This past weekend, I took my kids to see Disney Pixar’s “Monsters University.”  Despite being a movie entirely about monsters – a scary theme – it had a wholesome storyline and a lot of laughs.  A great family movie!

In the adult world, there are many things far scarier than monsters. Residents of Colorado are facing the most destructive wildfire in the state’s history. If losing their home isn’t scary enough, what if they didn’t carry enough insurance to rebuild it? Insuring your home to value is one of the most important steps you can take to fully protecting your greatest asset.

Many people believe their insurance coverage should be based on the price they paid for their home.  Others believe they’re adequately insured if the insurance coverage is based on the fair market value (the amount the owner would expect to receive if the home were sold today).  And for those who just completed construction on a new home, you see no reason to insure it for more than what it cost to build, right?

The amount of insurance you buy should be based on the cost of replacing the home. The costs associated with replacing or rebuilding a damaged home are substantially higher than those to build a home new.  Why?

  • Demolition and debris removal costs.
  • Rebuilding to current local building codes.
  • Special planning and architectural work problems that aren’t often encountered during the process of new construction.
  • Specialized contractors and skilled laborers repair and rebuild homes at a labor rate that is usually higher than the rate negotiated in building a new home.

Also, consider the fluctuations in the cost of building materials.  Supply and demand along with weather conditions effect the availability and price of materials such as lumber and plywood.

What amount of insurance do you carry?  Is it enough?  I’m not trying to scare anyone, but it’s important to think about what would happen if you lost your home and had to rebuild.

Here are 3 easy steps to help you get started:

1. Take an exterior/interior inventory of your home.  Things to consider:

  • Total living area (include bonus rooms and finished basements)
  • Exterior wall construction (siding, brick or stone veneer, etc.)
  • Roof type (asphalt composition shingles, wood shake, etc.)
  • Additional features such as garages, decks, porches or fireplaces
  • Features and finishes (custom, builder’s grade, etc.)

2. Share this information with your insurance agent.  Most insurance companies utilize an estimating tool that calculates the reconstruction cost with the information provided by your agent.

3. Review your current homeowners insurance with your insurance agent and determine if any changes are needed.  Consider adding a replacement cost endorsement to your policy for additional protection.

One of the most important things to remember is as you change your home, from adding a deck to finishing a basement, it’s important to contact your agent and update your insurance coverage.  It’s recommended to do this every 3 to 5 years, or as needed depending on significant updates or renovations.

For more information on insuring your home to value, check out these tips sheets:

My Homeowners Policy and Insurance to Value

Is Your Home Insured to Value?

Why Reconstruction Usually Costs More Than New Construction

Understanding your home’s reconstruction cost and how it affects your insurance coverage isn’t scary, especially when you have a trusted advisor to help you.  Contact your insurance agent today!

4 responses to “The Not-So-Scary Truth about the Reconstruction Cost of Your Home”

  1. Great thought! most people do think about what it is inside or what the house is worth but you are right about all the little extra things that surround “replacing” a house. I got some good advise from and agency i found at

    1. Melissa Hilvers Avatar
      Melissa Hilvers

      Thanks! I’m happy to hear it was helpful. Stop back again!

    2. If I cancelled my insurance how long before the home is uninsured?

      1. Hi Winona! This situation would depend on what date you canceled your insurance. If you canceled your home insurance effective immediately, your home would be uninsured as of that moment. Depending on your contract language, you may also have the option of terminating the policy as of a future date. We recommend contacting your agent to determine the proper course of action.

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