Which home characteristics have the greatest impact on replacement cost estimates?

By Trish Hopkinson  |  August 24, 2015

Does a property have a garage or just a driveway? How many fireplaces are in the house? Are the exterior walls wood, vinyl, or brick? What’s the slope of the property? On what type of foundation does it sit?

Those are just a handful of the questions insurers can answer to estimate the replacement cost of a home. But considering the limited amount of time insurance representatives have to answer these questions, which characteristics provide the most reliable estimate as quickly as possible?

Estimating reliable replacement costs calls for balancing three factors: an easy way to identify home characteristics, accurate property information, and a fast valuation calculation process. To better understand the effects of key home characteristics on replacement cost estimates, Verisk experts designed and executed a study of the number and combination of characteristics required to create a reliable replacement cost estimate.

Verisk’s team analyzed more than 450 properties across the United States and Canada that experienced total or near total losses. The actual replacement costs from those losses were compared with variations of 32 different combinations of building characteristics to see which combinations were closest to the known replacement cost.

The analysis resulted in a baseline data set of 212,952 variations. Ultimately, Verisk experts identified the nine primary characteristics that will give you the most reliable estimate with the fewest data points. Using these nine characteristics resulted in a 9.1 percent difference between replacement cost estimates and the baseline valuation.

360Value® primary characteristics data set
Year built
Total finished square feet
Quality grade
Number of stories
Foundation type
Finished percentage of lowest level
Exterior wall finish

The research team then identified 16 secondary characteristics. By adding any nine of the 16 secondary characteristics below, the research team saw an even better result, bringing the replacement cost estimate to within 4 percent of the baseline valuation.

360Value secondary characteristics data set
Bathroom count
Floor covering
Cooling system
Roof cover
Kitchen count
Kitchen counters
Property slope
Site access
Interior wall finish
Foundation shape
Roof shape
Average wall height
Exterior wall construction
Foundation material
Interior wall material

The analysis and results are specific to 360Value®, but insurers can apply them to other replacement cost estimators. 360Value customers can now apply the findings to increase the reliability of their replacement cost estimates for a wide range of properties across the United States and Canada.

Interested in reading the report? If you’re a client, simply contact 360Value Client Services at support@360-Value.com.

Trish Hopkinson is a Senior Project Manager for 360Value and has been employed by Xactware for 16 years. Her background is in quality assurance and technical writing.