Pop quiz: Which affects the cost of your insurance policy: your home’s replacement cost or market value? The answer: replacement cost, and here’s more about why:
What is Market Value?
Market value represents the agreement between the buyer and the seller of how much a property is worth. Factors considered include:
- Value of land
- Site improvements to the land
- The building
- Sometimes personal property and intangible assets
In order to compare market value to replacement cost, it’s important to know what replacement cost means, as well as what it includes.
What Is Replacement Cost?
Overall, people think that home insurance should match their loan amount or what the real estate market deems their home is worth. If your home were destroyed, your home insurance coverage should be for replacement cost, or how much it would cost to rebuild your home. After all, that’s what home insurance is for: leaving you whole in the event of a total loss.
How is Replacement Cost Calculated?
Replacement cost, or sometimes called dwelling coverage, protects all structural elements attached to your home. This includes but is not limited to:
- Framing of the home
- Roofing
- Fireplaces
- Plumbing, electrical and HVAC systems
- Bathrooms
- Kitchens
- Attached structures such as a garage or deck
Additionally, replacement cost calculations take labor and price of materials into consideration. With labor shortages or inflation in play, undoubtedly those market behaviors will influence the replacement costs of a home
Increasing Your Protection is Easy
There are a lot of endorsements that can be added to your home policy for minimal extra cost that can protect one of your biggest assets- your home. Above all, we want our clients to have peace of mind that they are being protected from financial disaster. That’s what we do best at Cincinnatus Insurance!
Do you have enough dwelling coverage to rebuild your home today? Contact your Cincinnatus Insurance advisor to quickly review your policy.