You never know what it is like to repair or rebuild your home after a claim until you’ve lived through it. People often ask where the cost of reconstruction or the insured dwelling value comes. It is a common question, especially for someone who has just built a new home, but their insurance value is higher than the rebuilding costs.
Fortunately, here’s an easy way to understand the difference between insured dwelling value or reconstruction cost on your dwelling home insurance. We’ll give you a comprehensive comparison of the construction costs in normal circumstances.
Do You Have to Clean Up a Big Mess?
A home insurance claim is a big mess, and it’s the truth. If you’ve never claimed the fruits of your insurance, you have the feeling of security and insure. So, your mind says that everything will be okay even if anything happens. This circumstance is real, but the perception that everything will suddenly be okay couldn’t be farther from the truth. Why?
Once you had to make claims to your home insurance, understanding some factors like why reconstruction cost or the amount of coverage on your dwelling seems high, can be confusing. Therefore, you need to have that mindset of a better understanding of what would happen in a claim.
What Should You Know About Home Insurance?
When it comes to home insurance, you need to know that: It should provide enough coverage for all costs whenever you need to rebuild your home, regardless of the cause of damage. Regardless if it is because of the soaking water into your walls and floors caused by a tornado or windstorm, a big hole in your roof, or fire damage as well.
What’s even harder is the process of claiming your home insurance. It only means that you have to allow all kinds of strangers to enter your home. What type of people did you ask? Well, first, experts will knock on your door to evaluate what they will do to fix the problem and how to rebuild it. Then, you need people to clean up the mess before you restore your home. It is where the cost of debris removal comes in and more emergency contractors.
As much as you want to look around and find the best price for the service, you need an emergency crew to drop everything they are doing and come to your rescue. The process may sound a bit complicated, but these things need to happen if you want to fix your home and get back to it sooner than later.
Why Is Insured Value Different than the Value You Paid to Build Your Home?
It is because insurance companies know that there is urgency in the need to get the work done and to find materials for all reconstruction costs. Therefore, the price may slightly go higher. This process is far different from negotiating prices on materials and build things according to the contractor’s planned timeline.
You have no choice but to accept the insurance company’s value because there’s no time to shop around to find deals and sales on everything you need for reconstruction. You also can’t wait for a worker who charges you half the price on things to become available. It’s because you need people to work on your home as soon as possible, so you’re left with no choice.
Covering the Cost of the Mess
The value of your home insurance may be more expensive compared to hiring someone who can do the reconstruction. Still, you will be so appreciative of the expedited service that you will receive from the insurance company. You’ll have no problem with the fact that you insured your home correctly.
What are the Kinds of Claims Specialists Are Involved in Reconstruction vs. Building New?
Most people don’t give a lot of thought to this factor, but the kind of specialists required to rebuild or reconstruct things are specialized. It is more challenging to put the pieces together than to start with a fresh slate. Also, builders often work on specific schedules with pre-set plans. In the case of a rebuild, you will be asking for a custom job because the damage that will occur will be specific to your situation.
- Reconstruction specialists and after disaster contractors
- Architects may be needed
- Mold specialists and people with experience in controlling the damage after water losses
- Various contractors and specialists for the different needs of your home
- Debris removal and storage people who will take any items into safe storage.
- You may need particular landscaping work that depends on the degree of damage that occurred.
What are the Kinds of Coverage that You Need to Make Sure Your Home Is Not Underinsured?
You need to include your home value to your insurance home policy. It is not the real estate value or tax value, but the reconstruction value based on an insurance appraisal or calculation. You also have to understand the coverage that you chose, and the basis of your claim’s settlement.
Dwelling Coverage Options
Here are some coverage options that you can buy as a part of your home insurance policy. To be clear, feel free to ask your financial advisor about it.
- Inflation Protection
- Guaranteed Replacement
- Extended Replacement
- Replacement Cost Value – This kind of coverage is a Cash-Out Option. Generally, insurance companies offer it on higher valued homes, custom homes, or older homes. This method is essential when the materials used in rebuilding may not be readily available. It is also beneficial if the construction standards have changed dramatically since the original construction of your home. So, this coverage can be an advantage if your home suffers significant damage.
Actual Cash Value (ACV):
This method is not the same as the cash-out option because ACV is a depreciated value. So, it is the least favorable of all insurance options in terms of what you get in a claim. So, avoid this plan if you have an older home.
What if You Can’t Find the Right Option?
If you can’t find the right claim policy that offers the kind of coverage you want, feel free to shop around. Every insurance company provides its services to its specific target markets. If you’re lucky with the best policy, you could gain thousands of dollars on your home insurance claim payout
If You Disagree With the Dwelling Value of a Home Appraisal Report
People get surprised to believe the value of rebuilding their homes. This guideline only gives you an insight or rough estimate of why reconstruction is usually higher than the real estate value. Therefore, you must know how to determine the reconstruction cost so that you can negotiate better with insurance companies. If you feel that your policy is underinsured, your first option is to strike up a conversation with your insurance representative. If nothing happens, look for new insurance.