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Your Home’s Replacement Cost: Rebuilding vs. New Construction

Full Replacement Value: Why Rebuilding Could Cost More Than New Construction

Your house is likely your largest investment. To protect it, choose the insurance coverage you need based on replacement cost, not original building cost.

Consider these eight factors that could make rebuilding more costly than new construction:

  • Temporary repairs. Unlike a new home build, with a rebuild, the home may need to be boarded up or require other work to temporarily secure it.
  • Demolition. A repaired home often requires partial or complete demolition of the damaged structure before rebuilding can occur. Demolition can become costly when you factor in removal and hauling of debris. If your home has asbestos, these costs can be even higher.
  • Building permits. Depending on your community, these can amount to 2.5 percent of total building costs.
  • Engineering and architectural fees. These can add 5 to 8 percent to the total cost of replacement.
  • Code compliance. Upgrades to bring a home into current code compliance can cost thousands of dollars when you consider electrical upgrades, asbestos abatement, addition of tempered glass, etc.
  • Landscaping. Some insurance policies cover landscaping – to a certain degree. The rebuild process can destroy any landscaping that survived the initial incident.
  • No price breaks. While home builders often obtain discounts on materials and labor purchased in bulk, a rebuild does not benefit from these economies of scale.
  • Foundations. Though rarely destroyed as a direct result of a fire, foundations often are weakened when moisture inside the concrete heats up and affects the integrity.

The items listed above can easily add 20 to 30 percent to the cost of rebuilding – even more, depending on the age and condition of the home. Make sure your home is adequately covered by choosing its true, full-replacement value.

Material provided by Kemper. Ask your agent about a Kemper Homeowners policy today.

Aniek Ramsay

Vice President, Branch Manager | Woodland