Are You Adequately Insured For a Home Rebuild?

Are You Adequately Insured for a Home Rebuild?

If you’re following us on social media or have received our latest newsletter, you probably know we recently had a house fire. Being in the process of rebuilding our home after a devastating loss reminded me of the importance of adequate coverage. In this blog, I want to share a few essential matters to consider to ensure you are covered if you ever need a home rebuild.

Let’s Talk About Coverage A

Dwelling coverage, also known as Coverage A, is one of the most important things you need to discuss with your home insurance agent. It covers damage to your home structure in the event of damage. With the increase in home premiums, you might find it tempting to reduce coverage, including Coverage A. But this could put you in a tough situation in the future. Your home is an investment; now is not the time to cut coverage.

How Coverage A Changes Impact Home Premiums

Disruptions in the supply chain due to the pandemic increased prices of construction materials essential to home rebuilding. Paint and plywood prices have increased by more than 80%. So has the cost of lumber, furniture, shingles, and appliances. As a result, replacement cost calculations or Coverage A also increased, along with home insurance premiums. This increase is necessary to ensure the cost of rebuilding would not exceed the amount covered by your policy.

The Cost of a New Build Vs. The Cost of Home Reconstruction

According to HomeAdvisor, the new build cost for the average home is $100-$200 per square foot. But other important factors like land slope, location, construction style, and quality, footprint, and foundation must be considered as these also affect a new build cost.

Another angle to consider is that developers can get close to $100 per square foot if they are building a home that is part of a larger development project where they purchased the construction materials in bulk/wholesale prices. Rebuilding your dwelling in the present economy and buying materials just for your home is how much your Coverage A should cover.

Reconstruction cost is the cost of rebuilding the house as it was when it was damaged. When doing it, you need to source construction materials and a crew at prevailing market prices. You have to note that demolition takes a long time, and the crew will likely have to work around some obstacles preventing them from carrying out construction smoothly – which means more time and expenses. Restoration contractors are using $275- $300+ per square foot for rebuild costs here in the metro area.

Asking Your Insurance Advisor to Walk you Through a Replacement Cost Estimate (RCE)

The most important reason for getting homeowners insurance is to make sure you can replace your home in case you experience a total loss. Many homeowners overlook this possibility when buying insurance. According to CoreLogic’s Residential Cost Handbook, 64% of US homes are underinsured by an average of 27%. This means two out of every three homes don’t have enough dwelling coverage/Coverage A to rebuild them. Don’t commit the same mistake!

Revisiting your policy’s replacement cost estimate when remodeling or renovating your home

Even a tiny change, such as updating your cabinets, can increase your replacement cost. Because of this, it is crucial to speak with your agent to ensure your policy is updated to reflect any changes.

Want to learn more about Coverage A? We’re happy to provide you with more information and answer your questions. Get in touch with us today.