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Replacement cost vs. market value: What you need to know

House insurance replacement cost: Your questions answered

What is home replacement cost?

An important number to check in your home insurance policy is the replacement cost (sometimes called blanket amount). This is the amount of insurance provided to rebuild your home from the ground up if it were devastated by fire, weather events or other perils. The amount of insurance for replacement is listed in your home insurance policy. Many policies break down coverage into dwelling (the building), detached structures (a shed or garage), and personal property.

What is the difference between market value and replacement cost?

Homeowners often confuse market value with replacement cost. The market value of your home is the price you would get for your home on the real estate market, which includes the land. Replacement cost covers the cost to rebuild and does not include land. For example, you may be able to sell your home for $500,000, but it may only cost $250,000 to rebuild.

What factors affect my home’s replacement cost?

  • Size and square footage.
  • Custom features and quality of finishes.
  • Finished basement or garage.
  • Age: Older homes may have features that are more difficult to repair or replace.
  • Exterior home features such as the siding, windows and roof.
  • Fixtures, cabinets, flooring and appliances.
  • Renovations: Notify your insurance company if you do renovations so they can update your home’s replacement value. And make sure your renovation project is appropriately insured.
  • Furniture and valuables: Keep a home inventory. It will help if you need to make a claim.

What are the types of insurance coverage?

When it comes to your home’s replacement value, the type of coverage you have will affect the insurance amount you receive in the event of a claim:

  • Guaranteed replacement cost means your home is covered for the full cost to replace your dwelling without depreciation, even if it exceeds the replacement cost limit in your policy. You’ll need to meet some conditions to be eligible for this coverage, and it’s important to make sure your home’s insured value is up to date.
  • Actual cash value is equal to the replacement cost, minus depreciation. You pay a lower premium for an ACV policy, but you also receive less money in the event of a claim than you would with a replacement cost policy.
  • Specified limits means your insurer will reimburse you for the cost of repairing or rebuilding your home, up to the coverage amount written in your policy.

Does the replacement cost amount affect my insurance premium?

Yes. A lower replacement value will reduce your home insurance premiums. However, if this amount is too low, you may not have enough coverage to replace or rebuild your home.

Is my house replacement value accurate?

The cost of rebuilding your home may have increased in recent years, so it might be time to get your home insurance valuation updated. There are 2 ways to do this:

  1. Talk to your insurance company: Your insurer calculates the replacement value based on the information you provide.
  2. Get a professional appraisal: You can have your home replacement cost assessed by an expert.

Replacement cost is not something to take lightly. If you think your home’s replacement value needs to be updated, contact The Personal to review your policy.

For more on this topic, visit:

Update your insurance

Update your Insurance Replacement Cost

All About Home Insurance

Replacement cost vs. market value: What you need to know

Do you know how much it would cost to rebuild your home after severe damage? We explain the difference between replacement cost and market value to help you make sure you have the right amount of home insurance coverage for your needs.

The Personal refers to The Personal General Insurance Inc. in Quebec and The Personal Insurance Company in all other provinces and territories.

The information and advice in this article are provided for informational purposes only. The Personal shall not be liable for any damages arising from any reliance upon such information or advice. The Personal recommends using caution and consulting an expert for comprehensive, expert advice.