How does homeowners insurance replacement cost differ from home market value?


You may have wondered why in case your home is worth $150,000 your insurance company insists on insuring you on well over $300,000. Well, the homeowner's insurance replacement cost is a lot different from the home market value. The replacement cost will cover all the expenses to rebuild your house in case of a loss, and the rebuilding cost will be the same for two identical properties in different locations and different market value for each.

Consider this - it is a lot different to have a small house in Hollywood, and the same house in Arizona. Both properties will be the same, the rebuilding costs may be the same, however one will cost twice as much as the other on the market.

The homeowner's insurance replacement cost does come out a lot but in case of total loss they have the responsibility to restore your property with the same structure, design and functionality on the same place, and if this is exactly what you want, you should take the replacement cost insurance plan into consideration.

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