I bought my home for $200,000 why do I have to insure it for $300,000?

Question: I bought my home for $200,000 why do I have to insure it for $300,000?

Answer: We get a question similar to this just about every day. Insurance companies do not care about the real estate value because it goes up and down depending on the economy and other factors. What they are concerned about is the replacement value. They have to rebuild that house so they set their own limit, which is often higher than the real estate value.

Additional Info: The replacement cost assessment of a home is often different than the market value of a home. The replacement cost value takes into account the demolition and removal of the damaged home as well as today’s standard when it comes to materials and their associated costs.