what is your home rebuild value

Don’t Be Underinsured: Rebuild Cost vs. Market Value

Understanding the difference between your home’s market value and its insured or replacement cost is critical in ensuring you’re not underinsured. Market value reflects what a buyer would pay for your property, including the value of the land, whereas insured value, also known as dwelling coverage, focuses solely on construction costs required to rebuild your home without including land value. This distinction is crucial because misunderstanding might lead to either overinsurance or underinsurance, impacting your financial stability in times of loss.

As construction costs fluctuate and the real estate market shifts, the gap between the market value and insured value can widen, making regular assessment of your dwelling coverage essential. Why? Many people think of what they paid for their home as their maximum potential loss in a home insurance claim. There’s a bit more going on with the numbers, though, and it’s to the insured’s benefit.


Rebuild Value vs. Market Value

Understanding the nuanced differences between the rebuild value insurers use to determine the replacement cost for your property and market value is pivotal in safeguarding your home with the appropriate insurance coverage. Replacement cost refers to the expense of rebuilding or repairing your home at current construction and labor prices, without accounting for depreciation. This figure is determined by various factors, including the home’s size, age, special features, and current construction costs.

Conversely, market value is the price your property might fetch on the open market, influenced by the real estate economy, property location, and other external factors. While market value encompasses the land on which your property sits, the insured rebuild value or replacement cost focuses solely on the cost of reconstructing the building itself.

To accurately insure your home, understanding these distinctions is crucial. For instance, insuring a home at its market value could result in overinsurance or underinsurance since this figure includes land value, which is not at risk from most insurable events. On the other hand, the replacement cost provides a more accurate reflection of the expenses you would incur to rebuild your home as it stands, ensuring you’re covered adequately in case of a disaster.


Market Value vs rebuild value photo

Rebuild Cost: More Than Just Purchase Price

The rebuild cost of your home is not based on the market value or what you paid for the property. Instead, it is the sum total of expenses required to tear down the existing structure and rebuild your entire home from the ground up. While you may have purchased your home for $250,000, the rebuild value will likely differ due to:

Inflation and Rising Costs

Over time, the cost of materials and labour has increased significantly. Construction materials like lumber have become more expensive, and labour wages have also risen. These factors contribute to the higher rebuild cost. Consider the cost of tearing down the existing structure, debris removal, purchasing new materials, and hiring labour. All these expenses add up and influence the insured value of your home.

Unique Features and Improvements

The insured value also considers your home’s unique features and any improvements you have made. Modern home insurance policies consider factors such as the number of storeys, square footage, and upgrades to the kitchen and bathrooms. These enhancements add value to your property and are reflected in the rebuild cost.


Determining Rebuild Value

Insurance companies use advanced tools and databases to determine your home’s rebuild value accurately. One such tool is iClarify, which accesses a vast database of property information, including claims and inspection data. By leveraging this information, insurers can provide a more accurate estimate of your home’s rebuild value.

The Role of iClarify

iClarify employs a four-step process to calculate the replacement cost:

  1. Geo-coding and Imagery: iClarify gathers your property’s latitude and longitude coordinates to provide accurate imagery. This data pulls construction feature information and finds comparable homes nearby.
  2. Confirmation of Construction Features: The user confirms the construction features of the home, ensuring the data is accurate and up to date.
  3. Comparison with Comparable Homes: iClarify identifies the 100 closest homes inspected or had a claims adjuster on-site. By analyzing the data on these comparable homes, iClarify determines the replacement cost.
  4. Calculating the Replacement Cost: Using the information gathered from the property and comparable homes, iClarify calculates the replacement cost, providing a more accurate estimate for rebuilding your home.


The Importance of Accurate Home Insurance Coverage

Ensuring that your home insurance coverage accurately reflects the replacement cost of your home is vital for future claims; incorrect information could lead to claim denials or insufficient coverage, leaving you financially vulnerable.

Home insurance serves as a financial safeguard, covering damages to the property, liability claims, and additional living expenses if displacement occurs due to a covered peril. However, very few realize the insured dwelling limit at the time of purchasing the policy significantly influences the payout from the insurer. This highlights the importance of selecting adequate insurance coverage that mirrors the replacement cost of a home. Estimates suggest that around 80% of Canadian homes are underinsured by an average of 27%. This means the insured value falls short of the actual rebuild cost by roughly a quarter.

Regularly performing property valuation assessments helps ensure that coverage amounts are sufficient to cover replacement costs at today’s prices, safeguarding against the financial strain of underinsurance.

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Reviewing and Adjusting Coverage

As the cost of materials and labour changes, it’s vital you review your home insurance coverage regularly. Some policies offer automatic inflation-based adjustments to the insured value at the time of your policy renewal, providing added protection against rising costs. However, it is always a good idea to review your coverage with your broker or insurance advisor more than once a year.

The Importance of Regular Reviews

Reviewing your coverage ensures that it aligns with your home’s current rebuild value. Consulting with your broker at least once a year or every ten months allows you to stay informed and make any necessary adjustments to your policy. This proactive approach helps ensure that you are adequately protected in the event of a loss.

Updating Coverage for Home Improvements

If you make significant improvements to your home, it is crucial to inform your agent or broker to ensure your policy covers the increased value. While minor upgrades like painting may not affect the insured value, renovations such as upgrading the bathrooms can impact the rebuild cost. By keeping your insurance provider informed, you can ensure your coverage aligns with the value of your investment.



Understanding your home’s rebuild value is essential for securing the right insurance coverage. Insurance companies determine the insured value of your home by considering factors such as inflation, rising costs, unique features, and improvements. Tools like iClarify provide accurate estimates by leveraging extensive property information databases. Regularly reviewing your coverage and updating it for home improvements are crucial to ensure adequate protection. By staying informed and proactive, you can have peace of mind knowing that your home insurance coverage aligns with your property’s value.

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