When you initially acquire house owner’s insurance, you may discover that you are paying for a policy with more protection than your house is presently worth. Is this just a way for the insurer to extract more money from you? Probably not– your policy may cover replacement value of your house instead of market value. These are very different numbers.
There’s a little bit more to it, however in essence, replacement value is what it will cost you to construct a home at today’s costs, whereas market price is what it would cost you to buy it.
- Replacement Worth— This is simply as it sounds– it is the amount of money needed to change or restore your home, based upon the basic structure and size of the house prior to the damages. This ought to consist of products and labor, in addition to any demolition and removal expenses connected with damaged areas.
Because replacement worth only refers to the physical replacement of the home, it has nothing to do with …
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