Where does the “replacement cost” come from?

REPLACEMENT COST

At Bailey Family Insurance we educate about ensuring your home for “full replacement cost” but what does that mean?
Why am I insuring my home for way more than what I paid for it? 

What does “replacement cost” mean?

Where does the “replacement cost” come from?
The replacement cost is calculated by using an “estimated replacement cost tool”. This tool requires the agent to input all information about the structure of the home (layout, siding type, # of stories etc.) as well as interior features ( # of bathrooms, size of garage etc.). The tool then calculates the amount it would cost to clean up debris from a total loss as well as replace the items in today’s world. 

Why does replacement cost matter?