Experiencing a home fire can be a traumatic event that can leave a lasting impact on you and your family. Once the fire is put out and the smoke clears, it’s time to start thinking about what comes next. Depending on the damage, one of the biggest decisions you’ll face is whether to buy or build a new home. After contacting your insurance company, the answer may not be clear.
Your insurer 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’s next? Here are some factors to consider before making a decision.
Policy & Law Assessment
Before deciding whether to buy or build, you should understand what is covered by your homeowners’ policy and what is covered by law. Insurance experts will advise you that the policy language has all the information you require regarding how a homeowners insurance policy should react to a loss. But this isn’t the only thing you should consider.
This is where the Valued Policy comes into play. Thanks to these valued policy laws, in 20 US states, the actual cash value (ACV) of policyholders’ damages should be proven without too many hassles when their home is declared a total loss. 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.
In fact, the first state to adopt a valued policy statute that covers all insured dangers was Wisconsin. Here, 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.
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.
Next, it’s important to consider your insurance coverage. As mentioned above, it is beneficial to understand what your policy language covers vs. what the state laws are. 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, your insurer will likely push for the cheaper option. In the ultimate decision of rebuilding vs buying, it comes down to whichever party presents the best evidence in favor of a particular decision. In some cases, there isn’t a debate on whether to repair or rebuild your home. The damage may be so significant that it is beyond repair. In other cases, house fire insurance claims are more complicated, and there’s considerable debate over whether to repair or rebuild your home.
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 a scope of loss with an estimate are required during a fire insurance claim. Usually, someone appointed by your insurance company will come and assess the damage with pictures and 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 but it may be just enough to repair.
Building a new home can take several months while buying an existing home can be a faster process. If you need to move quickly, then buying an existing home may be the better option. However, if you have the time and resources to build a new home, then you can create the home of your dreams at your own pace.
Some questions to ask yourself when it comes to the overall 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? Summer vs 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?
Another factor to consider is the cost. Building a new home can be more expensive than buying an existing one. But this also allows you to create a custom home that meets all of your needs, compared to the current circumstances. On the other hand, buying an existing home can be more affordable, but you may need to make renovations to make it feel like your own.
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.
If you have a strong emotional attachment to your current home, then rebuilding may be the best option for you. You can rebuild the home exactly as it was before the fire and restore the memories that were made there. However, if you don’t have a strong attachment to your current home, then buying a new home may be the fresh start that you need.
This is a very personal experience that many Americans face each year. It is more than okay to be selfish and want things exactly the way you want them, or exactly how they were before. As a homeowner, you have every right to factor in personal decisions like this, as long as you have the documentation, money, time, and policy support to rebuild.
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 assessing property damage, determining the value of lost or damaged items and advocating for fair compensation.
Hiring a public adjuster after a house fire can provide much-needed support and guidance during a stressful and difficult time. Contact Fortitude Public Adjusters today!