The replacement value of a home for the purposes of a Massachusetts home insurance policy is the amount it would cost to rebuild the house from scratch. Many people make a highly inaccurate estimate of the replacement value of their home because they confuse the insurance replacement value of a home with its market value.
The market value of your home includes the value of the plot of land the house is built on; if the house is rebuilt on that plot of land the land remains in your ownership and only structure itself needs to be replaced.
Estimation of the cost of rebuilding your home from scratch first requires an estimation of the square footage of the floor area. You also need to estimate what part of the floor area is unheated space such as porches and garages, because heated and unheated areas have different construction standards and costs. These figures can be used with online software that calculates the cost of reconstructing your home based on current costs in your location for building materials, labor and fittings.
Prices of building materials and other cost elements tend to rise steadily. You should recalculate the building replacement of your home regularly, and if necessary adjust the building replacement cover in your Massachusetts home insurance policy to ensure that you are fully covered for the cost of reconstruction.