Market Value vs. Reconstruction Value

Courtesy of Rentz & Rentz Insurance Inc

Market Value / Reconstruction Value

You buy your house for $200,000.  A hurricane destroys it.  When you rebuild, it cost $300,000.  Why?  Prices of materials go up, labor is higher, and supply and demand of both materials and labor could be low.  All of these factors contribute to the price to rebuild.  Market value and reconstruction cost are not the same.   Make sure you keep up to date with construction costs in your area.  Ensure that your homeowner’s policy limits correspond to the cost to reconstruct in case of a natural disaster, whether it is a wildfire, hurricane, or flood. Unlike a home’s resale value (which includes the cost of the land), the cost to rebuild is based on the amount needed to hire a contractor plus building materials and other additional costs.

Purchase Adequate Coverage

You decide how much coverage to buy for your home, but Rentz & Rentz Insurance Inc recommends purchasing coverage at least equal to the estimated cost of rebuilding your home.

How Does this Differ from Market Value?

The market value of your home is the amount a buyer would pay for your home, including the land, no matter how much rebuilding would cost.

What is Replacement Cost?

Replacement cost is the rebuilding cost necessary to repair or replace the entire home, including construction costs. This cost is different than the following:

  • The market value
  • The purchase price or the cost of the land
  • The amount owed on a mortgage

 How do I Know Replacement Cost?

Get an estimate of the replacement cost of your home from a reputable builder. Rentz & Rentz Insurance Inc can help.

 Home Improvements

When making a major change, let us know the specifics. For example, if you’re replacing a standard bathtub with a whirlpool tub, or if your new countertops are made of marble, your home improvements could add enough value to your home to justify reexamining your coverage limits.

 We’re Here to Help

Have other questions or doubts? Rentz & Rentz Insurance Inc is ready to assist you in the process of determining the value of your home and purchasing the right coverage to protect your investment.  Call or text (912) 367-1479 or email

2016, 2019 Zywave, Inc. All rights reserved. This Know Your Insurance document is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.

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