Why is my rebuild cost higher than my home's value?

The short answer

The two numbers answer different questions. One is what the property would sell for, the other is what construction would cost, and construction costs do not fall when the market does.

What goes into a rebuild figure that a sale price does not?

Demolition and debris removal before anything is built, current material and labour rates rather than the rates at the time of the original build, and any work required to meet today's building code even where the original construction met the code of its day.

The land is the other half of the difference. A sale price includes the lot; a rebuild does not, because the lot survives the fire.

Where land is expensive relative to buildings, market value can sit well above rebuild cost. Where land is inexpensive and the house is large or unusual, rebuild cost can sit above market value.

What does this mean for an Ontario homeowner?

The dwelling limit on a policy is set from rebuild cost, not from a purchase price or a municipal assessment. A figure taken from a sale is measuring something else entirely.

Insurers calculate rebuild cost from the home's size, construction, finishes and location, and update it as construction costs move.

A broker can walk through what the current figure is based on and what would change it.

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