Glossary

Market value

The price a willing buyer would pay a willing seller on the open market, which includes the land and location and is not the basis for dwelling coverage.

Also called: fair market value, FMV

Market value is what your property would sell for. It reflects land, location, schools, the condition of the neighborhood and the state of the housing market, as well as the building. None of those things should drive your dwelling limit. Coverage A insures the structure, so it is set by the cost to rebuild it, and the land is not part of that figure.

The two numbers can point opposite ways. Say a house in a sought-after neighborhood sells for $600,000, but the land accounts for $350,000 and the structure would cost $300,000 to rebuild. Insuring it at market value overinsures it. Now say a rural house sells for $200,000 and would cost $350,000 to rebuild because of materials and labor. Insuring at market value leaves a $150,000 hole. Property tax assessments are no better a guide.

Market value does matter in a few places. Some states and policies define actual cash value with reference to market value, and the older-home form HO-8 exists because rebuild cost can far exceed what an old house is worth. Lenders also care about market value because it limits the loan. For the difference in practice, read replacement cost vs market value: why your home's price is the wrong number, and use a replacement cost estimate to set the limit.

Last reviewed October 10, 2026

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Related terms

Replacement cost What it would cost to repair or rebuild with materials of like kind and quality at today's prices, with no deduction for age or wear. Actual cash value What an insurer pays for damaged property: the cost to repair or replace it today, minus a deduction for age and wear, so less than a new-for-old payment. Replacement cost estimate A calculation of what it would cost to rebuild a home today, from its size, construction details and local labor and material prices. HO-8 (modified coverage form) A named-perils policy for older homes whose rebuild cost far exceeds market value, paying to repair with common materials rather than replace like for like. Dwelling coverage (Coverage A) The part of a homeowners policy that pays to repair or rebuild the house itself, including attached structures such as a garage, porch or deck. Underinsurance Carrying a coverage limit below what a loss would cost to repair or rebuild, which leaves the owner to pay the gap.

Related guides

How the age of your home affects insurance Older homes cost more to insure and can be harder to place because of aging wiring, plumbing and roofs. Newer homes earn credits that fade. What to document. HO-8 policies for older homes The HO-8 is a named-perils form that pays to repair an older home with common modern materials, not to restore its original plaster, tile and trim. Replacement cost vs market value: why your home's price is the wrong number Market value includes land and location; replacement cost is what builders charge to rebuild the structure. Why they diverge and which should set your limit.