Have you done a major renovation in your house lately? If so, it likely affects the rebuilding costs associated with rebuilding your home and is a recommended time to have a discussion with your insurance professional. Remembering to regularly review your home’s coverage with an insurance professional is a good step toward maintaining an adequate level of insurance to rebuild your home, in the event of a disaster.

So why do rebuilding costs differ from the market value of a home or even the cost of new construction? Reconstruction costs can be affected by a number of factors, including but not limited to the following:

• Economies of scale: When houses are originally built, it is usually many houses being built at the same time. This means that the contractor can buy the necessary building materials and supplies in a single transaction, often in bulk. Just as buying 50 or 100 bathtubs at a time will cost less per unit than buying just one, you can apply the same economic benefit to buying just about anything else required for homebuilding in quantity as well. This can add up to thousands of dollars in savings compared to building a single house.
• Reverse Reconstruction: New construction almost always follows the pattern of establishing a foundation and building from there. When rebuilding is required, and you need to rebuild a home that isn’t a total loss, you need to start by removing the roof and work from the top down. Since this process is labor intensive and takes more time to perform, it is also generally more expensive.
• Site Preparation – When a home needs to be rebuilt, the site it sits on must be prepared before any new construction can proceed. This usually means additional costs for the demolition of any remaining (unusable) structures and the removal of the resulting debris. In cases of intense fires, soil remediation may also be necessary. On new construction projects, site preparation is generally limited to brush removal and grading costs.
• Labor Costs – Having workers such as carpenters, masons, masons, electricians, plumbers, roofers, and painters on site for an extended period can help schedule and make efficient use. If a particular house isn’t ready for the job that their specific expertise requires, they can probably relocate to work in a house that is. This flexibility in scheduling is generally not possible when working on a single home and has a large impact on overall costs considering that labor is one of the largest components of rebuild costs.
• Accessibility: Reconstruction of a destroyed home is often required in established neighborhoods with mature trees, lawns, gardens, and fences. These and other obstructions can limit access to the job site and therefore increase the costs of getting necessary rebuilding materials to the job site.
• Older and Custom Homes – Reconstruction of older or custom homes should generally include the replacement of features and finishes that are considered unusual compared to more conventional homes. Whether rebuilding materials are in short supply due to age or classified as “high-end,” the expectation is that they will be more expensive to replace. Some examples of items that are expensive to replace in the home might include tile or slate roofs or floors; lath and plaster walls; paneling; tin-clad ceilings, with exposed beams, or made to measure; solid wood doors; ornamental fireplaces; led or stained glass windows; shaped stairs; and custom hardware.
• Up-to-date building codes – In cases where homes are more than a few years old, it should be expected that building codes have changed since the home was originally built. Meeting newer codes may require rewiring, re-plumbing, using safety glass, or working with fire-retardant roofing materials.
• Natural Disasters – If your home was damaged or destroyed due to a natural disaster, it is likely that other homes in your area will need to be similarly repaired or rebuilt. In this case, it is not uncommon for material and labor costs to be higher due to shortages and increased demand for both.
• Partial Damage – If your home was only damaged and not destroyed, the remaining structure must be protected from looting and the possibility of further damage. In the usual cases, personal property should be stored off-site until the house can be repaired. To prevent further damage, plastic sheeting material is typically used to temporarily cover portions of the remaining structure exposed to the elements.
• Permits and Fees: Reconstruction may require permits, home inspection fees, and architectural/engineering fees.
• Inflation – It’s no secret that material and labor costs continue to rise due to inflation. Depending on when the cost of rebuilding your home was originally estimated, it may cost more to complete the project today.

For the reasons described above, reconstruction costs can differ significantly from the market value and cost of new construction. Prepare adequately for a disaster by regularly reviewing your coverage with an insurance professional. Remember, the adequacy of your home insurance coverage depends on accurate information about your home’s size, location, age, unusual features and finishes, as well as details related to any renovations or additions. The more you reveal relevant information about your home, the more fully your coverage can protect you in the event of a disaster.