Home Market Value vs. Replacement Cost

A home is one of the largest investments you will make during your lifetime. It is important to protect this investment with up-to-date and adequate coverage. There are several changes that could affect your home’s insurance coverage:

  • Refinishing or remodeling
  • Changes in the economy
  • Inflation

To make sure your home is adequately covered at a time of a loss, it is important to know the difference between market value and replacement cost coverages.

Market Value vs. Replacement Cost

Market Value (or selling price) is determined by:

  • Age and size of house
  • Physical condition
  • Location
  • Cost of the land
  • Market value may only represent one-half or one-third of the cost to rebuild

Replacement Cost is determined by:

  • Local construction costs for materials and labor
  • Square footage of the home
  • Year built
  • Exterior Features (i.e. walls, roof, exterior trim)
  • Style of house (i.e. ranch, two-story)
  • Number of bathrooms
  • Special features (i.e. fireplace, arched windows, any custom building)
  • Recent home improvements
  • Central air conditioning
  • Attached garage
  • Additional costs (i.e. debris removal, contractor and architect fees)

Replacement cost for a single home does not recognize the discounts on mass purchases that a multiple-home construction project does.

Contact your ERIE Agent for more information or questions regarding market value replacement cost.


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