Let’s get right to the bottom line on this answer:

• The Market Value of a home usually does not equal Cost to Rebuild (replace) the dwelling/building.
• The limit of insurance in this case, should reflect the cost to rebuild (replace)

The limit of coverage for most homeowners should reflect the cost to rebuild the dwelling/building. In insurance terminology that is called the “ replacement cost ” of the home. A home’s purchase cost or market value may reflect factors that are not included in the price to rebuild

• Location - Location can significantly influence a home’s value. For example, lakefront and oceanfront properties.
• Demand & Economic Factors - areas where demand for real estate outstrips supply and economic factors drive up residential values.

Some banks may require the limit of insurance represent the full purchase price (or the amount they finance). However, lenders are recognizing that many homeowners policies can (or do) extend coverage for the dwelling even if the cost to rebuild ends up being more than the limit shown on the policy declaration page. So to answer your question “ Should homeowners insurance cover the entire cost of the home? ”

• Yes (in most instances).
• However, the limit of coverage on the dwelling should reflect the entire cost to rebuild (replace) the structure.
• In some instances, the purchase price (or market value) of the home may be more (or less) than the cost to rebuild (replace).

Have additional questions about your homeowners insurance? We LOVE to help! Please feel welcome to call us at 607-324-7500

This article first appeared on quora.com https://www.quora.com/Im-buying-my-first-house-and-getting-quotes-from-different-homeowner-insurance-companies-I-noticed-a-lot-of-them-are-only-quoting-me-for-about-90-of-what-Im-paying-for-the-house-Should-homeowners-insurance-cover-the