What is My Home’s Replacement Cost?

Maybe you've noticed the insurance price on your home is not equal to the original cost or the cost of rebuilding. Or, you're in the initial stages of reading about finding home replacement cost when you are shopping for home insurance coverage.

You need to have a sense for what your replacement value will be if you need to rebuild your home or replace your personal property after an unforeseen event like a fire, hurricane, or tornado.

According to CoreLogic, a provider of property-level information and analytics, about 60% of U.S. homes were under-insured by 20%. Knowing the value of your home for reinstatement can help you ensure that your home is under-insured.

Use this guide to help you find your home's true replacement cost.

What is replacement cost?

Replacement cost coverage, if you buy it, might be a part of your homeowner’s insurance policy. Replacement cost refers to the dollar amount needed to rebuild your home with similar materials at current prices if everything was damaged or destroyed, and it typically covers the replacement of personal items if they are damaged or destroyed as well.

Replacement cost coverage can be used in place of actual cash value insurance coverage, which pays you a set amount for repairing or replacing damaged or lost belongings at their depreciated value. With actual cash value, you'll get less money for your repairs or replacements over time because the value of the losses accelerates.

If you discover that you want to have different insurance coverage, actual cash value insurance may be a better investment for you. It is always a good idea to check what you have with your independent insurance agent and think about how your claim the situation is covered.

Factors that affect your home’s replacement cost

Calculating the replacement cost of your home goes beyond your sales price and rebuilding cost. Renters' insurance usually differs from market value or reconstruction cost because additional variables are deemed as well. These factors include:

• Construction costs
• House shape and style
• The age of your home
• Building codes
• Material costs
• Debris removal service
• Specialists
• Renovations
• Value of your possessions

How to find your home’s replacement cost

The purchase price and amount of work you want to put into it are the two factors that determine the replacement cost of your home.

• Do your own calculations, using an online replacement cost calculator. 
• Using the services of an appraiser. 
• Asking your agent for help with independent coverage.

Your replacement cost may be less than the market value of your home, since real-estate value includes the land and you won t have to rebuild or replace what it owns. Your replacement cost may be greater than real estate value as well, especially if your home is older, has unique features or outdated utilities that will be more expensive to recreate or replace.

You should make sure you compare various numbers to ensure accuracy, especially if you decide to compute your numbers yourself.

3 steps to calculate your home’s replacement cost

With regard to your own home's replacement cost, consider these steps:

Step 1:

Speak with real estate agents and your local community home builders to calculate the building cost per square foot in your location. Then, multiply that figure by your home's square footage.

Step 2: 

Before you finalize this number, you need to consider the various factors:

• Cabinets, fixtures and appliances. Examine the price tag of cabinets, utility fixtures and appliances, including heating and air conditioning systems. If your kitchen is dated, changing it is probably going to increase your bills.
• Flooring. What is the cost of new flooring? Get an estimate from flooring professionals.
• Roof replacement. Find out how much a local roofing company will charge you. The age, type, and material of your roof will greatly affect the final price of replacement.
• Home exterior. Windows and features like stonework, woodwork, and siding can all add together. Get an estimate and include all costs related to rebuilding any type of outside structure, such as a patio or deck.
• Special landscaping. Describe any pool or architectural decorations that must be rebuilt cost.
• Personal possessions. Estimate the expense of replacing your individual property.

Step 3:

Now that you've calculated your replacement cost, calculate the expense of double-checking your number with another method to confirm accuracy. This could take the form of consulting an appraiser, using a calculator online, or using an estimate offered by your insurance company.