How to Calculate the Cost of Rebuilding Your Home

Whether you’re mid-renovation or simply preparing to renew your insurance policy, it’s important to properly calculate your home’s reconstruction cost. After all, properly insuring your home starts with correctly assessing its value. Here are some tips from our brokers.

A unique context

As you can imagine, the ongoing pandemic has had an impact on the cost of rebuilding your home. Although car and home insurance premiums were already on the rise before the pandemic hit, COVID-19 and its repercussions have driven them even higher.

In the case of home insurance, the “lumber crisis” has taken a toll on the insurance market. This is because most homes in Quebec are wood-frame houses. However, since the pandemic and lockdown began, companies have been supplying less wood than before, which has made this product harder to come by — and as you know, scarcity comes at a price. This means that if you were to make a claim today, it would be much more expensive than if you had made the same claim 10 years ago. The cost of insurance simply follows market trends, which is why we can’t compare 2021 prices with prices from a decade ago.

Note: according to an article published in La Presse on April 2, 2021, over the last 10 years, the price of lumber has hovered around $400 per thousand board feet (mbf). However, as a result of the pandemic, it has now surged to between $800 and $850 per mbf. Some researchers believe it won’t be long before the price of lumber reaches $1,500 per mbf.

Our tips for correctly estimating the value of your home

When estimating the value of your home, don’t just look at the final premium. Your assessment should first and foremost focus on being adequately and appropriately insured in the event of a claim. You don’t want to end up paying a fortune because you’re underinsured! Here are our tips for calculating the value of your home — after all, you know it best! Of course, you can always turn to your Lareau broker for assistance and advice. That’s what we’re here for!

1. Consider all the costs involved.

Just because your insurer has crunched the numbers with their software and come up with an amount doesn’t mean it will be enough to cover all your expenses. Ask yourself whether this amount would be enough to:

  • Rebuild your home (replacement cost).
  • Replace all the property you own.
  • Rebuild any other structures on your property, such as a detached garage.
  • Cover relocation expenses, including the extra cost of living elsewhere and additional food expenses.

These costs add up quicker than you might think.

2. Don’t only look at the market value.

Unsurprisingly, the home itself makes up the core of your home insurance policy. It’s also one of the biggest investments you’ll ever make. That’s why it shouldn’t be overlooked! When you request your insurance quote, don’t make the mistake of insuring your home based on its market value, the value shown on your municipal tax bill, or — even worse — your mortgage. If the loss is covered, your insurance will cover the cost of rebuilding your home — without factoring in the value of the land. That’s why it’s important to calculate it properly.

3. Have your home’s information on hand.

Having the correct dimensions of your home at the ready when the insurer asks for them is a crucial step in the insurance quote process. No need to take out your longest tape measure or run circles around your home to make your calculations: you should have a copy of your certificate of location, along with your notarial act. If you don’t have a copy, ask your notary for one. This document will give you the exact measurements of your home.

4. Have your home appraised by a professional.

We recommend hiring a specialist to inspect your home and calculate the cost of rebuilding it, even if you work in construction. Why?

  • To ensure that the reconstruction cost is accurate and adequate in the event of a claim.
  • To have the right to take legal action against the professional in question if they make an error. Although hiring a professional means that the potential for error is much lower, mistakes can still happen. Luckily, a professional carries liability insurance for exactly this type of situation.

To conclude, calculating the reconstruction cost of your home is not always easy or straightforward. That’s why you can turn to a specialist! Your Lareau broker will be pleased to handle it for you and make the necessary recommendations to ensure you’re fully covered in the event of an unfortunate incident.

Leave it all to us and enjoy a fun and safe summer!

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