Reconstruction Costs and Your Homeowners’ Insurance

Reconstruction costs have increased over the past couple of years, and as a result, so has the cost of many homeowners’ insurance policies. What does one have to do with the other? This blog post aims to answer that question, and others you might have about reconstruction costs. So read on to learn more!


What is a Reconstruction Cost?

Your home’s reconstruction cost (also known as Dwelling Coverage Limit) is the piece of your homeowner’s insurance policy that puts a dollar figure on the cost to rebuild your home, and any attached structures, to what they were before a total loss occurred.

For example, if your house were to burn down in a fire, the reconstruction cost dictated by your Dwelling Coverage Limit is what your insurance carrier would compensate you to rebuild your home to what it was before the fire.


Is Reconstruction Cost the same as Current Market Value?

Reconstruction Cost and Current Market Value are in fact two separate things.

The reconstruction cost of your home relates to the price of labor and materials that would be required to build your home, from the ground up, back to its pre-loss state. It also includes other facets of rebuilding such as demolition, debris removal, etc.

The current market value, on the other hand, relates to the real estate market in your area and looks at comparable properties to determine a sale price for your house based on its location, condition, and other key factors.

The current market value has no bearing on the cost of your insurance coverage, while the reconstruction cost does.


How does Reconstruction Cost relate to my insurance coverage?

Your home’s reconstruction cost is factored into your homeowner’s policy from the time you establish coverage. As a result, it’s important that the right amount of Dwelling Coverage is available in your policy, otherwise, you could be left paying for the balance of a gap that exists between your coverage and the reconstruction cost.


Don’t hesitate to reach out to our team at J. Hoffman Insurance if you have additional questions about Reconstruction Costs that were not answered in this blog. We’re happy to talk with you and make sure you have all the knowledge, and coverage, you need!