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Replacement Cost vs. Market Value: Why It Matters for Your Coverage

By Nicole Wright | Insurance & Notary


Hey sis! Let’s have a quick heart-to-heart about something that sounds boring but can seriously save your pockets: Replacement Cost vs. Market Value on your homeowners insurance. I know, I know—it doesn’t sound fun, but trust me, if something ever happens to your home, this is the difference between being fully covered or coming out of pocket.


Let me break it down. 🍷💅


🏠 First up: What’s “Market Value”?

Market Value is what your home would sell for on the open market. It’s based on your location, school district, the housing market, and all that real estate stuff.

But here’s the thing: market value includes the land—and girl, insurance doesn’t need to replace your land. If your house burns down, the dirt is still there, okay?

So if you insure your home based on market value, you might not have enough coverage to actually rebuild it. Yikes.


🔨 Now let’s talk about “Replacement Cost”

Replacement Cost is the money it would take to rebuild your home as it was—same materials, same size, same style—no matter what the housing market says.

This is the number you really want to pay attention to. Why? Because building materials and labor costs don’t care about your neighborhood comps. If lumber goes up or contractors are charging more, that’s what it’s gonna cost to put your home back together.

So if you’re underinsured, you're either going to:

  • get a smaller payout, or

  • come out of pocket to make up the difference.

And who has time (or money) for that?


💡 Real Talk: Why This Matters

Let’s say you bought your house for $220,000 but the cost to rebuild it today is $295,000. If your policy is based on that $220K, you’re already down $75K in coverage.

That could mean cheaper premiums, sure—but at what cost? Don’t fall for that trap.


📝 Here’s What You Should Do:

  • Ask your agent if your policy is based on replacement cost or market value.

  • Review your policy every year—especially if you’ve remodeled or added on.

  • Don’t be afraid to ask questions (or switch agents 👀) if you’re not getting clear answers.


Want to Know if You're Covered the Wright Way?

I got you, girl. Let’s make sure your home is fully protected so you’re not left stressed if life ever throws you a curveball.



Let’s make insurance make sense—the Wright way. 💙

 
 
 

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