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Do you know how insurers determine the cost of rebuilding a home?

Bare plywood and beams as a new house is framed up from the foundation. High lumber costs have affected the building process. Shot in Washington state, USA at sunrise.

REBUILDING COSTS: AN ESSENTIAL ELEMENT IN HOME INSURANCE

The cost of reconstruction is the amount needed to rebuild your home to its original condition after a loss, such as a fire. This amount has nothing to do with market value or municipal assessment, and always excludes the land.

Although a professional appraisal is the best way to estimate this cost, there are also software programs recognized by home insurers that allow you to obtain a relatively accurate estimate, based on criteria such as :

  • House dimensions
  • Number of floors
  • Finishing the basement
  • Number of bathrooms and shower rooms
  • The presence of an attached garage
  • Roofing material
  • Type of siding
  • Level of finish (standard, high-end, custom, etc.)
  • Cost of plans, permits, taxes and excavation
  • Administration costs and contractor’s profits
Elements that can increase the cost of reconstruction

In some cases, the home insurance broker or insurer will have to take into account certain details that can substantially increase the cost of reconstruction:

  • Built-in furniture
  • Built-in appliances
  • High-end finishing elements (e.g. chandeliers)
  • Architect or designer fees
Post-disaster reconstruction: why costs are soaring

It’s also important to understand that the cost of rebuilding after a disaster can exceed that of a new build by 30%, mainly because of :

  • The urgent need to act quickly
  • Demolition and debris removal
  • The site’s limited accessibility
  • Lack of economies of scale on materials and labor
  • Protecting intact parts of the house
Why evaluate your home insurance?

It’s essential that your home insurance coverage accurately reflects the cost of rebuilding your home to new condition. This avoids under-insurance in the event of a claim.

 

Also, remember to notify your insurer or home insurance broker when you make any renovations or additions over $5,000, such as :

  • An extension
  • Adding a terrace
  • Major kitchen or bathroom renovations
  • Creating a bedroom or powder room in the basement

These simple steps can save you a lot of trouble in the event of a claim.