amount of any mortgage loan.

Our Pro Tip: When buying a new home, be sure to obtain a replacement cost estimate. It’s best to ask for this when you have the home appraised. Estimates should reflect your home’s features including architectural details or unique building materials that may affect hour estimated replacement cost like upgraded bathrooms and kitchens, finished or partially finished basements, additional rooms or living space, custom molding or arched windows, and any other unique features.

Questions about understanding your home’s estimated replacement cost? Please reach out!

We’re happy to help answer any questions.