Reconstruction cost is the price tag to rebuild a home. This is not the same as the market price of the property. It is not the amount you pay to buy or sell the home. Rather, this cost represents the total cost to source materials, obtain permits, and rebuild the structure. How do you get this value?
It is an important number to determine. Your home insurance should be at this level. If not, you may not be able to afford rebuilding the property.
How Much Does It Cost to Rebuild a Home?
The reconstruction cost of a home represents much more than just the cost to buy the home. Building a home is often more expensive.
If the home suffers a devastating event, and repairs are not possible, your home insurance company will consider it a total loss. When this occurs, the company will pay what your home’s value is, or the reconstruction cost, depending on what you select at the time of obtaining your policy. The value of your home may fluctuate. Market conditions impact this. But the cost to rebuild it tends to be higher.
How to Determine the Cost to Replace Your Home
Your agent can offer some guidance here. However, it is important to consider a few key factors to determine the right value for your policy.
- How old is the home? Older homes have hard-to-replace fixtures and features. It can be hard to match custom molding or unique features. This adds more cost to the home.
- How are construction prices? Recently, the cost to build a home is on the rise because construction costs for labor and materials are growing.
- What are local building codes? In some cases, codes continue to change. This can make it harder to rebuild the same home. You may need to make other changes
Most often, a home insurance agent should calculate the reconstruction cost of the home. If you wish to gain some insight, contact a local home builder, as well. Discuss your home, features, size, and overall needs. He or she can offer insight into what the cost might be. Update this value on a regular basis.
As home construction costs change, you may need to update your policy to reflect this. You do not want to find yourself without enough financial protection. You should not have to. Reconstruction costs do not have to make your policy too expensive.