A fire destroys your home. A storm causes so much damage it is no longer structurally sound. In situations where repairs cannot happen, your home insurer may decide to rebuild instead. This is not an easy decision. It is also not common. Most often, repairs are faster and less expensive. However, if your insurance says rebuilding is the only option, several things can occur.
Paying and Moving On
In some situations, the home insurance company gives you an option. It can cut you a check for the repairs, and you can decide what to do. Keep in mind this fact. If you have a loan on the home, the check goes to cover the loan first. Anything remaining goes to you.
In some cases, you may not want to rebuild. You may want to simply move on. This is common in situations where the listed value of the home is not enough to rebuild it.
For example, you did not update the home’s value to match growing local construction costs. The cost of rebuilding is more expensive in many areas. It may be more than the market value of the home. If you do not have home insurance specifically covering the rebuilding value of the home, you may only receive the value of the home at the time of the loss.
Rebuilding Happens
If your home insurance policy covers the cost to rebuild, several steps happen. First, they will work to demolish and remove the existing structure. This generally includes handling any damage cleanup and material haul away.
Then, they will work with you, a home builder, and the city to plan a new home. You will get a say in the home’s structure and design. And, you can make changes to it. However, the amount they pay is a set amount. If you decide to add higher valued features, you may have to pay out of pocket for them. The rebuilding process always must meet safety guidelines in your community.
Rebuilding is a long process. You may also receive compensation from the home insurance policy to cover your costs to live offsite during the rebuilding efforts. Check with your agent to learn more about your policy’s coverage. If you do not have a policy allowing for rebuilding costs, it may be time to update. This is critically important as homes become more expensive to build.
