Home insurance replacement cost questions???

[mmhassa2]

So currently looking for insurance on our new built home and seems like the replacement cost formula is different with each company....some uses $130/sq while others use $200/sq. Needless to say that changes the cost from $416K to $640K as the replacement costs.
So how does one choose the insurer then? RBC is using $130/sq while Aviva that we have car insurance with is using $200/sq. Used insurancehotline and they used $175/sq:?:

[Wallly]

Cost of your home divided by the square footage will give you an idea replacement cost, then buy what you need.

[Busybuyer888]

Most of the times we select insurance on the price of the premium. We don't really factor in an entire house replacement as the main priority. (ie. I once elected for a policy that said it would cost $50K to rebuild a 50's bungalow).

The more common things are theft, & liability. (This is where I would focus my priorities.)

So basically, between the two policies OP has highlighted it mean, with the cheaper one, OP will only have 400K+ to build a new home in case of a complete disaster ... (what are the chances?) ... vs. $600K+ to build a new home.

It is OP's choice which one to select - as OP is paying for the pleasure.

[cliff]

OP will only have 400K+ to build a new home in case of a complete disaster ... (what are the chances?) ... vs. $600K+ to build a new home.

It is OP's choice which one to select - as OP is paying for the pleasure.
Keep in mind that they will only give you enough to rebuild a home of similar kind and quality to what you currently have regardless of your policy limit.

For example if the OP's house costs 500K to rebuild, and he bought a policy for 1M, he will only get enough to rebuild his 400K house, not 1M to build a mansion in it's place.

[Toukolou]

Cost of your home divided by the square footage will give you an idea replacement cost, then buy what you need.

This isn't entirely true. Land value needs to be considered.

Depending on the finishes OP, I wouldn't go anything less than $150, $175 sounds about right.

[mmhassa2]

Thanks for the responses! Is the amount they calculate with negotiable??? I'm going to call a bunch of companies tomorrow, but would love some input. Personally I dont think we need 640K to rebuild the house. But is the amount upto us to decide??

[Busybuyer888]

Thanks for the responses! Is the amount they calculate with negotiable??? I'm going to call a bunch of companies tomorrow, but would love some input. Personally I dont think we need 640K to rebuild the house. But is the amount upto us to decide??

The replacement cost is one aspect/feature of the policy. IMO it is NOT the most important ... infact least important.

But then, our family is rather partial to old/older homes sitting on valuable land. We would love something to happen to it and use the insurance money to assist in putting up a mansion on the land. (ie. insurance money to subsidize 25% of the cost of the new custom build.) :)

[CSK'sMom]

We know a couple of general contractors who build a few homes a year... Their advice to us was that rebuild really is closer to $200/sq, around here at least. Rebuild tends to be more expensive than building from scratch due to so many variables with damage. As others have said, there are other things that can be far more important when insuring a home. Contents is where most folks are pitifully under-insured. Look at the one time payout for total loss as well. With building materials these days, a house can go up in flames really fast and even with a quick fire dept response it can be a total loss quickly.

Our experience shopping home insurance this year, no you can't set your own rebuild value. The companies choose how they calculate it based on info provided and won't budge...

[rocking23nf]

If your house is worth 400k and it burned down tommorow, a 400k policy isnt going to cut it.

Theres site cleanup and demo
All possesions need to be replaced
Cost of living while house is being rebuilt, do you really want to pay rent and a mortgage? It could be a year or more. What if it was something like the fires at slave lake? you could be waiting years to have your home rebuilt.

House insurance is cheap, my house was just built for 480k. My insurance is around 45-50 a month for a 2 million total coverage package.

[CompWizrd]

The "replacement cost" factors in the area, such as break-ins, other claims in the area, etc.. at least this is what two insurance companies have told me.

My old house is insured for 424k or so(insurance company set this, and said it can't be reduced) Actual space is 700 sq foot main floor and about 400 second floor.. so almost 400 dollars a square foot.. House is on the market right now for $105k.

Current house was built in the early 90's, insured by the insurance company for 399 or something similar(note, LESS than the first house), and is about 1600 main floor, 1500 basement.. House value was around $240k last year.

The new one is about 850 a year, and the old one is 650.. new one has a much higher deductible($2500), but has sewer backup coverage, etc, so they're not directly comparable.

[Justin C]

I went through an argument with RBC Insurance about their replacement-cost calculations. They even sent an appraiser out who determined that it would cost $700k to rebuild my house (more than $200/sq ft). I asked if it was possible to reduce that number since it drove the price up quite a bit, but the answer was "no", they also ensured me that if it cost MORE that they would cover it.

I then switch to Belair/Nordic and they calculated the replacement cost as much lower, but also guaranteed that they would replace it regardless of what it cost.

It appears that the replacement-value is just an internal calculation with no room for negotiation and in most cases they will fully rebuild a similar house regardless of what it costs (ie, if they estimate 500k but it actually costs 700k they will still pay 700k).

[mmhassa2]

Lots of helpful advice..thanks! Those who said the replacement cost is one of the smaller factors in terms of premium, well when I keep everything same and just change the replacement calculation it goes from $1400/year to $800/year. So it must be a big factor. I guess finding a company that uses the lower amount formula is the way to find a reasonable premium. So far Personal Insurance and RBC seems like the way to go. Will update as we will decide today.

[PhuFighter]

I live in a 1190 sq ft bungalow from 1965. The replacement cost, according to my insurance company, is $310k - but that includes the cleanup from whatever was there before, and restoration to the same quality finish that we had prior to the incident. They sent someone to actually come by and document this, and told us to update them if we change anything in our house. That means that they are expecting $310k/1190 = approx $260 sq/ft. Eep.

[aqnd]

Looks like mine is about 300/sq ft.
But I was getting similar values from everyone. I think it has more to do with "build date" being in the 1800s, despite probably not a single thing being original.

[Busybuyer888]

Lots of helpful advice..thanks! Those who said the replacement cost is one of the smaller factors in terms of premium, well when I keep everything same and just change the replacement calculation it goes from $1400/year to $800/year. So it must be a big factor. I guess finding a company that uses the lower amount formula is the way to find a reasonable premium. So far Personal Insurance and RBC seems like the way to go. Will update as we will decide today.

One of my points was you get to choose your insurer and thus how much replacement cost is covered (and of course how much you premium you pay). So yes, we can all get policies that cover us for $1M custom rebuilds.

1) The likely hood of theft, law suits and partial damage (tree falling on house, truck running into house) is much more likely than house is destroyed.
2) Replacement cost is not the feature of an insurance policy I would only focus on. It is the other things that happen much more. (ie. how much is covered for theft, liability coverage.)

At the end of the day, each person makes a judgement call on what amount of insurance they need/want and in the end how much they pay.

To be honest, in the GTA for a one-off custom build (which is what a burned down house would be), one would be hard pressed to get a new home built for under $250 per sq. ft. (Entire project ... total cost).

But on the otherhand, does one want to pay an extra $1K for home insurance per year? (Each home owner has a choice).

[mmhassa2]

Thanks everyone, went with Personal for a yearly price of $943 a year taxes included.

Included $640K for rebuild
$30K extra for water damage
1 Million liability

And some other things I would have to look over at the papers. Thanks all for all the information :)