HOME – Market Value vs. Reconstruction Value

February 15, 2018 - 1 minute read

Ensure that your homeowner’s policy limits correspond to the cost to rebuild in case of a natural disaster, whether it is a wildfire, hurricane or flood. Unlike a home’s resale value (which includes the cost of the land), the cost to rebuild is based on the amount needed to hire a contractor plus building materials and other additional costs.

Purchase Adequate Coverage 

You decide how much coverage to buy for your home, but SterlingRisk recommends purchasing coverage at least equal to the estimated cost of rebuilding your home.

How Does this Differ from Market Value? 

The market value of your home is the amount a buyer would pay for your home, including the land, no matter how much rebuilding would cost.

What is Replacement Cost? 

Replacement cost is the rebuilding cost necessary to repair or replace the entire home, including construction costs. This cost is different than the following:

  • The market value
  • The purchase price or the cost of the land
  • The amount owed on a mortgage

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