Bradley Insurance Group, Inc.

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 Market value is the estimated price your home will sell for on the open market between a buy and a seller under conditions for a fair sale.  Market value will include intangible factors that influence the price of your home such as its location, neighborhood, proximity to a good school district and commutability to work locations. These factors can increase or decrease the value of your home, but they should not impact how much it should cost to cover your home.

Replacement cost is what your insurance carrier estimates the cost will be to construct a building of like kind and quality at current construction prices.  Replacement cost is driven by tangible factors such as square footage of the home, construction material, quality of finishes in the home, and many other factors. Certain markets can have a major impact on replacement cost such as building materials, labor, and fuel markets.

A big misconception in the insurance industry is that replacement cost and market value should be the same.  These numbers can be close when economic conditions are stable, but these numbers can vary significantly during times of economic uncertainty like we have seen over the last couple of years.  The rising costs of raw materials, fuel, and labor have driven replacement costs up reflecting in the major premium changes we have seen in recent years.  

You should be checking your renewals every year to ensure your replacement cost on your home is accurate.  You should also review your policies yearly with your agent to ensure everything is updated, correct, and you have the proper coverage to protect your assets.  If you would like to set up a policy review with one of our licensed agents, click the button below.