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Rebuilding vs New Construction
Why does Rebuilding usually cost more than New Construction?
It's important to understand the difference between New Construction Costs, Resale Value, and Rebuilding Costs in Alberta. Brown & Ward Insurance is only concerned about the last one – "Rebuilding Costs", because that's what you buy insurance for. In the event of an unfortunate loss, you want to know you have enough coverage to "Rebuild" and get back in your home.
It doesn't matter what you can sell it for, that's about economics and Supply & Demand. You are not building a new home on a nice piece of cleared land from the ground up…there are many factors involved in "Rebuilding" vs. "New Construction"
Using "x-amount" of dollars per square foot doesn't cut it.
Call Brown & Ward today and let us give you a proper "Rebuilding Cost Evaluation", and quote your insurance. You deserve to be with a broker who cares about why you buy insurance and why you should have the proper coverage.
Economy of Scale
When a contractor is building many homes at the same time, materials can be purchased in large quantities for delivery, as needed… everything from framing lumber to plumbing fixtures. If you buy a large number of bathtubs for instance, suppliers will compete for your business and offer substantial price discounts.
When you buy just one bathtub, especially if it must be a match for one that has been destroyed, it will generally cost much more than if it had been part of a larger purchase.
This holds true for almost everything that goes into a home and this factor alone can push the cost of rebuilding thousands of dollars higher than the cost for comparable new construction.
Top-down versus Bottom-up
New construction begins at the foundation and builds upwards.
Rebuilding a house that is not totally destroyed often means removing the roof and rebuilding from the top down, a far more time-consuming and labor intensive process.
Demolition and Debris Removal
New home construction normally begins on open ground, perhaps with some brush removal, grading or other minor site preparation.
Rebuilding begins with a partially or totally destroyed structure occupying the building site. Parts of the structure may still be standing but are unusable, requiring demolition and removal.
The site may have to be extensively cleaned, after an intense fire for example, and the soil may be contaminated. The foundation may have been damaged beyond repair. A lot of work is usually required before the first cement can be poured or the first nail hammered in.
Use of Labor
When a new homebuilder has several houses under construction, even if they are not all in the same area, work can be scheduled for the most efficient use of carpenters, plumbers, electricians, and casual laborers'. If one house is not ready for wiring, the electrician can often work on another.When only one home is being rebuilt, the same kind of efficient scheduling is rarely possible.
Labor usually accounts for the largest share of home-building costs.
Inflation
It is rare that all sectors of the economy respond to inflationary pressures at the same rate.
Construction materials, especially wood products, frequently increase in cost faster than other commodities and significantly faster than the general rate of inflation.
Access to the Worksite
When new homes are under construction, there is usually no landscaping, allowing for easy access to the site. Materials can be driven directly up to any side of the structure as needed.
When a house is being rebuilt among existing homes though, there are trees, shrubs, lawns,flower beds, fences, and similar obstructions limiting access. Materials often have to be offloaded further away and hand-carried to where they are needed. This factor is compounded if the building site is on sloping ground. The impact on labor costs can be significant.
Special Features and unusual Materials
Older homes and homes that have been extensively remodeled often have customized features or include materials not commonly found in homes being built today. These features and materials can be expensive, if not impossible to duplicate. Examples include slate or tile roofs, lath & plaster walls, coved ceilings, wainscoting, solid wood doors, custom ironwork, ornamental fireplaces, exposed beam ceilings, stained glass, or other leaded windows, curved staircases or tile floors and other items.
Building code changes
Older homes were built during times when building codes were less strict than they are today. If you are rebuilding or restoring your home, you may need to meet the newer and more demanding building codes.
Even undamaged parts of the structure may have to be rewired or plumbed to meet current codes. Building codes may also require you to replace windows with safety glass or replace roofs with fire-retardant materials. Building code changes can add thousands of dollars to the cost of restoring a damaged home.
Construction costs rise after natural disasters
In the wake of a natural disaster affecting a wide area, the costs of building materials and contractor fees tend to rise sharply in response to the sudden surge in demand. Even without deliberate profiteering, this would normally be true because when local supplies are quickly exhausted, materials have to be brought in on an emergency basis, often from mills or factories at great distance.
This may require higher transportation costs, and a lot of overtime pay. Whenever many homes have to be repaired or rebuilt at the same time, the cost for each will be higher than normal, sometimes much higher.
Undamaged parts of the home and the contents must be protected
Once the fire is out or the windstorm has abated, all parts of the property not destroyed must be protected from further damage or looting. This can involve covering a roof, missing windows, or holes in the walls with plastic sheeting for example. As soon as possible, undamaged personal property items must be removed and placed in temporary storage for safekeeping. In some cases security must be hired to watch the location until it can be secured, again adding cost.
Satisfying the policyholder
One of the most important service elements to a homeowners claim is getting the homeowners back into their repaired home as soon as possible. Not only does this reduce the additional living expense part of the claim, but it also strengthens the relationship between insurer and policyholder, through the good service commitment. This heightened "urgency" usually carries a higher cost in materials' delivery fees and contractor fees.
There is not the same pressure or expectation when constructing a new home.
Is this information being shared with you by your current Insurance Broker?
The majority of them do not – so don't you deserve to place your coverage with a Brokerage that cares about you, and informs you on why and how you should purchase insurance?
Give us a call and see why thousands of other customer's choose to insure with Brown & Ward Insurance – click on "Get a Free Quote", call us toll free at 1-888-782-3757, or contact us by email at info@brownandward.com.
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