Can I Insure My House For More Than It’s Worth?

you can insure your house for more than it's worth

In a word, yes, you can insure your house for more than it’s worth. However, there are a few concepts to be aware of before deciding to insure your house for more than its value.

Market Value vs. Replacement Cost Value

Sometimes, people get their homes appraised by insurance agents and find the number is different than their insurance value. It’s important to understand that market value is different from the replacement value. Market value is what your house and property would sell for if you listed it on the market. The replacement cost value is how much it would cost to completely rebuild your house. A real estate agent appraises the market value of your home while an insurance company appraises the replacement cost value of your home. 

Let’s put these differences in concrete terms. Let’s say that you have a nice home and your home’s market value is $350,000. This means that if you were to sell it, you would sell it for $350,000 because of the desirable location and property. However, your insurance appraises the replacement cost at $200,000 because it would only cost that much to rebuild the home itself. The opposite could also be true. You could have an older home with less desirable finishes that would only sell for about $75,000 on the market. However, it would still cost $200,000 to rebuild a new home. That is the difference between a market value and a replacement cost. 

Insuring Your Home for Higher Than Market Value

Insuring your home when the replacement cost is higher than the market value is a smart idea. Insuring it for the replacement cost guarantees that you will be covered if your house is damaged and needs to be rebuilt. As stated above, your house may not sell for a high value on the real estate market because it has cheap finishes or is old and worn. However, building a new home to replace your home would cost significantly more. The cost of rebuilding your home would include permits, demolition, materials, construction crews, etc. You want to have a policy that will cover all of these costs in full.


Understanding the difference between market value and replacement cost value can help you understand what you can insure your house for more than it’s worth. Call a Redwood Agent to learn more today!