When you’re choosing a home insurance policy, you have the option to base it on the replacement cost or fair market value of your property. This will affect your monthly rates and deductibles. If you’re unsure which to set your policy at, understanding these concepts can help you determine which to use. To guide your decision, here’s more information on the difference between them.

Market Value

The market value of a property is the amount the average buyer would be willing to pay for your house if it was sold today. Depending on the local real estate market and the age of your home, this may be more or less than what you originally paid.

To determine the market value of your house, an insurance company might look at recent sales of similar properties in the area or real estate trends. Since the market fluctuates, this value might change annually, which may affect the cost of your home insurance.

Replacement Cost

Your replacement cost is the expense required to rebuild your home after a total loss. This pricing includes materials, labor, and permit fees. These costs tend to rise over time, so a property’s replacement value is usually much higher than its market value. This is especially true if you have an older or historic home.

For most homeowners, buying home insurance based on replacement costs is the best way to ensure you have the resources to recover from a disaster. Your rates may be higher, but you’ll receive more compensation if you have a claim.

Homeowners throughout the Rochester, NY, area trust the experienced agents at Mazzola Insurance for all insurance needs. As an independent agency, they work with several of the industry’s top carriers and take the time to ensure you get all the coverage you require. Learn more about them online, or call (585) 266-7130 to request your free home insurance quote.