Home Market Value vs Replacement Cost

Apr 21, 2019 | Main Blog

Homeowners’ Insurance: Market Value & Replacement Cost

As far as investments go, purchasing a home is one of the most significant steps you can take financially. Being that your home is perhaps your most important asset, it only makes sense to want the best, most comprehensive homeowners’ coverage possible. For over four decades, the Farnham Insurance Agency has worked committedly with customers seeking adequate homeowners’ insurance. We aim to deliver solutions, excellent customer service, and an overall positive insurance experience, both for our clients and our policyholders.

Influencing Factors

Market value and replacement cost coverage policies are important homeowners’ insurance options available to protect you, your family, and property. However, when choosing a policy, there are a few factors that can impact your homeowners’ coverage and rates, including:

  • Alterations to the home itself
  • Inflation
  • Economical growths and hardships

Market Value Coverage

While keeping the above-mentioned factors in mind, it’s also necessary to understand the basics of market value, or selling price, insurance. Market value coverage is calculated based on several general aspects of a home, such as the:

  • Rebuilding cost (usually one-third or one-half of the cost
  • Value of the land
  • Overall condition of the home
  • Age
  • Size
  • Location

Replacement Cost Insurance

Replacement cost coverage exists to protect homeowners from covering the costs of lost assets. Numerous factors are taken into account when replacement cost insurance is calculated. These calculations generally include:

  • Type/ style of home
  • New upgrades
  • Outdoor fixtures and features
  • Distinctive or customized fixtures and features
  • Central air conditioning
  • Size in square feet
  • Number of bathrooms
  • Expenses for construction, materials, labor, and other related costs

Multiple-home construction provides discounts that are not included in the replacement cost for a single home.


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