Home insurance basics
Home replacement cost, explained
Replacement cost is what it would take to rebuild your home with materials of like kind and quality at today's prices. It has nothing to do with the land, so in the Puget Sound market it can be well above or well below what the home would sell for.
Rebuild cost vs. market value
Short answer: Market value includes land and location; rebuild cost includes only labor, materials, permits, demolition and debris removal.
| Market value | Rebuild cost | |
|---|---|---|
| Includes land | Yes | No |
| Rises with demand for the neighborhood | Yes | No |
| Rises with labor and material prices | Indirectly | Yes |
| Includes demolition and code upgrades | No | Yes (with ordinance or law coverage) |
Replacement cost, ACV and extended replacement
Short answer: Replacement cost pays to rebuild new; ACV subtracts depreciation; extended replacement pays above the limit by a set percentage.
Older and historic homes also need ordinance or law coverage — see Tacoma home insurance and Seattle home insurance.
Keep exploring
- Home insuranceWhat Washington homeowners insurance covers — dwelling, belongings, liability, living costs — and what it doesn't. Get a home insurance quote from a Federal Way agent.
- How much homeowners insurance do I need?How to set each homeowners limit: dwelling to rebuild cost, belongings to replacement value, liability to protect your assets — plus when to add an umbrella.
- TacomaTacoma home insurance for historic North End homes, Northeast Tacoma views and valley neighborhoods near Mount Rainier lahar zones. Code-upgrade coverage, flood and earthquake.
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