How Do Insurance Companies Determine Home Replacement Cost? 

This is a question that many first-time or even veteran home buyers often ponder. Discussing your homeowner’s policy with an agent or broker, you’ll hear the term home replacement cost quite frequently. Sure, they’ve explained to you that replacement cost insurance is how much it would cost to rebuild your home from the ground up in the event of a total loss, but how is that number explicitly calculated?

Factors Used to Determine Home Replacement Cost

There are many factors used in determining home replacement cost. Insurance companies have specialized systems that help them determine an actual dollar figure for the replacement cost of your home. These systems consider all aspects and details of your home from big to small; the quality, size and style of your house are significant factors in determining home replacement cost. Most insurance companies will ask you several specific questions about your home, such as:

  • When was your home originally built?
  • What’s the total finished square footage?
  • How many bedrooms?
  • How many bathrooms?
  • How many pieces per bathroom?
  • Is there a basement?
  • Is it fully or partially finished?
  • What’s the foundation material: block or concrete?
  • Are the walls drywall or plaster?

Everything from ceiling height to floor coverings, and counter-top materials are all considered in home insurance replacement cost.

Additional Details Considered in Home Replacement Cost

To gain a better understanding regarding the particulars of your home, you might also be asked more specific questions regarding elements inside your residence, such as:

Do you have a fireplace?
Is it gas or wood burning?
Are there any specialty features in the home: built-in book shelves, chair rails, intercom systems?
Are the windows wood, vinyl or aluminum?
What is the roof covering?
When were the shingles last replaced?
What is the amperage in the home: 100 or 200 amp?
Wood siding, vinyl siding, stone or brick exterior?
Is there a crawlspace?
Is there a sump pump?

All of these details and materials are considered. Insurance systems factor in wall covering material, whether it is drywall or plaster, flooring and trim work and all other materials that would be required to rebuild the home; these factors are coupled with contractor rates to determine a cost per square foot.  After all these details are gathered and input, the system generates a dollar figure. This figure is your home’s estimated replacement cost. It is this number that determines how much you will get paid in the event of an insurance claim.

Home Replacement Cost Determines Other Coverages

The home insurance replacement cost figure acts as a baseline for other coverages in your policy as well. Contents coverage is usually based on a percentage of the replacement cost; general out-buildings or detached structures are generally based on a percentage of the home replacement cost, and so on. As such, it is extremely important that the replacement cost of your home is calculated accurately to ensure proper coverage.

Trust the Douglas Residential Cost Guides Accurate Replacement Cost Estimates

To ensure that your home is adequately insured, it is essential that your home replacement cost be as accurate as possible. The Douglas Residential Cost Guide can help you determine home replacement cost before ever stepping foot in an insurance office. Arming yourself with as much knowledge as possible about your home will help you protect it effectively. Douglas Residential Cost Guide is a finely-honed system used to carefully calculate home replacement cost for residential occupancy; it provides peace of mind for homeowners. Knowing how much coverage you need to protect your most valued asset before ever walking into an insurance office allows you to ensure your homeowner’s policy, and its coverages, are what’s best for your home. Your house works hard to protect you; in turn, Douglas Residential Cost Guide works hard to help you protect it.