When you insure a typical home for its market value, you are at risk of having incomplete coverage. For example, imagine that a family buys a home for $175,000 and takes out a homeowner's policy for the same amount. The estimated replacement cost for the home, though, is $225,000. If a fire or other insured event destroys the house, the insurance settlement may be less than the actual replacement cost of the home. The family would either have to make up the difference themselves or build a new, less expensive home.