MetLife, Your Life®

Simple Tips for Life’s Unpredictable Moments

How Your Home’s Value is Determined

Learn what insurance pays to rebuild or replace it in case of fire or a natural disaster.

Q. My MetLife Auto & Home homeowners policy has replacement cost coverage and inflation protection. How would you determine the current market value of my home if it were destroyed by fire or a natural disaster?

A. There is a key difference between replacement cost and market value. It is rare for the two to match. Market value doesn’t play into replacement cost coverage. MetLife Auto & Home will calculate the replacement cost of your house—that is, the amount of money it would take to rebuild the home you lost. The market value of a home—what someone might pay for it on the open market—is based upon its location.

MetLife Auto & Home calculates the replacement cost of your house—that is, the amount of money it takes to rebuild the home you lost. Replacement cost coverage is based on the cost of rebuilding, including the necessary debris removal. A home’s market value—what someone might pay for it—is based on its location.

Take this example from California: The market value of a 900-square-foot house on the beach could be $1 million. But is the house itself worth $1 million? No. If it were destroyed by fire, the insurance company would pay to rebuild the structure, which might cost only $300,000. Remember, it’s the land that’s worth so much money in this instance.

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