Tuesday Tip - Reconstruction Cost vs. Market Value


Hi Insurance Family! It's Tuesday Tip Time. So what is the difference between Replacement cost vs. Market Value?

We are often asked by our insurance family why their home is insured for $220,000 when they get their tax assessment or say they could only sell the home for $150,000. There are many factors that are considered when calculating replacement values of homes such as quality of construction, construction materials, as well as location and many other factors. In addition to MSB and E2value software that insurance companies use for calculating reconstruction estimates many insurance companies use independent inspectors to help determine the reconstruction value of your home.

So just because you may have purchased your home for significantly less than what it is insured for, that doesn't mean it would not cost that much to build it back. With recent catastrophic events such as the wildfires in CA and elsewhere across the country it has put a strain on building materials and has caused construction material prices to increase substantially.

Another important reason to keep your home insured to value is when dealing with most replacement cost policies is because if the home is not insured at least 80% to value you may not receive the full value of your claim. This is why it is very important to contact your agent if you have built an addition or made significant improvements to your home?

Have questions give us a call 410.651.1111 or 410.749.2220!