Why is my house not insured for its market value?

Believe it or not, the selling price of your home isn’t really related to its insurance value. Your insurance policy doesn’t factor in the cost of the land your home is built on, but rather it’s designed to cover the costs associated with rebuilding your home after a major or total loss (like a fire). In addition to reconstruction costs, your insurance policy covers the teardown, removal, and disposal of debris. If your home is older, the builders may incur extra costs bringing the rebuilt structure up to current building codes.