The term Reinstatement value refers to the costs that would be involved if a homeowner were to rebuild a building and / or piece of property using the same materials and putting it together in the same way. Reinstatement value is different from the actual value of a home.

In fact, reinstatement value and actual value have fairly little to do with each other. Actual home value is important when assessing how much the property can be sold for. The only time reinstatement value is important to a homeowner is in regards to insuring their home against catastrophe.

One reason that building reinstatement value is generally different from home value is that it takes into account the costs of removing what’s left of the original home and clearing the site before rebuilding. Reinstatement value also takes into account all of the professional costs that will be involved with reconstruction such as architectural work, construction crews, etc. all of which are priced at today’s competitive values.

Inflation is factored into reinstatement costs, so the cost is constantly rising, albeit slowly. For this reason insurance policies that cover the home will gradually increase in cost as well. Another factor to consider is that housing codes and regulations are constantly changing. If a home is considerably older than it is entirely possible that it will have to be altered to meet current housing standards, and this comes with a considerable increase in rebuilding costs.

Home owners need to know the cost of building reinstatement for their homes in order to assess the cost of the insurance that covers their houses. In addition, it’s helpful to know what elements factor into building reinstatement so that the home owner knows how they can adjust in order to increase the reinstatement value of their home in comparison to the actual value.

Likewise every home owner should take out an insurance policy just big enough to cover the full value of their home. If the insurance policy is too small and something catastrophic occurs, the home owner will not be left with enough funds to recover the amount of property they have lost.

It is crucial to have reinstatement insurance not only in case something terrible happens but also in case there is ever a need to request a mortgage. If a home owner wants to mortgage their property, chances are extremely high that all of the lenders they reach out to will require that their home be covered first.

They will suggest some major companies to insure the home, but by law the lender cannot discriminate against the home owner for their choice of insurer. For that reason all that really matters for these situations is that the home be significantly insured.

There are recourses available for home owners who need to calculate their rebuild costs. The Royal Institute of Chartered Surveyors offers a building costs information service which includes an online calculator for assessing the rebuild cost for reinstatement. Alternatively, most property surveyors will assess reinstatement value for a fee.