Resources & Insights

Rebuild Reality Check: Understanding the True Cost of Rebuilding a Home

January 30, 2024

Andy Orlando
Senior Vice President, CCIG

When was the last time you calculated the true cost of rebuilding your home in the event of a fire or catastrophic loss? Most people would probably say it’s been quite a while since they thought about it.

One common misconception is that the rebuild cost is tied to your home’s market value, and they are actually entirely separate. Market value is what you could sell it for, but the rebuild cost? That’s what it’ll take to put the bricks back together.

What is the Rebuild Cost?

The rebuild cost is every expense involved in completely rebuilding your home from the ground up, including:

  • Demolition
  • Design
  • Architect fees
  • Interior design fees
  • Permitting
  • Actual cost of supply, materials, and labor
  • Contractor costs and overhead margin (typically ranges from 10-25%)

It also includes temporary housing costs so you have a place to stay while your home is under construction.

Considerations for Rebuilding Today

For example, let’s think about an 8,000-square-foot home that sold in 2004 for $4 million. That home probably has high-end finishes and custom designer touches.

The cost to rebuild that home in Colorado today ranges from $550 to $800 per square foot. That’s a potential cost of $6.4 million. In upscale locations like Aspen, it can run as much as $2,000 per square foot (which could cost as much as $16 million).

Because of fluctuating costs and inflation, almost 83% of construction materials experienced a significant price hike since 2020, with an average price increase of 19%.

Compounding the issue is a persistent shortage of skilled workers, leaving contractors and construction companies severely short-staffed. With fewer workers able to complete home rebuilding projects, the timeline for these jobs stretches into years rather than months.

In addition to market factors like supply and demand, you must also consider how easy it is for a construction company to get their team and materials to the job site – which can be challenging in mountainous areas or remote locations. All those extra factors accelerate the total cost of rebuilding your home.

Steps for Homeowners to Consider

  • First and foremost, check your policy to see how much rebuild coverage you have. This is even more important if your home is in a catastrophic risk area.
  • Talk to your insurance advisor to understand your insurance to value coverage and find out if it is adequate in today’s market.
  • Ask what kind of temporary housing coverage your policy includes:
    • What type of housing can you stay in?
    • Is it comparable to your current home?
    • How long is your temporary housing coverage? Remember that home rebuild projects can take years. 

Even if your home isn’t in a catastrophic risk area, it’s better to be fully prepared and understand your coverage. The last thing you want in an emergency situation is to find out your coverage falls short of what you need.

Let’s work together to create proactive solutions for your program. Our team can evaluate your current coverage and identify any possible gaps. We’ll ask the right questions, review not just your home but your geographic area, and leverage our expertise to ensure you feel comfortable and safe in the knowledge that your home is protected.

This article is part of CCIG’s First Quarter 2024 Curious Corner: Insurance Market Insights newsletter.

Share this:
Back to Resources

Contact Us

Call us at 303-799-0110 or reach out by filling out a short form.

Get In Touch