Why doesn't home insurance cover the market value of a property?

I'm confused about why my insurer is valuing my property for less than the market value. Why the discrepancy?

The market value of the home is not always equal to the cost of rebuilding the home. The market value is determined by many more factors like the time of year you buy, what neighborhood you are in, etc. If you buy a home in California and the market value is $1 million, it typically will not cost $1 million to buy materials and pay for labor.
The point of insurance is to return you to where you were before the loss occurred. So insurance companies will pay for the materials and labor to build the same house you purchased, with the same kinds and quality of materials you had before the loss.
This can also be a positive for you because the higher the coverage, the more the policy will cost.
Savannah Grabek
Answered on Mar 01, 2021
Savannah Grabek is an expert in Personal Lines insurance. She has 5 years experience in the insurance industry. Savannah began her carrier working with just property insurance and is now tenured in all personal line including home, auto, motorcycle, boat and umbrella. She previously worked for GEICO and has now been working with Jerry insurance for the past year. Savannah lives in New York with her son, fiancé, and puppy Bear. In her free time she enjoys spending quality time with her family and hiking with her dog.

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