You have a tremendous amount of time, effort and money invested in your home. To protect this investment, you have a homeowner’s insurance policy. If a natural disaster, such as a wildfire, destroys the property, you may want to rebuild. Does your policy cover the high cost of the project?

In California, insurance providers do not have to give customers an estimate of the value of rebuilding destroyed homes. They also do not have to recommend the level of coverage an insured homeowner needs. If an insurer chooses to do so based on the information you have provided, though, the insurance estimate must meet certain legal requirements.

The components of a legal insurance estimate

To earn your business or merely to provide comprehensive service, an insurer may give you a replacement cost estimate. If your provider chooses to do so, the estimate must contain certain components.

To reflect the reasonable cost to rebuild your home completely, the replacement cost estimate must include the following expenses:

  • Demolition and debris removal
  • Labor, building supplies, materials
  • Overhead and profit
  • Architectural plans and permits
  • Components and features of the home

The problem with misleading estimates

California law leaves it to homeowners to buy adequate insurance coverage. Because a misleading estimate may leave you grossly underinsured and violate state law, your insurer may legally choose not to give you a projection of the cost of rebuilding your house.

If you have no rebuilding cost estimate from your insurer, you probably want to ask a construction specialist to estimate the cost of rebuilding your home. Then, ask your provider to make your coverage amount meet or exceed this independent estimate.