Experiencing a house fire can be an extremely traumatic and stressful experience. Once the flames are put out and the smoke clears, you’re left with a smoldering mess and one important question about what to do next: should you buy a new home or rebuild?
It’s one of the biggest decisions you’ll face in the event of a fire and, depending on the extent of the damage, the answer might not always be so clear. Your insurance company will likely push for the lowest-cost option, but if this minimum doesn’t fit what you actually need or what your homeowners’ policy promises, what should you do? Here are some factors to consider before making a decision regarding buying or rebuilding after a fire.
Buying or Rebuilding After a Fire: Questions You Need to Ask Yourself
What’s My Insurance Coverage?
One of the first things you should do when deciding whether to buy or rebuild is to consider your insurance policy. If you have adequate coverage, then it may be easier to rebuild your home. Your insurance company can work with you to find a contractor and oversee the construction process. If you don’t have adequate coverage, then buying a new home may be a more affordable option.
Regardless of which option is best, as mentioned, your insurer will push for whatever is cheapest. However, what it really comes down to is whether you or your insurance company provide better evidence in favor of a certain decision.
In some cases, the fire damage is so severe, that there isn’t any room for a debate on how much money you are owed or whether you need to buy or rebuild your home. In other instances, there may be considerable debate over whether you should repair or rebuild your home, and the insurance claim therefore gets more complicated. This is when you need to make sure your evidence is especially strong in favor of your case.
Whatever happens, don’t give up! You deserve fair compensation for the damage to your property, and may need to go back and forth with your insurance company a few times in order to get it.
What Laws Are in Place to Protect Me?
Once you understand what is covered by your homeowners’ policy, you should also understand what is covered by the law. Insurance experts will try to tell you that your policy has all the information you need regarding how an insurance policy should react to a loss—but that isn’t true.
Thanks to the valued policy statute, which was first adopted by Wisconsin in 1874 (They were the first state to do so!), insurance companies are legally required to pay out the full policy limit to the insurer if a dwelling is considered a total loss, regardless of the cost of repairs. A total loss means that the property has been damaged so severely that the cost of repairing or rebuilding it exceeds its actual cash value (ACV).
The tipping point occurs when the cost of repairs reaches 51% of the insured value of the house. The homeowner is then entitled to the policy limit for the dwelling, according to the legislation, and is no longer required to demonstrate the home’s ACV.
Each state has a unique way of applying its policy laws. Some exclusively deal with losses from domestic fires, while others cover all risks covered by a homeowners’ insurance policy. Regardless, thanks to this law, the ACV of policyholders’ damages should be proven without too many hassles when their home is declared a total loss.
The key to unlocking the protections of valued policy law is the same key that unlocks the protections in your policy: investigation of the loss with proper documentation, the scope of loss with an estimate, policy provisions, and procedural compliance with state and municipal requirements.
How Bad Is the Overall Damage?
Obviously, the overall impact of the damage at hand will be one of the biggest factors in deciding whether to rebuild or repair. Is it a total loss, or is the damage limited to one area of the house? If it’s a total loss, then building a new home may be the best option. If the damage is limited to one area, such as the kitchen or a bedroom, then it may be more cost-effective to repair the damage.
Proper documentation and scope of loss (a detailed, itemized description outlining the damage and necessary repairs needed to restore a property to its pre-loss condition) with an estimate are required during a fire insurance claim.
Usually, someone appointed by your insurance company will come and assess the damage, take pictures, and record any other necessary information. From there, they will review the damage and give you an estimate of the scope of the loss. Oftentimes, this number will be drastically lower than what you would actually need to rebuild (this is where you’ll need to go back and forth with your insurance company in order to receive a fair settlement), but other times it may be enough to repair or rebuild.
What’s My Time Commitment?
Building a new home in Wisconsin can take anywhere from 7 to 14 months depending on factors such as local building codes, the complexity of the project, and availability of materials. Meanwhile, buying an existing home can be a much faster process that’s largely dependent on the amount of residential inventory in whatever area you want to live.
If you want to move and get re-settled quickly, then buying an existing home may be the better option. However, if you have the time and resources to build a new house from the ground up, then you may want to consider building the residence of your dreams at your own pace.
Some helpful questions to ask yourself when it comes to determining how much time you have to invest in a home are:
- Where will you live while your home is being built?
- How will this affect others in the household?
- Is this happening during a difficult season? (ex: summer versus winter)
- Will this affect your job? Will this affect other family members’ school or work schedules?
- Are you building in the same area?
- Can you financially support this project from start to finish?
How Much Will It Cost?
At the end of the day, most things come down to money. Building a new home can be expensive—depending on whether you choose a basic builder-grade home or go completely custom, it can cost anywhere from $375,000 to $1,000,000. However, building a home can allow you to make customizations that meet all of your needs.
On the other hand, buying an existing home can be more affordable (according to Redfin, the average Wisconsin home costs around $323,900), but you may need to make renovations to make it feel like your own or to match your personal preferences.
It’s important to note that when constructing a new home, you must pay for costs that aren’t included in the home’s actual cash value, such as expedited labor costs, materials, expert fees, and the price of your family’s interim housing.
How Strong Is the Emotional Attachment?
If you have a strong emotional attachment to your current home, then rebuilding may be the best option for you. You can try to rebuild your home exactly as it was before the fire (or at least get very close) and restore the memories that were made there. This is especially important if you enjoy living in a particular neighborhood or are near friends and family. However, if you don’t have a strong attachment to your current home or location, then buying a new home may be the fresh start that you need.
During this process, it’s more than okay to be selfish and want things exactly the way you want them, or exactly how they were before. You’re the homeowner, so you have every right to make personal decisions motivated by emotions—just so long as you have the documentation, money, time, and policy support to back it up.
How Can A Public Adjuster Help?
After experiencing a house fire, the last thing any homeowner wants to deal with is the complicated and overwhelming process of filing an insurance claim. This is where Fortitude Public Adjusters can be a great help.
Our trained professionals work on behalf of policyholders to negotiate with insurance companies and ensure that they receive the maximum possible settlement for their losses. We have experience working with policyholders after a house fire to assess property damage, determine the value of lost or damaged items, and advocate for fair compensation.
Hiring a public adjuster after a house fire can provide much-needed support and guidance during a stressful and difficult time, so why not contact Fortitude Public Adjusters today!
