What exactly is the reconstruction value of my home?

When you are trying to get the right insurance coverage for your home, should you use the purchase price, its current market value, your municipal tax assessment, or the reconstruction cost?

For home insurance, the “reconstruction value” determines your insurance amounts. It should not be confused with the “market value.”

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Market value, as the name suggests, represents your home’s current resale value, which is determined based on numerous factors, such as location, distinctiveness and popularity of the neighbourhood, style, and so on. For example, the market value of two homes located in different cities can vary considerably. However, the reconstruction value of the two homes—if they were destroyed by fire—will be the same.

And what if your home, whose market value is currently $290,000, would cost $340,000 to rebuild today? This potential difference between the market value and the reconstruction value of your home explains just how important it is to review reconstruction value regularly so you don’t find yourself with insufficient coverage.

Other factors that will affect value include square footage, number of floors, finishing, the quality of the materials used, and the cost of new materials and labour. You will to need to add landscaping, asphalt or interlock drive- or walkways, and other outdoor elements. If the structure is destroyed by fire, it will have to be demolished and the debris removed, which can be very expensive. In addition, if a fire occurs in winter, the foundation sometimes has to be demolished because the water used in firefighting can cause the foundation to shift. Make sure you are always covered for a sufficient amount in case your home undergoes a total loss and needs to be rebuilt!

Most insurers provide calculators that estimate the cost of rebuilding your home based on certain criteria. However, a professional assessment conducted by a specialized firm or a contractor will be more accurate and give you greater peace of mind.

Promutuel Insurance, your home insurance partner!

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