What is the value of Tom's home if he must insure it for at least $320,000?

Tom is required to insure his home for at least $320,000, which indicates this amount represents the minimum value he needs to protect it against potential losses. In many cases, the value of the home is based on its market value, replacement cost, or a combination of both, and insurance companies often recommend insuring a home for an amount that is equal to or exceeds its replacement cost to ensure full coverage.

Choosing an option greater than $320,000 reflects prudent risk management, as it allows for coverage of additional costs such as inflation, renovations, or increases in local construction fees. By selecting $400,000, it positions the insured value well above the minimum requirement. This would provide a buffer against unforeseeable increases in repair or construction costs that could arise over time.

In this context, it's essential to prioritize ensuring that one is not underinsured. The selected value of $400,000 not only meets but exceeds the stated insurance requirement, thereby enhancing financial security in the event of a total loss.