Replacement Cost vs Market Value
Your home's sale price is not the same thing as the amount it may cost to rebuild after a total insured loss.
What is home replacement cost?
Insurance Bureau of Canada says the insured amount for a building should correspond to what it would cost to replace the home if it were completely destroyed. The estimate can reflect size, age, construction type, roofing, heating and unique features.
IBC — Types of home coverage →Why market value can be higher or lower
Market value incorporates the land, neighbourhood, supply and demand, local schools, transit and other real-estate factors that do not directly determine reconstruction cost. A valuable urban lot can make market value much higher than rebuild cost. In another location, difficult construction conditions or expensive materials can push replacement cost higher than expected.
What can change reconstruction cost?
Replacement costs also affect premiums
IBC lists replacement cost as one of the factors that can influence home insurance rates. Higher expected rebuilding costs can increase the amount of property risk an insurer is taking on.
IBC — How home insurance rates are set →