Replacement cost vs market value: which number is on my policy?

The number on your policy is replacement cost, not market value. Your dwelling limit, the big number on your declarations page, is supposed to represent what it would take to rebuild your house from the foundation up. It is not what the house would sell for, and the two can be surprisingly far apart.

Market value is what a buyer would pay for your property. It includes the land, the neighborhood, the school district, and whatever the housing market is doing this year. Replacement cost ignores all of that. It is lumber, labor, materials, and code requirements, priced at what they cost right now. Your land doesn't burn down, so it isn't part of the number.

This is why the gap matters in both directions. In much of Northern Colorado, market value runs well above replacement cost because land here is expensive. In other cases, especially older homes, rebuilding to current code can cost more than the house would ever sell for. Either way, after a total loss, the only number that does anything for you is the replacement cost figure, so it is the one that needs to be right.

The problem is that construction costs have climbed steeply, and a dwelling limit set years ago may not rebuild anything close to your house today. So find the dwelling limit on your declarations page and ask yourself an honest question: could a contractor put this house back for that number, this year? If you're not sure how it was calculated, ask whoever wrote the policy what it was based on. There is more on what a homeowners policy does and doesn't do on our home insurance page.