Over half of the homes in the USA are underinsured*.
*Marshall & Swift/Boeckh

Surprising, right?
This is because home insurance policies are believed to provide coverage based on what you paid for your home or
its market value, as opposed to your home’s replacement value. Understanding the difference between the two is
important when making sure your coverage is adequate.

What is Market Value?
Market Value or Actual Cash Value, is the amount a buyer would pay for your home, including the land regardless of
how much it would cost to rebuild it. Market value is influenced by factors beyond the material and labor costs of
repairs or reconstruction. Also, the land itself will be included in the home’s market value, however it will not be
covered under your homeowner’s policy.

What is Replacement Cost Value?
Replacement cost is essentially the amount it would cost to rebuild your home from the ground up. This includes
factors such as similar building materials and the same degree of craftmanship. But there are non-material costs
included such as permits, fees, debris removal, contractors overhead, labor, and profit. In most cases, your home’s
replacement cost may exceed its market value.

Below are a list of some items Insurance Companies consider when calculating replacement cost:

- Roofing materials: The cost of roofing materials varies greatly depending on the type of shingles and style
of the roof
- Exterior features: Decks, Porches etc. can affect the replacement value
- Quality of Materials used: Materials such as floor types (hardwood, ceramic tile, marble), countertops,
cabinets, fixtures, hardware are different from one home to the next
- Interior features: Many homes do not only contain builder’s grade finishes, there are many custom features
and/or upgrades that should be considered
- Heating and Cooling systems
- Garages
- Debris Removal: Removing debris after a loss can add costs that are not included in homes that are new
builds
- Square footage
- Number of bathrooms, kitchens, bedrooms
- Finished or Unfinished Basements

Although replacement cost will vary slightly from company to company, most companies will come out to your home
to perform a home evaluation/inspection. This inspection helps document the details of your home, so that you have
the right protection in the event of a claim. At, Westrock Insurance, we like to gather specific details of your home,
and we have found that our estimates are mostly in line with the insurance company’s inspections. If you or someone
you know concerned about their replacement cost, please give us a call today to review your policy!