Download - Guelph Chamber of Commerce

Confused About Why Your Home Costs
More to Rebuild than What You Paid for it?
You’re not alone. It’s confusing that there
could be so many different numbers
(listing price, home insurance rebuilding
cost, tax assessment) about the same
object; your home. Let’s look at each in
turn.
Market Value
Depending on the neighbourhood and city the market value for a
similarly sized home can vary dramatically. For example, a 2000 square
foot bungalow could go for $450,000 in Guelph, but that exact same
home could go for $1,000,000 in the heart of Toronto. The market
value of your home is the price you can expect to receive from a buyer
in a fair and open negotiation and has no effect on insurance.
Property Tax Assessment
The property tax assessment of your home in Ontario is based on work
by the Municipal Property Assessment Corporation or MPAC. They
assign property values based on 200 factors such as sales of homes in
the same neighbourhood, the location, lot dimensions, living area, age
of the property, and quality of construction of the home in question.
Your municipality then assigns taxes based on MPAC’s property value
assessment of your home. Lot dimensions and sales of homes in the
vicinity do not affect your home rebuilding costs.
Rebuilding Cost
How do insurance companies determine the rebuilding cost of your
home?
Apart from knowing the age, size, dimensions (not including the lot),
and the quality of your home and the costs of labour and building
supplies (which constantly fluctuate) there are other important factors
that determine how much your home will cost to rebuild if it is totally
destroyed.
1. Demolition and Debris Removal
When a home is totally destroyed, there is a lot of work to be done
before a new home can be built. The whole structure must be
demolished and removed. The cost to transport and dispose of the
debris of a home can be expensive. If the damage is severe enough
even the foundation may require excavation and removal. Home
insurance bases the rebuilding cost on the worst case scenario to
ensure there is enough coverage in the event of a total loss.
2. Environmental Costs
Increasingly, we rely on electronics and technology in our homes.
From computers and smart phones to entertainment centres and
children’s toys there are a lot of electronic components. Once
the debris is removed the ground is tested to ensure it is not
contaminated. This increases a home’s rebuilding cost.
3. Access to the Work-site
Sometimes, homes in a neighbourhood are built very close together,
or have mature trees lining the boulevard. Home insurance
companies take these factors into consideration. This can mean
special equipment must be brought in to mitigate further damage to
the neighbourhood or property.
4. Special Features
Some homes have very unique and special materials. The more
unique the building material the more expensive and time consuming
it is to replace. That is why your broker should ask you detailed
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