FAQs on home replacement costs and “Dwelling A” coverage limits
Q: How is a home’s replacement cost determined and why is it important?
A: In the event of a loss, wouldn’t you want the comfort of knowing that you have enough insurance to cover the cost to rebuild? The cost to rebuild a home not only includes material and equipment costs, but also labor. Labor estimates take into consideration wages, fringe benefits and overhead for workers such as medical costs, workers compensation, federal and state taxes. It is also common to encounter unforeseen costs not included in the original reconstruction plans. The replacement cost estimate takes into consideration these average cost adjustments.
Q: What are some differences between a home’s Estimated Replacement Cost and a home’s Market Value?
A: Replacement cost is different from, and not influenced by, the selling price of other homes in the neighborhood, the cost of land, the desirability of a location or the quality of a school system. Instead, replacement costs must account for the expenses to reconstruct your home. This can include the preservation of undamaged parts of your home, the cost to clean-up a loss site and prepare it for reconstruction, labor costs, and the current cost of building materials.
- Oil and gas costs have increased over the years, and so have the costs of oil-based building materials like roofing shingles, plastics and even paints.
- Paint costs are up 4.5%, copper pipe costs are up 19%, Romex wire costs are up 19.5%, asphalt shingle costs are up 8.3%, and insulation costs are up 12.3% (based on 2011 data).
Q: What are some differences between a home’s Reconstruction Costs and New Construction Costs?
A: Differences include labor skill levels, the loss of economies of scale when working on just one site, access to the worksite, and homeowner involvement. All of these factors may contribute to making reconstruction more expensive than new construction.
Not sure if your insurance portfolio properly reflects the cost to rebuild your home? Contact us for more information on homeowner’s insurance, an insurance quotation, or an Insurance Tune-up(SM) on your existing insurance.