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Mon, June 17

Ask the Contractor: Insurance: Make sure you’re covered

Q: Our homeowners insurance just went up $100 per month. What is the cost per square foot to rebuild so we know that we are covered correctly?

Marge and Bill, Prescott

My phone has been ringing off the hook with this very question. There is no standard cost per square foot amount and there are many key factors that have an impact on what it would cost to rebuild your home. Costs to rebuild your home often differ from market values, mortgage requirements, tax assessments and real estate appraisals because of current building code changes, current labor and materials costs and specialized workers required

Square foot pricing is a ratio of the total costs of a project components divided by the size of the livable portion of a house in most instances. Since the components that make up a project can be so different from project to project it is impossible to predict a price per square foot with any accuracy.

Most of the calls coming in are coming from homeowners questioning their homeowner insurance coverage. We know that homeowner’s insurance is deceptively simple, it is the coverage you need in the event of significant loss, and not all policies or claim situations are the same and coverage comes in as many forms as there are flavors of ice cream.

How do you know you are adequately protected, that your coverage is current and you have the right coverage? Every year or two, ask your agent to run a replacement cost survey to help make sure you are adequately insured.

Keep in mind the replacement cost for your home has no relationship to the resale value of your home.

If you have several barns, sheds, garages, etc. that are not attached to the home, make sure you raise the “Other Structures” limit.

If your home is over 10 years old, you should discuss with your agent adding “Ordinance or Law” coverage. You cannot profit from a loss, so if your home was built to an older set of codes, this Ordinance or Law coverage would cover you to rebuild under current code changes and therefore you would not have to pay for the new code requirements out of pocket. Unless you have this coverage, your insurance carrier will not cover the upgraded code requirements in rebuilding your home.

Double check to see if you have coverage for “Backup of Sewer and Drain.” This is an option-only item.

If you have anything in your home or on your property that has propellers, golf carts, boats, quads, etc., these items require special coverage.

Ask your agent about an automatic inflation provision. This will more than likely raise your premiums, but possibly something you should consider.

Inquire about additional coverage for protection from mold, sewage backup and flood insurance. This coverage must be purchased separately.

Insurance experts say failing to have enough insurance to cover the cost of rebuilding your home if it is destroyed is the largest mistake homeowners make. Many homeowners buy only enough insurance to cover the amount of their mortgage, but keep in mind the mortgage is at most 80-90 percent of the value of the home. And then there are the homeowners that insure their home for an amount equal to the current value of their home. This figure is far less than the actual cost to rebuild.

The top of the line protection and most expensive option is “Guaranteed Replacement Cost Coverage.” This is when the insurer will pay to rebuild your home no matter what it costs.

With the replacement cost tools that many insurance companies have they can get very close to what a homeowner needs to be covered. The tool is updated quarterly by zip code so the construction costs will be accurate.

Purchasing homeowner’s insurance and then never thinking about it again is wrong! Home insurance should be an accurate reflection of your needs at all times. What most people do not realize is that your needs change over time.

Here are three reasons to look at your policy at least every 2 years:

If, since you updated your policy, you’ve purchased a new television, exercise equipment, or any other property of value, then you’ll want to update your policy to make sure you’re covered.

This is particularly true if you have replacement cost coverage, which reimburses you for the price you paid for the item without factoring in depreciation. With that in mind, it’s a good idea to hold on to the receipts of all high-value items you purchase so that you can help expedite the reimbursement process if you experience a loss.

Another good reason to reevaluate your homeowner policy is to make sure that any changes that you have made to your home have the appropriate coverage.

Whenever you expand or remodel your home, you need to make sure that your home insurance policy reflects the increased property value. Major changes often cause property values to shoot through the roof.

If you miss your chance to re-evaluate your policy limits, you may find yourself paying a premium that does not reflect your circumstances. Don’t let this happen to you.

The value of your property, and the cost to rebuild it, can increase over time due to inflation. That doesn’t mean, however, that the amount of coverage you have will increase with inflation, which could leave you drastically underinsured if you experience a total loss of your home.

Fortunately, many insurance policies come with inflation guard coverage, which automatically increases your coverage by a certain percentage every year.

Inflation guard coverage is typically available for homeowners who cover 100 percent of the value of their home.

Remember to tune in to YCCA’s Hammer Time every Saturday and Sunday morning at 7 on KQNA 1130am/99.9 fm/95.5fm or the web at Listen to Sandy to Mike talk about the construction industry and meet your local community partners. It is fun, it is entertaining and enlightening.


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