Every year, about one in 20 homes that have homeowners insurance file a claim. Policies can extend to theft and vandalism, but claims most often result from wind, hail, fire, or other weather-related damage to your home.

In some unfortunate cases, like with tornadoes and hurricanes, it can involve rebuilding a home. This can be an extremely stressful time, and calculating how much your policy will pay out can be complex. 

This article covers how homeowners insurance can impact the cost to rebuild a house. It will help you calculate compensation based on the nature of the damage and the specifics of your policy. Keep reading to learn more. 

How Homeowners Insurance Works

Home insurance coverage protects homeowners from random, unforeseeable events that cause damage or destruction to their homes. These include damage from lightning, wind, hail, and floods.

It includes destruction caused by falling trees, fire, and smoke. Policies sometimes cover things like mold or mildew that damage baseboards or other structural parts of your home. 

In addition to your dwelling itself, homeowners insurance can cover different aspects of the building. This includes windows and doors, as well as floors and carpeting.

It also might cover personal belongings. Be sure your policy details what personal items it covers, so that you can determine which it excludes as well. 

Finally, besides the home itself, homeowners insurance can cover other buildings on your property. These can include free-standing garages, sheds, or things like fences. 

Cost to Rebuild a House

One major component of your homeowner’s insurance policy is the cost to replace your home or dwelling. You and your insurance company select the amount that the policy will pay when you set it up. Note that some plans, such as those for very old homes, do not cover home replacement or rebuilding at all. 

Determining the dwelling’s replacement cost value (RCV) is not as simple as defining your home’s market value, or “actual cash value” (ACV). A more accurate estimate involves identifying the current cost to rebuild a house comparable to the one that was destroyed.

To calculate this, first determine the average local build cost per square foot. Then, multiply that by the square footage of the structure that was lost. 

Insurers have other methods for calculating RCV as well. These most often include a professional appraisal when the insurance policy is being written. Regardless of the method, it should be clearly spelled out in your policy, so that you will know what amount you will receive should the unforeseeable happen. 

Explore Home Insurance Policies Today

Now that you understand how a home insurance policy can affect the cost to rebuild a house, you can take steps to ensure you are covered. Home replacement can be an extremely stressful time, but having the coverage you need can guarantee that you will be compensated fairly for your loss. 

RBP Insurance is a full-service insurance agency that has been providing the highest quality policies to its clients since 1960. In addition to home insurance, we offer vehicle, life, health, worker’s compensation, general liability, and more. Reach out to us today for a free insurance plan quote.