Replacement cost covers the cost to rebuild your home after a loss with like kind, size and quality. Included in the replacement cost limit is expenses such as debris removal, specialized reconstruction and labor. Consumers often feel a disconnect between the size of their home and the replacement cost limit assigned by their insurance carrier. They often do not realize that reconstructing their home can be costlier than building a new home and here’s why.
Cost of Labor & Materials
Your insurance is designed to cover not only the materials but also the labor cost included in reconstruction of your home. Labor and material costs, like everything else, are on the rise. This same theory applies when building a new home. But keep in mind that acquiring some materials used in an older home might be costlier than what builders use today.
Prepping the ground for a new build is less costly than when rebuilding due to the remnants of the damaged home. Consider a home that has burned. You can’t just come in to plow everything down, load it up and haul it off. Cleaning up after a fire loss requires special gear to protect from ash and soot particles in the air. You also must be cautious of exposed wiring and other hazards on the property and dispose of them properly. Once you have removed all the debris you can then begin to prep the site for construction.
Specialized Reconstruction Costs
Builders working on a new build are working from a clean slate. Builders working on a reconstruction after damage might have to call in architects specialized in reconstructing with what is left at the site. This type of specialty work would be included as part of your insurance payout under a replacement cost insurance policy,