Hey neighbor — Tanner here. Let’s talk about something that trips up a lot of homeowners:
“Why is my home insured for less than what it’s worth?”
Totally fair question. The short answer? Insurance isn’t about what your house could sell for, it’s about what it would cost to rebuild.
Replacement Cost: The Rebuild Price Tag
Think of replacement cost as what it would take to rebuild your home today if something major happened…like a fire, hailstorm, or kitchen fire gone wild.
It includes things like:
- Construction labor and materials
- Contractor and permit fees
- Debris removal
It’s based on the structure, not the land.
So if your house burned down, replacement cost answers:
“How much would it cost to put it back just like it was?”
Market Value: The Real Estate Number
Market value is what your home would sell for in today’s market — land, location, and all. It changes with interest rates, demand, and your neighborhood.
That’s why your home’s market value might be $500,000, but the cost to rebuild it (replacement cost) might only be $400,000.
Your insurance company doesn’t need to buy your home from you… they just need to rebuild it if life throws you a curveball.
Bottom Line
Your home insurance should be based on replacement cost, not market value.
Because when disaster hits, you don’t need a “For Sale” sign…you need a solid plan to rebuild.
If you’re not sure your coverage fits your home anymore, let’s take a few minutes to review it together. We’ll keep it simple — just real answers from real people.
👉 Let's Chat
