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If the unthinkable happened and you lost your home due to fire or storm, you would most likely have to rebuild.  But how much would that really cost and would your current homeowner’s insurance policy cover the entire loss?  In a homeowner’s policy, there are two very different coverage options, Market Value and Replacement Value.

      A Market Value policy (aka or Modified Loss Settlement) in general will provide the homeowner who has a partial loss with repairs that will be done on a basis of “like kind and quality”.  Simply put, this means that repairs made or replacements needed, will be done with commonly available materials and methods.  For instance, if you had plaster walls, the replacements would be dry wall.  The insurance company will pay only up to the amount of coverage stated on the policy.

    Replacement Cost is the cost to actually rebuild your home in the case of a partial or total loss.  This type of policy’s coverage includes material, labor, site supervision, architect’s services, contractor’s profit and overhead, as well as the foundation.  The rebuilding process can be significantly more costly than even new construction.  Here a just a few of the reasons why:

  • Extensive planning and matching of labor and materials required to build around an existing structure with partial losses.
  • Contractors specializing in reconstruction and restoration charge more for their expertise.
  • The increased cost of dwelling reconstruction is comparable to rebuilding an automobile part by part.  The labor and materials are more expensive when building a single home versus a tract home, just like labor and materials for a single car are more expensive than those for a mass produced version.
  • Older home construction such as plaster walls and custom woodwork is costly, and often it’s difficult to find a craftsman to do the work.

    There are several ways to obtain a replacement cost estimate on your home, including those provided by building contractors or professional replacement cost appraisers.  Estimates from these sources should reflect your home’s features, upgraded kitchens and baths, custom work or appliances, finished basements, built-ins, specialty windows, etc. 

    Knowing how much it would cost to replace your home, and choosing the best coverage for it can seem a bit overwhelming, but AJM Insurance is here to help make it easier.  Our experts are happy to assist you in deciphering your current policy, providing you with specific information about what it covers, what it doesn’t, helping you make the right coverage choices.  Contact us at 856-795-4020 today!

For more info about homeowners insurance Click Here.

Helpful articles relating to Market Value vs. Replacement Cost:
http://myknowledgecenter.com/personal-insurance/insuring-your-home-market-value-vs-replacement-cost/
http://myknowledgecenter.com/personal-insurance/rebuilding-home-costs-higher-than-new-construction/

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