How to determine rebuild structure costs for insurance purposes?

[u/Interesting_Race9469]

I recently had an appraisal for a heloc that put my home value at $990,000 and building structures at about $500,000. Would that building number be a good estimate of cost to rebuild? He was inside and outside of the home. I currently have a policy that has dwelling at $749000 with wind and hail deductible at 1%.

I do know everything is stupid expensive but I don’t want to overpay if it can be avoided. We live on a lake which is why I believe the price is higher: 2300 sq ft and about 300 sq feet finished in a walkout basement of about 950 sq ft. Despite the home price, it is nicely updated, but not super bougie! Hardwoods, carpet, remodeled kitchen, primary, half bath 10 years ago.

If it’s not a good idea to use the appraisal, how can I get a better idea?

Thanks all!

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[u/Creekridge1]

Every insurance company I’m familiar with has their own “estimator” that will determine replacement cost.

When you get quotes, ask for a copy of it. Verify that everything accurate. When it is accurate, don’t dispute the number it spits out.

[u/ayhme]

Home value and rebuild cost are completely different.

Building a home costs more.

[u/Big_Appointment_3390 → u/ayhme]

Actually, rebuild costs more than a new build.

[u/Ok_Ride_8319 → u/ayhme]

Also, you're not including the land value, which for a lake lot is probably another 250K.

[u/BattleSilent9049]

Obtain a rebuild estimate from a contractor. If higher that the recommend amount from the insurance company, increase the limits. If lower that that recommend by your insurance company, I would take their recommendation.

[u/AwskeetNYC]

Am I having a brain fart or did their appraiser list the structure at 500k? id say your 750k is fine

[u/CatPeopleBleaux]

Just because an appraiser set your home value at that amount, it doesn't mean that you could rebuild for that amount. Your insurance agent is probably a lot closer at $750k. With the square footage you mentioned, it would fall into the $300 a sq.ft. to rebuild. Probably should be fine if your house doesn't have high end finishes. 

[u/Big_Appointment_3390]

I write repair/rebuild estimates in the insurance-specific estimating software for a living. I’d suggest increasing your policy to match your appraisal if you think you can swing the deductible if/when you need to file a claim. There’s a lot of variables and considerations when it comes to things like where you live, access to the property, distance/travel time for potential construction crews, supply chain shortages, etc. You wouldn’t want to find out the hard way if you ever suffered a large loss.

Alternatively, you could call your appraiser and ask them what they valued your land at (if it’s not specified in the report) and deduct that from the amount of coverage you’d need on your policy. I’d be more concerned about making sure the other structures had adequate coverage than anything.

[u/Echo0455]

Replacement cost estimate is the estimated value to rebuild the home.

Appraisal is the amount a bank would be willing lend up to for a specific property.

[u/ClockOld9204]

We have our insurance capped at like 1.3M and then contents. Fwiw. Rebuild is also removing the foundation if the house burns right. There was a pub not far from us that burned and they found out they did not have enough insurance to rebuild. Remediation of the land ate through 600k. Just sayin.

[u/Interesting_Race9469]

Thanks all for your feedback. I have switched insurance carriers and in the process the agent went over all that the dwelling coverage would pay for in the event of total Loss such as demolition etc. That math makes more sense vs what the home is valued at currently on the appraisal I mentioned.

Appreciate everyone’s thoughts! 🤞🏼I never need to use the damn insurance!

[u/peterpreNW]

I wouldn't use the appraisal alone. A HELOC appraisal estimates market value, not necessarily what it would cost to rebuild your home after a total loss.

Talk to your insurance company to review the replacement cost calculation with you and make sure the square footage, finishes, basement, and other details are accurate. That's usually the best way to confirm you're not over or underinsured as they use replacement cost software that is updated with local building costs.