A replacement cost estimate must account for the reasonable cost to rebuild the home, including:
demolition and debris removal;
It may not be based on the resale value of the land or on a loan balance, because a dwelling limit insures the building, not the lot.
Example: a house might sell for $1,100,000, carry a $700,000 mortgage and cost $550,000 to rebuild. Only the $550,000 rebuilding cost is the right basis for the estimate.