What is the difference between Market Value and Replacement Cost?

Answer:

Simply stated, Market Value is the amount you could sell your home for and Replacement Cost is the cost to rebuild it. Each company handles Homeowners Market Value versus Replacement Cost slightly differently, but the following is an example of how the terms are generally used:

Replacement Cost: A fire destroys a home. The Replacement Cost would be the dollar amount the insurance company would pay to rebuild the home as it was before the fire, up to the limit specified on the insurance policy (Coverage A).

Market Value: When you apply for a Market Value homeowners insurance policy, the insurance company uses real estate tools to determine the real estate/selling value of your home in order to set the dwelling limit of the policy (Coverage A). So, in this example, the policyholder would receive the previously determined Market Value as the policy limit for the claim.