What Does Rebuild Cost Mean for Home Insurance?

When shopping for home insurance, or simply updating your existing policy, there are a lot of coverages and terms to navigate. Your home and its contents are your most valued assets. It’s imperative that your home is not only insured correctly, but that you fully understand your coverages, policy details, and terms.  Fear not, we’re here to help.

What Is Rebuild Cost for Home Insurance?

The term ‘rebuild cost’ when discussing home insurance refers to the price it would cost your insurance company to rebuild your home, from the ground up, in the event of a total loss.  Rebuild cost is more commonly referred to as replacement cost or replacement cost new.

Why is Replacement Cost So Important for an Insurance Policy?

The most important aspect of replacement cost for your insurance policy is that it dictates how much your insurance company will pay out to replace your home in the event of a total loss.  It’s imperative that all aspects and details of your home are captured correctly to ensure an accurate replacement cost value. You’ll want to ensure there is enough coverage in place to replace your home from the ground up if necessary.

What If You Choose Not to Rebuild Your Home?

People who do not wish to rebuild their home in the event of a loss may opt for an actual cash value policy and may fail to understand what the impact of replacement cost is on their policy. Why does replacement cost matter if you don’t have replacement intensions?

Most insurance policies use the replacement cost value of the home as a baseline for other coverages listed on the policy. Many coverages listed on your policy are calculated as a percentage of the replacement cost value. For example, the personal contents coverage amount is usually calculated as a percentage of the replacement cost of your home. If the replacement cost of your home is calculated incorrectly, it can trickle down into every coverage of your policy, resulting in lack of coverage when you truly need it.

Ensuring You Have Adequate Coverage

Of course, the next logical question would be ‘how do I calculate my home’s replacement cost?’ and ‘how do I know if it’s enough?’ Luckily, insurance companies have their own replacement cost calculators they use to determine replacement cost. When insuring your home, they’ll ask a number of questions about the size, shape, and finishes of your home to help them calculate the replacement cost effectively.  Of course, this is a system that is not tangible to homeowners.

Get Comprehensive Insight Using the Douglas Residential Cost Guide

The thought of leaving such an important calculation up to one system that you have no experience with can be a little anxiety-inducing. This is where the Douglas Residential Cost Guide is here to help.  Douglas Cost Guide has developed a residential cost guide utilizing Canadian data and market trends to help Canadian homeowners calculate their home’s replacement cost with ease. Available online, the Douglas Residential Cost Guide is continuously updated to reflect most recent data and was designed with homeowners in mind. With over 30-years of costing and valuation experience, Douglas Cost Guide Inc. can help you calculate your home’s replacement cost with ease. Visit Douglas Cost Guide today to learn more.