“With the significant appreciating we have been seeing in the area, it is possible your coverage could be too low” according to Ryan Carlson, American Family Insurance.
There are several factors that are contributing to this situation.
In the event of a total loss of your home due to a fire, you will still own the dirt but will need to rebuild the house.
There are two major factors that are driving up the cost of rebuilding and causing the need for higher insurance coverage.
- Material Costs: The cost of materials continues to increase. They are 8.1% higher than at the same time one year ago according to ABC (Associated Builders & Contractors).
- Labor Costs: The bigger issue is labor costs. In the downtown turn of 2008, many construction workers left the industry and did not return. We have seen a 15.8% drop in construction trades between 2005-2015 according to Martin Drake, Bis Now. There are significantly less people pursuing careers in construction which is slowing down construction and driving up prices.
Your insurance agent will look at the price per square foot to rebuild your house which includes materials and labor, the size of your house and the upgrades you have done to determine the dwelling insurance amount. This would cover what it would cost to rebuild your house if it was a totally loss.
Another thing to consider is getting earthquake insurance. We live in an area that is prone to earthquakes and they say the “big one” is coming. This type of insurance can be expensive and comes with a high deductible but might be worth looking into.
Now would be a good time to set up an insurance review with your agent to see if you are underinsured.
Insurance is one of those things you don’t need it until you need it, so make sure you have the right amount.