Replacement Cost Estimator FAQ

What is a RCE (Replacement Cost Estimator) and how does it work?

·         Think of an RCE as a calculator used by the insurance company to estimate how much it would cost to replace your home in the event of a total loss.  The RCE uses information specific to your home (size, materials, etc.) and location.

·         The RCE of your home (or other structure) is what Webb Insurance Agency is forced to insure your home for. 


How does RCE value differ from “market value” and “tax appraised value”?

·         Market value is the current price at which a property can be bought or sold in a real estate transaction.

·         Tax appraised value is a figure the county tax office uses to determine annual property tax.

·         RCE is what the insurance company estimates it would cost to rebuild a structure (your home) on the original site with materials of like kind and quality.

·         Insurance companies don’t care about Market Value or Tax Value, their only concern is the replacement cost, which is determined by the RCE. 


What is insurance to value (ITV)?

·         It is the amount of coverage listed under “Coverage A” on your policy declaration page. It refers to the amount required to completely reconstruct your home in the unfortunate event of complete destruction. ITV is determined by using a RCE.


Why is reconstruction more expensive than new construction?

·         New-home builders typically build many homes at once, and receive huge discounts on building materials for this reason.  No discounts will be giving if it’s just your home that needs work.

·         The cost of debris removal wasn’t paid during new construction but will be paid during reconstruction.   This cost is estimated to be 10 to 20% of your REC amount.


How is the total living area determined?

·         It is determined by the square footage using the exterior dimensions.  This includes the area for all floors plus the area for a built-in garage.  This does not include area for basements, porches, breezeways, decks or attached garages.


What is a manufactured home?

·         Fannie Mae defines it as any dwelling unit built on a permanent chassis and attached to a permanent foundation system.


Why does my dwelling coverage keep increasing every year?

·         Dwelling coverage (aka Coverage A) reflects the amount of money available to rebuild your home in the event of a total loss.  The cost of everything goes up every year including the cost of building materials and labor.  This automatic annual increase is called “Inflation Guard,” it’s typically 4% per year and is present on all property policies that are insured for replacement cost.   There is no option of removing “Inflation Guard.”


What happens if I don’t provide accurate information about my home causing my RCE incorrect? 

·         If your RCE amount is too low you could be severely penalized in the event of a claim.  We suggest having your RCE a little on the high side to prevent these possible penalties from occurring and we have never had a homeowner complain they had too much coverage when tragedy struck.