How to calculate the replacement cost of your house?

Question

I just receive a quote from a well known insurance company. The dwelling amount seems to low to me ($350,000 for a house in Culver City, CA).

How to calculate the replacement cost of your house?

Is this a good idea to insure your house for more than his real value, so in case of fire you can build a better/bigger house?

Answer 1

Its calculated per $ x Square footage and then any extras on the property such as a garage or not.  You cant build a bigger house unless you get the ok from the township.  I would go over the replacement cost by a few grand at least 15-20 just in case.

Answer 2

Each company uses their own method of replacement cost, but as an agent, I was provided with a guidebook called "Boeck".  It does go by location & square footage.

Land is never included as it is always in existence and cannot be replaced.  Most policies want you to insure your existing home at 100% replacement cost to ensure no problems arise.  In the event this figure could still be off, there is usually a clause built into your policy that will take it to 125% only if deemed necessary to meet replacement.  

There is also an "inflation" endorsement that will increase your home value every renewal by anywhere from 2% to 4%.   It's always a good idea to have your agent re-calculate your home replacement cost.  For instances like we are seeing now with home values decreasing, you may very well be paying too much for your home insurance because the replacement cost figure is out of line.  Call your agent, or the one you are checking into, and have them go through the calculations with you.  Once again though, it is different, but not usually by much, for each insuring company.   And by the way, you will never be able to build a bigger & better house unless you agree to pay the difference of replacement cost and the new home value.  Hope this helps.

Answer 3

Well, it's not something you can do yourself, as each company has their own method.   You basically calculate the square footage of the house (from the outside, including ALL spaces, not just the sum of the rooms), add in for extras like built-ins, attached garages, finished basements, fireplaces, etc; then multiply by a zip code factor.  

It does NOT include the value of the land.

Insuring for more than the "real value"  isn't going to work, as you get the LESSER OF the cost to rebuild, or the policy limit, in case of a total loss.

Me, personally - the land our house sits on is worth way, way more than the house itself.

**You have to check with your agent to be sure, but generally, you do NOT have to build the exact same house.  It DOES have to be rebuilt on that lot, and sometimes, on that foundation.   If you build more house than you had before, you pay the difference.  If your current house is 2500 square feet, that's how much house the insurance company will pay to rebuild.  Anything more, is out of your pocket.

If you overinsure your house, for what you WANT, rather than what it is, you will NOT get the new house.  Also, unless you have ordinance & law coverage (or the equivelent), you do NOT get paid for upgrades necessary for local building codes.  You'd have to pay extra, and add that coverage on.  Hope that helps.**