Why do I need to insure my home for more than its market value?

Market value is the price paid for your house. Replacement cost is the price it will take to rebuild your house in the same location, the same size, and same quality of construction at today's costs.

The cost to rebuild a home not only includes material and equipment costs, but also labor. Unforeseen costs on the job site can quickly pop up throughout the scope of the project. Replacement cost estimates take into consideration these potential adjustments. An architect or engineer may need to be brought in. Demolition and debris removal, code compliance and building permits are also factors.

Economic factors can have an impact on the cost of common goods. Gas prices, supply and demand, medical benefits, and the overall cost of raw material play a role in construction costs. Over the years, these costs have steadily increased and will continue to do so. Oil and petroleum costs have risen and many building materials like roofing shingles, plastics, and even paints are made of these products.

Lastly, the likelihood of a home being a total loss is low. Partial losses are far more common. The amount of labor involved to repair a partial loss on an existing structure as compared to building from scratch is far more intensive. It is much easier to paint on a blank canvas as opposed to working on a small area of an existing painting.