[LyndsySimon]

I live in a community where there is very little oversight like this (by design), but my mortgage requires that I cover my home for the cost to rebuild, not the market value. I questioned this because in my case it’s more than twice the value, but apparently it’s how things are normally done.

[gonyea]

Well, market rate in this context meant the (regional) labor and material costs to construct a generic, equal sqft house with X rooms and Y baths. I perhaps chose the wrong term.

It'd likely require a lawsuit to make them shell out an additional $200k+ for the specialist architect and master carpenter to help recreate the original structure.

[theoh]

I don't know about "market rate", but I believe that items are typically insured for their replacement value.

There may not be a requirement to insure a protected structure at all, but it's plausible that such a measure could be introduced because of the perceived externalities (i.e. heritage value to society) of a protected building.

[LyndsySimon]

That's it exactly.

I live in an inexpensive area, and purchased my five(-ish) bedroom home for ~$125k. It would cost about $240k to rebuild, exclusive of the cost of the land.

When buying homeowner's insurance, my interest is that I would not lose value in the event of my home's destruction; I want to be able to buy another home of similar value and not owe more money than I already did. However, my mortgage requires that I insure the home's replacement value, and no insurer that I could find would cover me for only $125k.

This results in what I believe to be a negative incentive: assuming no equity, I currently owe $125k and have a home. If my home were to burn to the ground tomorrow, I would have a check for $240k. I'd then use that check to pay off my existing mortgage and buy a home of similar value outright - leaving me a profit of ~$115k in the process.