Have you done a major renovation to your home lately? If you have, it will likely affect the reconstruction costs associated with rebuilding your home and it is a recommended time for a conversation with your insurance professional. Remembering to regularly review your home coverage with an insurance professional is a good step towards maintaining a level of insurance adequate to rebuild your home, in case of disaster.
So why else do reconstruction costs differ from a home’s market value or even the cost of new construction? Reconstruction costs can be affected by a number of factors, including but not limited to:
- Economies of Scale – When houses are originally built, it is usually a case of many homes being constructed at the same time. This means that materials and fixtures required for the builds can be purchased by the contractor in one transaction, and often at a bulk rate. 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 to buying almost anything else required for home construction in quantity as well. This can add up to thousands of dollars in savings when compared to single home builds.
- Reverse Reconstruction – New construction almost always follows the pattern of establishing a foundation and building up from there. When reconstruction is required, and you need to rebuild a home that isn’t a total loss, you need to start by pulling off the roof and working from the top down. As this process is labour-intensive, and takes more time to accomplish, it is generally more expensive as well.
- Site Preparation – When a home needs to be reconstructed, the site it sits on needs to prepared before any new construction can proceed. This usually means additional costs for demolition of any remaining (unusable) structure and removal of the resulting debris. In cases of intense fire, soil remediation may be required as well. In new construction projects, site preparation is usually limited to costs for brush removal and grading.
- Labour Costs – Having tradespeople such as carpenters, brick layers, drywallers, electricians, plumbers, roofers, and painters all onsite for an extended period of time can aid in scheduling and efficient usage. If a particular home isn’t ready for work requiring their specific expertise, they can probably be moved to work on a home that is. This flexibility in scheduling is not usually possible when working on a single home, and has a huge impact on overall costs when you consider that labour is one of the largest components of reconstruction costs.
- Accessibility – Reconstruction of a destroyed home is often required in established neighbourhoods with mature trees, lawns, landscaping, and fences. These and other obstructions may limit access to the worksite and thereby increase costs in getting needed reconstruction materials to the worksite.
- Older and Custom Homes – Reconstruction of older or custom homes generally must include the replacement of features and finishes which are considered unusual when compared to more conventional homes. Whether the reconstruction materials are scarce due to age or classified as “high-end,” the expectation is that they will be more expensive to replace. Some examples of expensive to replace home elements can include tile or slate roofs or floors; lath and plaster walls; wainscoting; ceilings covered in tin, with exposed beams, or custom-shaped; solid wood doors; ornamental fireplaces; leaded or stained glass windows; shaped staircases; and custom ironwork.
- Updated Building Codes – In cases when houses are more than a few years old, it should be the normal expectation that building codes will have changed since the home was originally built. Adhering to newer codes may require rewiring, replumbing, 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, it is likely that other homes in your area similarly have to be repaired or rebuilt. In this case, it is not uncommon for material and labour 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 prospect of further damage. In usual cases, personal property must be placed in storage offsite until the home can be repaired. To prevent further damage, plastic sheeting material is usually used to temporarily cover parts of the remaining structure exposed to the elements.
- Permits and Fees – Reconstruction may require permits, home inspection fees, and architecture/engineering fees.
- Inflation – It’s no secret that costs for both materials and labour continue to rise due to inflation. Depending on when the reconstruction cost of your home was originally estimated, it may cost more to complete the project today.
For the reasons outlined above, reconstruction costs can differ significantly from market value and the 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 upon accurate information about your home’s size, location, age, unusual features, and finishes as well as specifics regarding any renovations or additions. The more fully you disclose the relevant information about your home, the more fully your coverage can protect you in case of a disaster.