Why reconstruction costs more than new construction

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Do you have enough property insurance coverage? Insuring for replacement cost (rather than the lesser “actual cash value” which accounts for depreciation) almost always means insuring for more than the market value of your property.

constructionReconstruction is almost always higher than new construction for many reasons.

Costs start mounting as soon as damage occurs. Demolition and debris removal costs money. Undamaged parts of the home or business and the contents must be protected. Access to an existing building almost always takes extra care and labor than delivering materials to a brand new work site.

Actual construction usually costs more, too. Repairing a building that isn’t totally destroyed often means removing the roof and rebuilding from the top down – a more time consuming and labor-intensive undertaking than building from the foundation up. Additionally, contractors usually lack economies of scale – buying one new door to match the one that’s been destroyed costs more on its own than one door purchased in a lot of 10 or 100.

Refer to your policy for the exact definition and explanation of replacement cost and review limits to account for reconstruction costs vs. market value.

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