There are two different types of claim payouts for a home: replacement cost and actual cash value. For replacement cost, carriers calculate how much it will cost to replace your home based on the current price of materials and labor. This can also include contractors, debris removal, and storage, which is why the home’s insured value tends to be higher than the purchase price. An actual cash value payout is replacement cost minus depreciation (age or life expectancy of the dwelling or property).
For more information about this topic, check out this article: [Actual Cash Value vs. Replacement Cost: What’s the Difference?] (https://getjerry.com/advice/actual-cash-value-vs-replacement-cost-whats-the-difference-by-cheryl-knight).