Depending on the age and condition of your home, calculating the insurance value or reconstruction cost, can be a complicated process. These tips from The Cincinnati Insurance Companies provide you with information to better understand the valuation process.
What is reconstruction cost?
Reconstruction cost, or replacement cost, is the cost to hire a contractor to replace your home as it is, using materials and design of a similar quality. This amount isn’t the same as market value, which is the value that comparable homes are selling for in your area; your home’s current construction cost could be a much larger amount.
Consider your unique home features
Every home is different. That’s why there are so many considerations that go into formulating the appropriate amount of coverage for reconstruction cost.
- Custom features. Can the features that make your home special be repurchased from a local retail store? Or, is a specialized contractor or boutique store order necessary? Think about the built-in cabinetry, stereo and media systems, custom window treatments and high-end appliances – all of these may need to be included in your cost to replace.
- Age of the home. Older homes may have unique features that are difficult to replace. For example, custom-sized doors and windows. Also, the cost of plaster wall construction is higher than drywall.
- Historic homes. There are other factors to consider if your home is listed on a historic registry or located in a historic district. Strict code requirements
or ordinances could make even partial losses costly. Talk with your agent about these requirements. - Site accessibility. Difficulty accessing your property to re-build your home can influence the cost. New homes are typically built on an empty lot that large machinery can easily access. The time and labor to work around landscaping, neighboring properties or restrictions set by the community can increase the cost.
- Time. Many homeowners understandably want to be involved in the process of rebuilding their homes, which can increase the time it takes to reconstruct. Finding a quality, experienced builder who is qualified to work with your insurance company to fulfill the terms of your claim can also take time.
- Demolition and debris removal. After a loss, a significant amount of cleanup may be required prior to starting the rebuilding process.
- Building codes. A rebuilt home may have to meet building codes that were not in place at the time when your home was first built.
- Economy of scale. Builders can receive discounts on materials and labor when multiple homes are built at once. These savings will not apply to rebuilding cost.
- Natural disaster effect. When materials and labor are scarce due to economic or weather-related conditions, costs can rise. These expenses can also include engineer and contractor fees, labor costs and foundation repairs.
Consult the experts
Your agent is experienced and ready to help determine the amount of protection you need to rebuild your home and replace your belongings.
One tool your agent may use to help calculate reconstruction cost is an estimator. By including square footage, architectural style, year of construction and type of construction, estimating software considers specific details about your home, along with construction costs in your community.
Inspections can also help accurately determine the value, especially if you have a custom home with special features that estimating software may not capture. When needed, Cincinnati provides inspections at no additional cost to you.
Keep your coverage current
As you build a life in your home, you may make enhancements that, in the event of a loss, you would want to replace. Whether you make additions or improvements yourself or you hire a contractor, remember to update your homeowner insurance as you increase the value. Your agent can work with you to update your Coverage A limit, which determines the amount of insurance you have to reconstruct your home in the event of a total loss.
When you see the coverage limits on your homeowner policy, think about everything that goes into making your house a home.
