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Reconstruction costs

Have you had a major home renovation lately? If so, it will likely affect the rebuilding costs associated with rebuilding your home and this is a recommended time to discuss with your insurance professional. Remembering to periodically review your home coverage with an insurance professional is a good step in maintaining an adequate level of insurance to rebuild your home in the event of a disaster.

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

  • Economies of scale: When houses are originally built, it is often the case that many houses are built at the same time. This means that the contractor can purchase the materials and accessories needed for the constructions in a single transaction and often in bulk. Just as buying 50 or 100 bathtubs at the same time will cost less per unit than buying just one, you can apply the same economic benefit by buying almost anything else needed for home construction in quantity as well. This can add up to thousands of dollars in savings compared to single-home construction.

  • Reverse rebuilding: New construction almost always follows the pattern of laying a foundation and building from there. When a rebuild is required, and you need to rebuild a house that is not a total loss, you should start by removing the roof and working from the top down. As this process is labor-intensive and time-consuming to perform, it is also generally more expensive.

  • Site Preparation – When a home needs to be rebuilt, the site it sits on needs to be prepared before new construction can proceed. This generally means additional costs for the demolition of any remaining (unusable) structures and the removal of the resulting debris. In cases of intense fire, soil remediation may also be required. In new construction projects, site preparation is generally limited to weed removal and grading costs.

  • Labor Costs – Having tradesmen such as carpenters, bricklayers, drywallists, electricians, plumbers, roofers, and painters on site for an extended period of time can help you schedule and make efficient use of it. If a particular home is not ready to work and requires your specific expertise, they can probably be transferred to work in a home that is. This flexibility in scheduling is generally not possible when working in a single home and has a major impact on overall costs when labor is considered to be one of the most important components of rebuilding costs.

  • Accessibility – Rebuilding 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 bringing necessary rebuilding materials to the job site.

  • Antique and Custom Homes – Rebuilding 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 expensive household items to replace may include tile or slate roofs or floors; slat and plaster walls; paneling; tin-covered, exposed-beam or custom-shaped ceilings; solid wood doors; ornamental fireplaces; stained or leaded windows; shaped stairs; and custom blacksmithing.

  • Updated Building Codes – In cases where homes are more than a few years old, the normal expectation is that the building codes have changed since the home was originally built. Adhering to newer codes may require rewiring, reinstallation, use of safety glass, or working with fire retardant roofing materials.

  • Natural Disasters – If your home was damaged or destroyed due to a natural disaster, other homes in your area will likely need to be repaired or rebuilt in a similar way. 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 against looting and the possibility of further damage. In common cases, personal property must be stored off-site until the home can be repaired. To avoid further damage, plastic sheet material is often used to temporarily cover parts of the remaining structure exposed to the elements.

  • Permits and Fees: Rebuilding may require permits, home inspection fees, and architectural / engineering fees.

  • Inflation – It’s no secret that both materials 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. Be properly prepared 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 the size, location, age, unusual features and finishes of your home, as well as details related to renovations or additions. The more you disclose relevant information about your home, the more fully your coverage will be able to protect you in the event of a disaster.

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