{"id":1299,"date":"2017-09-11T22:30:26","date_gmt":"2017-09-11T22:30:26","guid":{"rendered":"https:\/\/www.freeway.com\/knowledge-center\/?p=1299"},"modified":"2025-01-17T22:56:34","modified_gmt":"2025-01-17T22:56:34","slug":"replacement-cost-vs-market-value-home-whats-the-difference","status":"publish","type":"post","link":"https:\/\/www.freeway.com\/knowledge-center\/homeowners-insurance\/understanding-homeowners-insurance\/replacement-cost-vs-market-value-home-whats-the-difference\/","title":{"rendered":"Replacement Cost vs. Market Value of Home: What’s the Difference?"},"content":{"rendered":"

When you purchase a homeowners insurance policy, you\u2019ll see plans that will agree to cover the replacement cost or the market value of home, condo, or other living space. For many homeowners, this can be difficult. In fact, some homeowners don\u2019t even know the difference!<\/p>\n

It\u2019s important to know what you\u2019re buying when purchasing home insurance, so let\u2019s take a moment to explain what house market value and replacement value mean. We\u2019ll even throw in the benefits and risks of each one to help you determine which method is the best for your homeowners insurance<\/a> needs.<\/p>\n

What Does Market Value Mean?<\/h2>\n

To put it plainly, the market value is the amount a buyer would pay to purchase your home and land property in its current condition. While the land itself isn\u2019t covered in most homeowners policies, its worth would be included in the home market value.<\/p>\n

Benefits<\/strong><\/p>\n

If you have an ornate home that has artisanal woodwork\/masonry or is made of expensive materials, rebuilding your home to its original condition could be higher than the purchase price of the home and the land it stands on. If that\u2019s the case, you\u2019d likely pay lower premiums for the insurance market value of your home rather than with a replacement policy. If you aren\u2019t flushed with cash, it is practical to purchase a policy based on the property\u2019s value vs. price of repairs and restoration if disaster strikes.<\/p>\n

Risks<\/strong><\/p>\n

More than likely, you\u2019ll risk getting incomplete coverage if you choose to go with market value. In most cases, the cost of rebuilding a home after a fire or disaster is more than the actual cash value of the home or property that was established when you purchase the policy. This means that you would have to make up the difference in cost or build a less expensive home. It is best that you get your home professionally appraised, as its value can fluctuate over time and you can update your policy accordingly. Unless your home is incredibly specialized or is on a highly valued piece of land, purchasing a plan based on market value isn\u2019t recommended.<\/p>\n

What Does Replacement Cost Mean?<\/h2>\n

If you insure your home under replacement cost, your insurance will cover the repairs, replacement, and rebuilding of your home based on its size and structure. It bases your payout on appraisal and estimates of the current cost of repair\/replacement rather than the market value of your home and land.<\/p>\n

Benefits<\/strong><\/p>\n

If you do end up having your home lost and destroyed in an incident, replacement cost helps you get your home back, basically. Your house and quality of life would essentially return as if the covered event never took place. With that said, experts recommend that you insure your home in at least 100% of its estimated replacement cost if you were to have this implemented to your policy.<\/p>\n

Risks<\/strong><\/p>\n

Replacement costs can change over time, so you may need to get your home re-evaluated and your policy updated every couple of years to make sure you get enough coverage. Some homeowners plans offer an inflation clause that helps keep you covered, but it is still in your best interest to keep informed about the market conditions of your area. Because labor costs, building materials, and other factors rise over time, you may have to pay more into your premium than you do when you first initiated the policy.<\/p>\n

Freeway Insurance can provide a variety of quality homeowners insurance plans that can fulfill your needs and your budget. Call us at (800) 777-5620<\/strong> or get a free homeowners insurance quote<\/a> online today.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

When you purchase a homeowners insurance policy, you\u2019ll see plans that will agree to cover the replacement cost or the market value of home, condo, or other living space. For many homeowners, this can be difficult. In fact, some homeowners don\u2019t even know the difference! It\u2019s important to know what you\u2019re buying when purchasing home […]<\/p>\n","protected":false},"author":1002629,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63],"tags":[103],"importance":[],"type-content":[],"acf":[],"_links":{"self":[{"href":"https:\/\/www.freeway.com\/knowledge-center\/wp-json\/wp\/v2\/posts\/1299"}],"collection":[{"href":"https:\/\/www.freeway.com\/knowledge-center\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.freeway.com\/knowledge-center\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.freeway.com\/knowledge-center\/wp-json\/wp\/v2\/users\/1002629"}],"replies":[{"embeddable":true,"href":"https:\/\/www.freeway.com\/knowledge-center\/wp-json\/wp\/v2\/comments?post=1299"}],"version-history":[{"count":4,"href":"https:\/\/www.freeway.com\/knowledge-center\/wp-json\/wp\/v2\/posts\/1299\/revisions"}],"predecessor-version":[{"id":6943,"href":"https:\/\/www.freeway.com\/knowledge-center\/wp-json\/wp\/v2\/posts\/1299\/revisions\/6943"}],"wp:attachment":[{"href":"https:\/\/www.freeway.com\/knowledge-center\/wp-json\/wp\/v2\/media?parent=1299"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.freeway.com\/knowledge-center\/wp-json\/wp\/v2\/categories?post=1299"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.freeway.com\/knowledge-center\/wp-json\/wp\/v2\/tags?post=1299"},{"taxonomy":"importance","embeddable":true,"href":"https:\/\/www.freeway.com\/knowledge-center\/wp-json\/wp\/v2\/importance?post=1299"},{"taxonomy":"type-content","embeddable":true,"href":"https:\/\/www.freeway.com\/knowledge-center\/wp-json\/wp\/v2\/type-content?post=1299"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}