Insurance Replacement Cost vs Market Value: What's the Difference?
Why the insurance replacement cost on your policy is not the same as market value — and when each figure matters.
Insurance replacement cost is the cost to rebuild the
Insurance replacement cost is the cost to rebuild the improvements on the same site to a similar standard. It excludes land value and does not track market prices.
Market value is the most probable price a property
Market value is the most probable price a property would sell for in an arm's-length transaction. It includes land, location, and market conditions.
The two figures move independently
The two figures move independently. A rebuild-cost figure can rise on construction inflation while market value softens, and vice versa.
Lenders, courts, and the CRA rely on market value
Lenders, courts, and the CRA rely on market value. Insurers rely on replacement cost. Use each figure only for its intended purpose.
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