What is market value?
The market value of your home is based on what your house and land would sell for on the real estate market. It’s essentially an appraisal of how much your home would be worth if you had to buy it from a realtor today.
A home’s market value is based, in part, on the size and condition of the house. But it’s also influenced by a number of other factors — including your neighborhood, school district and the overall real estate market in your area.
What is replacement cost?
A homeowners policy based on replacement cost means your home is insured using an estimate of what it would cost to repair or rebuild your home with materials of like kind and quality in the event of a total loss. Unlike your home’s market value, the replacement cost will not vary because of where you live or what similar homes are selling for. Instead, replacement cost is calculated on factors like the cost of building materials and construction contractors.
What’s the difference between market value and replacement cost?
Here’s an example to help you understand how these two types of coverages would play out in the event of a claim.
Let’s say your home has a market value of $250,000. But at the current rates of construction and materials, it would cost $300,000 to rebuild it in the event of a total loss — like a fire or natural disaster.
If your home was insured using its market value, you’d be left with a $50,000 coverage gap. In this case, your options would be to build a smaller, less expensive home, or pay out-of-pocket for the difference.
What is Guaranteed Replacement Cost?
Whether the value of your homeowners policy is calculated using market value or replacement cost, the amount your home is insured for will be listed as the limit on your policy Declarations.
But sometimes, even the best estimates can come up short. That’s why ERIE offers Guaranteed Replacement Cost coverage. If your homeowners policy includes Guaranteed Replacement Cost, ERIE will pay to rebuild your home with materials of like kind and quality without limiting it to the amount of coverage listed on the policy Declarations. That means if it’s a covered loss and costs run high, ERIE will pay whatever the difference is.
It’s also worth noting that this coverage requires any home improvement over $5,000 to be reported to your agent within 90 days. So be sure to tell your agent about any recent home improvement projects.
Get the protection you deserve
With Guaranteed Replacement Cost from ERIE, you can rest easy knowing your coverage will go the distance. Because unlike other types of homeowners policies that subtract for wear and tear or depreciation, ERIE pays the full cost of rebuilding your home back to its former glory.
Ask your local ERIE agent about Guaranteed Replacement Cost coverage today — and get the peace of mind you deserve.