Are You Underinsured? What Every Homeowner Should Know About Replacement Costs
There’s nothing better than a summer evening spent grilling in the backyard, enjoying the home you’ve worked so hard for. But behind those peaceful moments, there’s a question many homeowners overlook: Is your home truly protected if the unexpected happens?
You might have insurance—but are you covered for what it would actually cost to rebuild your home today? Many people don’t realize they’re underinsured until it’s too late. Here's what every homeowner should know about replacement costs, and how to make sure your policy keeps up with today's rising rebuild prices.
1. Replacement Cost vs. Market Value
One of the biggest misconceptions we see is homeowners assuming their home’s market value is the same as its replacement cost. In reality:
Market Value reflects what your home would sell for.
Replacement Cost is what it would actually cost to rebuild it—materials, labor, permits, and more.
With supply chain issues and rising construction costs, replacement value can far exceed market value.
2. Why So Many Homeowners Are Underinsured
A recent study found that nearly two out of three homes are underinsured. Some common reasons include:
Outdated coverage limits from when the policy was first written
Home improvements that weren’t reported to the insurance company
Inflation and rising labor/material costs not accounted for
Relying on generic or bundled policies that aren’t personalized
3. The Risks of Being Underinsured
If your home is underinsured and disaster strikes, you may be stuck paying tens of thousands—if not more—out-of-pocket to rebuild. Worse, you could be forced to settle for less or rebuild with lower-quality materials.
4. How to Know If You're Covered Correctly
✅ Have your policy reviewed annually
✅ Ask your agent about Extended Replacement Cost or Guaranteed Replacement Cost endorsements
✅ Keep records of renovations or upgrades
✅ Make sure other structures (like garages or sheds) and personal belongings are also properly covered
5. We’re Here to Help
At Ellen Fenton & Company Insurance, we take the time to personalize your coverage and make sure it reflects current costs—not just what worked 5 years ago. If you’re unsure whether your home is properly protected, we’re just a call or visit away.
Final Thoughts:
Insurance shouldn’t be a “set it and forget it” decision. Let us help you stay ahead of the unexpected. Because peace of mind? That’s priceless.
