Here in the beautiful mountain state of Colorado, we are all too familiar with the impact and catastrophic nature of wildfires. Many homeowners have been forced to face a total loss to their homes with only questions on where to begin when it comes to rebuilding their assets and their lives. Throughout the years these fires have taken the homes of many while many in turn face the inevitable truth…. that their homes were underinsured at the time they experienced this horrible loss. This statistic continues to climb. It is never within a claim that one wants to find out that they don’t have enough insurance to restore them to their original state…especially when there are tools available that can avoid such a concern.
So, what are those available tools and how can one use them to the best of their ability? What does it mean to “Insure your home to Value” and what happens if you are underinsured? And how can you work with your agent to allow for that peace of mind if you, too, fall victim to a catastrophic event? Today we will explore those very inquiries above to help guide our clients, both prospective and current, to making one of the biggest decisions when it comes to their homeowner’s insurance…. How much coverage do I need on my home?
What Is Insurance to Value?
Insurance to value is not the market value of your home, as one may think. Market value is consistent with sales in the area and includes things like the view, detached structures, land, taxes, school districts, etc. where insurance aims to insure to rebuild and does not include a view or land or what the home sold for down the street. Insurance to value is the coverage amount listed on your policy also referred to as “Dwelling Coverage” or “Coverage Amount A”. This amount should reflect the amount needed to reconstruct your home in the event of total destruction. It is also necessary for your home to be insured to value for certain other coverages like an extension to your Coverage A, being applicable in a loss, if needed.
What Is a Reconstruction Guide and How Do They Work?
Reconstruction guides vary by the carrier as well as their options within. In general, these are calculators that take the input characteristics of the property and compose a Dollar figure it estimates it would cost to rebuild that property based on those facts and current construction rates. Initially, these estimators pull from a variety of databases to obtain the information included at the start. The information included can vary from basic, like finished square footage, foundation type, bathroom count, patio or decks attached to the property, to more intricate details like upgraded windows and doors, an added doggie bath in the basement bathroom, skylights, and solar panels, as well as specialized siding and roofing.
However, this technology is not always as dependable as we would like it to be. Inaccurate information, or updates that you might have made to the home will not always be assessed properly. Did you just put new flooring in? Did you complete a kitchen or bathroom remodel with a fancy new tub or brand-new granite countertops? Even more, did you make an addition to the property that added square footage? Finish a basement? All of this can drive this estimate and should be navigated through a chat with your agent.
What Does It Mean to Be Underinsured?
Realizing that your home is underinsured prior to experiencing a loss and filing a claim is a critical factor in maintaining adequate coverage. However, if an assessment of your reconstruction estimate is not based on accurate characteristics of your home or if it has not been assessed recently to include changes in construction costs, you may face the 80% rule. This rule dictates that homeowners must have coverage worth at least 80% of their home’s total replacement cost to receive “full coverage” from their insurance company. This is called a “coinsurance penalty”. In the event a loss occurs, and the home is found to be underinsured greater than 20% less than its estimated replacement value, a claim can incur depreciated payouts meaning less coverage from the insurance company and more out-of-pocket costs to the insured. In total loss situations, this can result in tens of thousands of dollars not being covered to replace a home leading to a financial burden on insureds and their families as they try to rebuild their lives.
Why Is it Important to Work with A Personal Agent?
Having a personal and local agent, in a state where we encounter such a variety of concerns regarding our insurance protections, can be highly valuable. Your agent can be your neighbor. Or work right down the street from you. They live and breathe the same Colorado air and encounter the same weather and catastrophe concerns as you and your family. We are insurance consumers ourselves; we understand firsthand the struggles when it comes to ensuring peace of mind regarding your protections if a loss occurs. We can also help navigate the sometimes volatile and unique rate responses we see, too! We will have our finger on the pulse regarding how carriers are reacting to situations and claims while truly understanding not only what it means to be insured in Colorado, but also what it means to be properly protected.
Working hand in hand with a personal agent regarding the reconstruction guide we discussed above can help navigate the inner workings and tools within the guide that can be used to best paint the picture of your unique home as it sits today. With experience and training using this tool, paired with familiarity with the types of homes we see in the different neighborhoods, a personal agent can ensure that you are using this guide to a greater extent. In addition, they can encourage more frequent assessments as construction prices change, as we have seen most recently, with our inflation and supply chain concerns. This then allows for more confidence in the coverage amount recommended for Dwelling Coverage A in your policy.
Agents are also familiar with additional coverage that is valuable to better help respond to our weather and our particular situations on the Front Range. Because we see freezing temperatures over months in the winter, pipe issues, especially those spanning over time, can be of grave concern. in those secondary home cabins that some of us commonly enjoy but cannot frequent as much as we would like there are additional concerns. Wildfire defense systems are often built into carrier options that can help with mitigation when it comes to an impending wildfire near your location. This tool, offered by some at no cost, helps the carrier to work with local fire departments and add an extra layer of protection to your property through mitigation tools at no expense to you! Your agent can help you navigate if that is included in your policy and what that looks like. This is just a snippet of non-standardized coverages that personal agents may discuss with you to allow for the most thorough assessment of your insurance needs.
And finally, agents can help you regarding what your options are if faced with a loss at your home. Because we network with local and reputable businesses, we have a connection of resources that you can depend on allowing for a smooth and trusted process if you are faced with that decision. Having people, you can trust who live in the area gives assurance that you are in good hands from the start of the claim to the very last nail that is hammered.
Still Have Questions?
<a href="http://<a href="7192588071">Give our office a call and our licensed agents would be happy to discuss this further with you. Here at Brukhouse Insurance, we believe that through the peace of mind we help to provide our clients, we are making all your dreams come true!