Ever wonder why your dwelling coverage and your replacement cost coverage are two different amounts? Cambridge Insurance is happy to shed some light on your home insurance questions. What most people want to know is: “How much insurance do I actually need on my home?” In order to answer that question we have to define two terms: Market Value (which is what a homeowner is willing to pay for the home) and Reconstruction (which is what it costs to rebuild or replace the home to original or standard conditions).

The same home could have a variety of market values depending on its history. For example, home built in the 1960s could have a market value of $100,000, but in 2007 the current homeowners let it go through foreclosure and the market value when it sold again was only $80,000. However, the reconstruction cost to rebuild or replace the home could be $150,000.

It is also important to remember that rebuilding a home is always more expensive than a new-build; mainly because of: