With the property market still sliding down its slump, this is easily one of the most common questions I receive as an agent. There could be two parts to the question, but the answer is the same. Let’s consider this scenario: You purchased your home with a mortgage for $200,000 ten years ago. Now, after making all those payments I’m sure you remember, your loan value is $140,000. However, your neighbors are only able to sell their homes for $120,000, and yours would likely go the same way.

Already we have several numbers in the works here, but there’s one more number that is the most important of all: the money it would take to actually rebuild your home.  Remember, with insurance, you are not buying a new home, you are rebuilding your current home. The key phrase to always keep in mind with insurance is “Make you whole again.” You should neither profit nor lose from a claim.

The insurance industry and the real estate and mortgage industries are surprisingly unrelated. You may hope that you should be able to lower the coverage on your home policy because you have paid down your debt on the house, or because it’s not “worth” what it used to be. On the contrary—what it’s worth to a new buyer is different than what it’s worth to you. You need your home, and I’m sure in the event of rebuilding from a catastrophic loss, you would like the same home you have been working so hard to pay for. Despite the decrease in home values, the cost of labor and materials for reconstruction have not followed suit. The home you are paying $200,000 for, but is only worth $120,000 to a new buyer, probably still costs about the same to rebuild, depending on your area.

As difficult as it may be to remember how important it is to keep your dwelling coverage at replacement cost when the insurance bill comes in the mail, just ask yourself if you could afford not to insure it to full replacement cost value. Your home is easily the most important tangible asset you own, and insuring the most important thing you own is definitely not the place to cut costs.

Have a question for Emily? Email her at emilyh@lymansheets.com, or follow her on Twitter @AgentEmilyHarte, find her on Facebook, and connect with her on LinkedIn.