Vail Daily column: What’s my home’s replacement cost?
July 12, 2014
Question: How do I determine proper insurance coverage for my home? I am particularly worried about the upcoming wildfire season. I still remember the devastating consequences that many homeowners on the Front Range faced due to insufficient amount of insurance after their homes have been destroyed by a wildfire.
Answer: When you think of the value of a home, you probably think about market value: what it would sell for or what you would be able to buy it for. However, when it comes to insuring your home, you instead have to consider what it would cost to rebuild in the event of a loss — a number which is often much higher. A market value appraisal of your home does not equal the reconstruction costs necessary to rebuild the home, nor does it equal the "actual value" on your real property valuation used to determine the tax liability.
Dealing with Higher Costs
Reconstruction costs may be higher than your home's market value, because the costs of residential construction have continued to rise despite the downturn in the economy and real estate values. Fewer homes have been built in the past several years, which has slowed the production of building materials on a national basis and resulted in a subsequent loss of skilled tradesmen. The building materials and labor costs to rebuild your home may cost even more due to the sudden labor and material demands if a natural disaster such as a wildfire or flood strikes your neighborhood.
The best way to determine the replacement cost of one’s home is to have a local established residential contractor provide a replacement cost appraisal, keeping in mind that in the event of a natural disaster, the material suppliers may be short of materials and price them accordingly and that contractors may have to import subcontractors from other areas, which will add to the cost.
Eagle County is prone to wildfire, as are many mountain communities. We have been particularly fortunate in that we have not had a significantly destructive fire in recent history. This can change with a hot, dry summer, which will leave vegetation dry and vulnerable to ignition. Should a firestorm occur in any of the heavily populated areas of our county, the respective fire departments may be overwhelmed and unable to respond to successfully protect all structures. The cost to rebuild your home to its current state is location specific and may change from year to year. The costs vary even within Eagle County, and can be very different from other in-state and out of state locations.
Get A Replacement Cost Appraisal
The best way to determine the replacement cost of one's home is to have a local established residential contractor provide a replacement cost appraisal, keeping in mind that in the event of a natural disaster, the material suppliers may be short of materials and price them accordingly and that contractors may have to import subcontractors from other areas, which will add to the cost. Some insurance companies have their own appraisal departments and are well versed in taking the above items into consideration. Wall Street Insurance represents several insurance companies that provide these services for the homeowners as part of the coverage.
Besides determining the cost to rebuild your home to its current state in the event of a total loss, there are other factors to consider when determining the adequate amount of insurance, including the cost to replace all of your possessions and amount of liability you should carry. Any valuable articles and jewelry should be protected with a scheduled or blanket endorsement.
Noel Harris is the owner of Wall Street Insurance, Inc. in Edwards. He and his team of highly specialized agents have been serving the insurance needs of the local community and vacation owners for the past 30 years. Feel free to call Wall Street Insurance at 970-926-4900 with any of your insurance questions or send an email to firstname.lastname@example.org.