There are companies that will write your home at a market value or cash value policy. They are becoming more popular now that the difference between market value and replacement cost is greater than a 100%. An unscrupulous person could purchase a home for $100k and let a small fire become a big fire and collect $300k from the insurance company. It is called a moral hazard, in other words, a person would benefit from a total loss and could be encouraged to allow it to happen.
Some companies will only insure a home at replacement cost because that is the type of policy they have been approved to write through the insurance commissioner. Every company that wants to write an admitted policy in a state must have the product and rates approved by the commissioner. If you call a couple of independent insurance agents you may find one that can write you a market value or cash value policy. Just make sure you understand how a partial claim is paid and if there is coinsurance. Some companies that write market value or cash value policies will offer a rider for additional premium that will give you replacement cost coverage on a partial loss and the insurance policy maximum for a complete loss or a loss greater than the amount of insurance.
The last thing is the mortgage company. Depending on the state, they hold the note and title on the home. They may not want to be cashed out in a total loss because they will lose investment income. They might want your home rebuilt so you will continue to pay interest for the life of the loan. They paid commissions and did the underwriting on the loan and they want to recover not only the loan value, but their costs, and hopefully earn some money on lending you money. The mortgage company may hold the gavel on whether you can consider anything but a replacement cost policy.
.Be careful and good luck.
The Home Insurance Specialists
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