☰ ˟
Lone Star Insurance Agency
Get More Information Cleburne (817) 641-3676 | Burleson (817) 426-2886
  • Home
  • Business & Commercial
    • Business & CommercialImage of right arrow
      • Bond Quote Online
      • Business Owners Policy (BOP) Quote Online
      • Commercial Auto Quote Online
    • Workers Compensation InsuranceImage of right arrow
      • Workers Compensation Quote Online
    • Contractors Insurance
  • Personal
    • Auto InsuranceImage of right arrow
      • Auto Quote Online
      • Auto Insurance - RESHOP Quote Online
    • Classic Car InsuranceImage of right arrow
      • Classic Car Quote Online
    • Homeowners InsuranceImage of right arrow
      • Homeowners Quote Online
      • Homeowners Insurance - RESHOP Quote Online
      • Homeowner Flood Quote Online
    • Dwelling Fire Quote Online
    • FloodImage of right arrow
      • Flood Quote Online
    • Landlord Insurance
    • LifeImage of right arrow
      • Term Life Quote Online
    • Manufactured Home Quote Online
    • Mobile Home Quote Online
    • MotorcycleImage of right arrow
      • Motorcycle Insurance Quote
    • Recreational VehicleImage of right arrow
      • Recreational Vehicle Insurance Quote
    • RentersImage of right arrow
      • Renters Insurance Quote
    • UmbrellaImage of right arrow
      • Umbrella Policy Quote
    • Watercraft & BoatImage of right arrow
      • Watercraft Insurance Quote
  • Customer Service
    • Client CenterImage of right arrow
      • Client Update Form
      • When To Contact Us
    • Payment Center
    • Claim InformationImage of right arrow
      • File A Claim
    • Companies We Insure With
  • Blog & General Info
    • Blog
    • Helpful Texas Dept Insurance Links
    • Myths About Buying Insurance
    • Industry Pro Tips & Reports
    • Insurance Glossary
    • Privacy Policy
    • Web Site Disclaimer
  • Our Agency
    • About UsImage of right arrow
      • Our Locations
      • Employee Directory
      • Dave Ramsey ELP
      • Nine Reasons To Do Business With Us
      • Love Your Agent Guarantee
      • Captive vs. Independent
      • Agency Comparison
    • Referral Reward ProgramImage of right arrow
      • Refer a Friend
    • TestimonialsImage of right arrow
      • Submit a Testimonial
  • Contact Us
    • Contact Us
    • Our Locations
    • Follow Us on LinkedIn
    • Follow Us on Facebook
    • Follow Us on Instagram
    • Follow Us on Twitter
  • Areas We Serve
    • Insurance - Cleburne, Texas
    • Insurance - Burleson, Texas
    • Insurance - Granbury, Texas
    • Insurance - Glen Rose, Texas
Logo
Insuring your Future today
Cleburne (817) 641-3676 | Burleson (817) 426-2886
Business Auto Classic Car Homeowners Life
Home > Content > Replacement Cost vs. Market Value

Replacement cost vs. Market value - Home Insurance Valuations

My home is only worth $120,000. Why does my insurance company want me to insure it for $275,000?

One of the biggest questions consumers have regarding homeowner's insurance revolves around the amount of insurance to place on their dwelling (home). When purchasing a house, the mortgage company requires the homeowner to obtain insurance prior to closing. Most consumers assume the amount of dwelling coverage will be equal to the amount they paid for their house. This is incorrect in some cases.

There are different methods to determine the value of a house. Market value is the price paid for your house. Replacement cost is the price or cost it will take to rebuild your house in the same spot, same size and same quality of construction, at today's costs. Insurance companies use the replacement cost valuation. These can be two completely different numbers.

For example, a home purchased in a depressed city neighborhood, may have a market value of $120,000. The exact house, located in a nice suburb, may have a market price of $285,000; however, the cost to rebuild the house after a loss would be the same in either location. The insurance company is looking to insure the home for the full replacement value, not the current market value. Remember, they are going to pay to build you a new home, not buy one for you down the street.

                 
Square Foootage of Home         2,500         2,500
Year Built         1920         1920
Market Value         $285,000         $120,000
Cost to Replace/Rebuild Home         $275,000         $275,000

For insurance purposes, you should insure your home to 100% of it's replacement cost. This will ensure the ability to rebuild the entire house, the way it is now, in the event of a total loss. One thing to remember, you're not insuring the land so leave this out of the replacement cost valuation of the dwelling.

Consult with your insurance agent and explain your home in detail regarding: square footage, number of bedrooms, bathrooms, kitchen, basement, fireplace etc. Insurance companies use a formula to generate the correct replacement cost. The coverage amount and the premium might be a bit higher, however you'll be properly insured. After a claim occurs is not the time to find out your insurance is not adequate. Having 100% replacement cost on the dwelling takes away this possibility.

To get a good idea of what it may cost to rebuild your home you can visit http://www.building-cost.net/ and plug in the appropriate information for your home.  This is a third party site and we do not endorse this site, it is strictly for example purposes.  Most insurance companies have their own formulas or use a third party vendor in order to come up with these formulas.

Connect with us

Social Social Social Social Social
google review

Burleson Location

240 NW Newton Drive
Burleson, TX 76028

Phone: (817) 426-2886
Fax: (817) 426-2887
google review

Cleburne Location

1200 W. Henderson Street Suite A
Cleburne, TX 76033

Phone: (817) 641-3676
Fax: (817) 426-2887

Fill out the form below to get started with an insurance quote

© Copyright. All rights reserved.
Powered by Insurance Website Builder