Has anyone ever asked you about the value of your home? If so, you likely responded with the market value of the property. However, this isn't the only correct answer. Canadian homeowners should also be aware of the rebuild value of their home (the amount it costs to rebuild your property if it gets utterly destroyed).
The easiest way to determine the rebuild value of your home is by getting an insurance appraisal — if you're not familiar with this type of appraisal, be sure to continue reading.
Knowing what to expect and how to prepare for a home insurance appraisal ensures that you'll receive sufficient remuneration if a natural disaster totals your home.
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What is a home appraisal?
A home appraisal is a practice utilized by insurance providers to determine the rebuild value of a property.
In Canada, home appraisals are completed by third-party appraisers. Having an objective third party ensures that both the homeowner and insurance provider are treated equally throughout the appraisal process.
Generally, home appraisers consider factors such as the size, build and location of the property while determining the rebuild value, but we'll touch on that again shortly.
What is the purpose of a home appraisal?
If you've recently been asked to complete a home appraisal, there's nothing to worry about. Your home insurance provider isn't trying to be nosey — they simply want to ensure that you'll be compensated correctly if a disaster damages your precious property.
For instance, if an insurance provider overestimates the rebuild value, they'll end up overcompensating their customers. Doing this causes the company to lose money, which isn't ideal in the long run.
On the other hand, if an insurance provider underestimates the rebuild value of a home, they'll end up under compensating their customers, which reflects poorly on the company and could result in a loss of business.
It's also worth noting that the majority of mortgage lenders require homeowners to complete an appraisal. Mortgage lenders do this to get a better idea of the risk level of a loan.
If a loan appears too risky, you may not receive financial aid from that particular lender.
Home appraisal vs home inspection — what's the difference between the two?
This is a great question! Many homeowners often confuse home appraisals with home inspections; however, the two practices are quite different.
As mentioned above, home appraisals are used to determine the rebuild value of a home.
In contrast, home inspections are used to look for issues or assess the general quality of a building.
How much does a homeowners insurance appraisal cost in Canada?
You'll be happy to learn that home appraisals cost absolutely nothing — if you're a homeowner, that is. Your insurance provider covers the cost of the appraisal.
What does an appraiser look for during a home appraisal?
To determine the rebuild value of your home, the insurance appraiser must assess the entire property. However, there are a handful of quintessential details that most appraisers deem most important, some of which include:
Roof
The roof is an essential part of any building, but they're vital for homes. Without a well-maintained roof, your family and belongings would be exposed to animals, harsh weather and the elements.
During a home appraisal, the insurance appraiser will assess the quality and condition of the roof. Specific details that appraisers keep an eye out for are the following:
- Materials used during installation
- Style of the roof
- The overall quality of the roof
Additionally, homeowners should know that having a damaged roof may negatively influence the price of your rebuild value — this is a crucial detail to keep in mind before scheduling a property insurance appraisal.
Electrical work
During a home appraisal, the insurance appraiser assesses the electrical work in the home. Some of the details that the appraiser will look for include:
- Quality of materials and installation
- Strength of electrical work
- Presence of knob and tube wiring (generally in older homes)
Taking the time to assess these factors gives the appraiser a better idea of the rebuild value of your property.
Potential for liability claims
The appraiser will be looking for risks that could lead to potential liability claims through the home appraisal process.
For those that are unaware, a liability claim is a claim made against (in this particular case) a homeowner after an accidental injury or death occurs on their property as a result of negligence.
Some common examples of these risks include:
Why do property appraisers look for these risks? Simply put, the risks would need to be addressed or fixed if the home gets rebuilt. In turn, the price of replacing or repairing the risks is a part of the total rebuild cost.
Presence of wood stoves
Do you have a wood stove in your home? If so, you should let the insurance appraiser know as soon as possible.
Currently, numerous restrictions and rules need to be followed to install a modern wood stove. However, if your wood stove has been in your home for decades, it's likely "grandfathered" in, meaning that it doesn't have to meet today’s standards.
However, if your home gets totalled and you want to replace the wood stove, it would need to meet modern code. Because of this, the price of making wood stove-related modifications is a portion of the rebuild value of your home.
How to prepare for a home appraisal
Preparing for a home appraisal requires very little prep work.
In most cases, you simply need to remove any clutter from the home that may interfere with the appraiser's responsibilities. You can also take a moment to point out or flag any noteworthy details that you feel the appraiser should know about.
What have you learned about home appraisals in Canada?
As you now know, home appraisals are a crucial part of being a homeowner. Getting your home appraised by a professional ensures that you won't have to start from scratch if your home is destroyed by an event that's out of your control.
