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New homeowners have a pretty good idea of their property’s market value. That’s because mortgage companies typically require an appraisal before they approve a home loan.

But there’s a different type of value home buyers need to know as well: Replacement cost. Replacement cost is the amount of money it would take to replace, or rebuild, your home in the event of a fire or other covered loss. Replacement cost has nothing to do with your home’s market value, land costs or any loans you have on your property. Here are some of the most important factors used to determine your home’s replacement cost:

  • Cost of construction in your area
  • The size of your home
  • The number of individual rooms and bathrooms
  • The materials used in your roof
  • Special features such as fireplaces
  • Recent improvements or additions

Your insurance company will provide an estimate of your home’s replacement cost when you request homeowner’s insurance. Just like market value, though, the cost of rebuilding your home is likely to change over time. It’s always a good idea to check in with your homeowner’s insurance company annually to make sure you remain adequately covered.