When writing a homeowners policy with a personal lines managing general agent (MGA), one of the most important responsibilities a broker has is to establish the right coverage limit. Homeowners often assume their policy will automatically cover the full value of their home, but in reality, the number that defines “enough” coverage comes from the broker.
For those working with a personal lines MGA, a replacement cost estimator is a foundational tool in this process. By drawing on actual data and standardized methodology, estimators provide the accuracy and consistency needed to protect clients from underinsurance and give brokers confidence that their policies reflect the true cost to rebuild.
What Is the Purpose of a Replacement Cost Estimator?
At its core, the purpose of a replacement cost estimator is to determine the cost of rebuilding a home if it were destroyed, not its market value, and not its assessed value for tax purposes. Clients often conflate these numbers, but they measure very different things:
- Market value reflects land and location. A home sitting on 10 acres or in a high-value neighborhood may have a market value far higher than the cost to rebuild its structure.
- Assessed value reflects tax considerations and does not capture reconstruction costs.
- Replacement cost reflects what it would actually take to rebuild the home today using new materials and current labor rates. It also factors in additional expenses such as architectural design, debris removal, and code upgrades.
This is also where the difference between actual cash value (ACV) and replacement cost becomes critical. ACV deducts depreciation from the payout, meaning a 20-year-old roof might only be valued at a fraction of its replacement cost.
Replacement cost coverage, on the other hand, is designed to rebuild the home in full with new materials at today’s prices. Most homeowners policies are written on a replacement cost basis, but brokers can use this comparison to explain why replacement cost coverage provides far greater security in the event of a loss.
Beyond Bricks and Lumber: Accounting for Soft Costs
Replacement cost isn’t simply the sum of wood, drywall, and shingles. A rebuild involves a range of soft costs and additional considerations that many homeowners overlook but that estimators capture, such as:
- Architectural design and engineering fees
- Demolition and debris removal
- Permit and inspection fees
- Code compliance upgrades
- Site preparation and utility reconnections
These types of soft costs can add tens of thousands of dollars to a rebuild. Without them, a policyholder may find their coverage falls short even if the structural costs appear accurate. Estimators ensure these realities are factored into the coverage limit.
Why Brokers Rely on Estimators
For brokers, a replacement cost estimator serves as a safeguard for professional credibility. Relying on homeowners to provide a rebuild figure is risky; it shifts responsibility to individuals who lack access to accurate data. By using an estimator, brokers ensure:
- Consistency in quoting. Every client is assessed with the same data-driven process, eliminating disparities caused by personal assumptions or negotiation.
- Credibility in underwriting. Standardized estimates support both new business and renewals, reducing friction with carriers and providing a defensible basis for coverage decisions.
- Adequacy of coverage. At claim time, brokers can point to verifiable data as the foundation of the limit selected, minimizing disputes and reinforcing client trust.
- Protection from guesswork. Estimators shift the onus away from broker judgment alone and root recommendations in objective, third-party data.
In short, estimators give brokers a defensible position and help ensure that clients are protected with the right limits from day one.
Keeping Valuations Current: Best Practices for Brokers
A home insured today may not be insured accurately ten years from now. Construction costs shift, families renovate, and regional events can drive sudden inflation in labor and materials. A policy written and left untouched for decades is almost guaranteed to fall out of step with reality. That’s why brokers play a vital role in keeping replacement cost valuations current. Some practical strategies include:
- Schedule desk appraisals every three to five years. Make it part of your renewal workflow to re-run the home through the estimator and check whether limits need to be adjusted.
- Recommend on-site or virtual appraisals every eight to 10 years. If the desk review raises questions, guide clients toward a professional inspection that captures structural changes or upgrades.
- Ask about renovations before each renewal. Don’t wait for homeowners to report updates. Proactively reach out with a checklist that asks about additions, kitchen remodels, new bathrooms, or outbuildings, and update the valuation accordingly. This process can be done through an annual call, a renewal questionnaire, or an automated mailing.
- Track regional cost shifts. Stay tuned to local construction and labor costs, especially after natural disasters. If prices in your market spike, flag policies for mid-term review so clients aren’t caught underinsured.
By building these practices into your process, you turn valuations into ongoing service touchpoints that strengthen relationships, reinforce trust, and help clients see the real value in your expertise.
A Personal Lines MGA Prepared To Quote With Accuracy
For brokers quoting through a personal lines MGA, replacement cost accuracy can mean the difference between a smooth underwriting process and one filled with questions. At Cochrane & Company, we recognize how essential these tools are in personal lines placements. That’s why we support our broker partners with access to advanced estimator tools, along with the specialty expertise needed to place coverage confidently.
Our role is to help brokers deliver policies that hold up when a claim occurs. By pairing replacement cost estimators with Cochrane and Company’s market access and underwriting knowledge, brokers can offer clients coverage rooted in accuracy, consistency, and trust.
Ready to strengthen your homeowners placements? Contact Cochrane & Company to learn more about replacement cost tools and the specialty personal lines solutions we provide.
FAQ About Replacement Cost Estimators
How often should a replacement cost estimate be updated?
Every three to five years is a good rule of thumb for a desk appraisal. Major renovations or local cost shifts may call for more frequent updates. Work with your personal lines MGA for the most accurate, up-to-date estimate.
Can estimators be used for older homes or custom builds?
Yes. Estimators account for unique features, materials, and construction types, providing reliable benchmarks even for non-standard properties.
What if the estimate seems too high or too low?
Clients often react with skepticism. Brokers can explain that the figure reflects reconstruction, not resale, and includes expenses like demolition, permits, and architectural design.
Does the estimator include code upgrades?
Yes, most estimators factor in requirements to rebuild in line with current building codes, ensuring coverage aligns with today’s standards, not outdated specifications.
About Cochrane & Company
For more than six decades, Cochrane & Company has been proudly at the forefront of the insurance industry. Our experience as a business and personal lines MGA has enabled us to innovate in powerful ways, reimagining the E&S market, and providing technology solutions that make it easy to do business with us. Licensed in all 50 states, we proudly serve clients across the nation, providing personalized and powerful solutions to help you become an even better partner for your clients. Speak to one of our experienced professionals today by calling (855) 967-0069.