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Understanding the Replacement Cost of Your Home

Replacement cost versus the market value of your home

What actually is the replacement cost of your home?  And why is it something that you need to understand?  It’s an important part of your homeowner’s policy to focus on, actually, so you’ll want to take the time to understand fully just what you’re looking at.  Let’s take a detailed look at what the replacement cost of your home is.

Replacement cost vs. market value

The replacement cost is focused on the value of your home as a sum of its "parts".  The value will vary drastically based on the price of supplies and the age of those materials and components.  The market value is the price you would pay to buy that exact same house (condition and etc) on the market in current times.  Since the marketplace also fluctuates wildly, this number will shift in accordance if you ever need to put in a claim.

What replacement cost really is

The replacement cost is the monetary figure that your insurance policy would payout if you were to file a claim for the replacement of your house.  The factors that go into that are going to be things like your roofing (style, quality, and type of material), your structural features (decks, balconies, etc.), your main mechanical devices (including the type, the quality, and the age), and the cost of debris removal from your home/lot.

This figure is set in your insurance policy, and you will have the right to claim that if you were to ever file a claim for it.  It’s important to understand what details go into this figure so that your home is insured for its replacement cost properly and accurately!

How does replacement cost change?

Every 3-5 years, you’ll have the option of having your home reappraised to update its value.  If you’ve made major renovations, you can request a new appraisal at your own pace, too.  The replacement costs will change over time and the goal is to increase your coverage at the same rate so that you are always protected.

Determiners of value

There are many concrete things that can impact the replacement cost of your home that most homeowners are unfamiliar with.  For example, when prices of wood and other building supplies skyrocket, the price of your home automatically does, too.

Do you have enough insurance?

It’s every homeowner’s worst nightmare to be underinsured.  If you aren’t sure if you are carrying enough insurance, take the time to be sure.  Ask your independent insurance agent for an updated replacement cost assessment/value when the opportunity arises so that you know you’ve got the amount of coverage that you need and deserve for your home’s protection. 

Understanding these details in your homeowner’s insurance isn’t superfluous but rather essential to understand just what you are covered for and what you aren’t covered for.  You’ll want to talk to your Harbour Insurance Services insurance agent as soon as you can to focus on understanding what replacement cost value is and whether or not you have the appropriate amount of insurance coverage on your home! Contact us at (281) 520-4090 and let's get you properly covered today!