If your home were destroyed by fire or other disaster, you might expect that your homeowners insurance would pay for all of the rebuilding expenses. That's not necessarily the case — unless you've purchased a policy that covers your home's current replacement value. Without this coverage, the expenses can really add up.
Replacement cost factors
Replacement value takes into consideration various costs and conditions, such as:
Demolition and debris removal
Before construction can begin, damaged portions of your home must be removed. Sometimes even undamaged parts must be removed to allow other sections to be rebuilt.
Increased cost for building materials
When new homes are built, the contractor often has several homes under construction at once, allowing for the purchase of large quantities of materials. Rebuilding projects often don't benefit from this economy of scale, resulting in higher prices for smaller quantities of materials. Inflation can also increase costs.
Labor costs
Electricians, plumbers and other construction workers are often assigned by a contractor to work on more than one new home at a time, depending on each home's stage of construction. This efficient use of labor scheduling is not possible when rebuilding a single home.
Changes in building codes
Current building codes for wiring and plumbing must be followed if your home is rebuilt. This may mean updating undamaged portions of your house as well to meet code specifications.
Make sure you're insured to value
Our Agency will will work together with you to determine an accurate replacement value for your home. We use the information you provide about your home, plus construction cost data provided by third-party inspection companies such as Marshall & Swift.
We recommend you insure your home to 100 percent of its replacement cost as part of your Homeowners Insurance coverage. This qualifies you for Dwelling Replacement Cost coverage. The coverage offers extra protection against inflation by extending your homeowner policy's dwelling coverage (Coverage A) to 125% of your home's stated replacement value.
Review your coverage regularly
Let us periodically review your home insurance coverage with you so you can select enough coverage to rebuild your home in the event of a disaster. If you plan any remodeling, such as finishing a basement or adding a room, make sure these improvements are covered. Call or visit us if you have any questions about whether your home is fully protected.
Product, coverage, discounts, insurance terms, definitions, and other descriptions are intended for informational purposes only and do not in any way replace or modify the definitions and information contained in your individual insurance contracts, policies, and/or declaration pages.