The purchasing power of the U.S. dollar continues to erode due to inflation. Your grandfather could buy an average home in America for around $4,000. Your father could buy the same kind of home for about $40,000. Now, in contemporary times the median price of a home in the USA is over $400,000.

Why have home prices gone up so much?

It’s slightly confusing, but the home prices are higher because of the degradation of the money unit. The dollar is worth a heck of a lot less than it was 50 to 100 years ago.

The Benefits of Replacement Value

If you insured your home for its cash value, this amount goes down as you subtract depreciation. If your home is damaged by a covered peril, such as a fire, and you only have it insured for its cash value, the amount you receive for your claim will not be enough. You will not have the necessary funds to rebuild your home to a similar condition as it was before the fire.

If, instead, you have replacement value coverage, your claim will be paid up to your policy limit for a covered peril with the amount it takes to rebuild your home at current prices.

Update Replacement Cost Annually

When you conduct an annual insurance review by working with your agent at Alliance Insurance Partners in Scottsdale, AZ, you will want to upgrade the coverage to the most current replacement value for your home.

The main benefit experienced by those who carry replacement value home insurance is that there should be enough funds to rebuild the home to a similar condition after it is damaged. Just knowing you have replacement value coverage can be comforting, especially when facing a major disaster.

Consult with your agent at Alliance Insurance Partners in Scottsdale, AZ, for all your home insurance needs.