Making improvements to your home such as remodel, finishing your basement or adding on a room is a good investment and adds value to your home.   If you have made improvements to your home recently, it is wise to stop and ask yourself the question: Am I adequately protecting my investment?  For many people, the answer is no.

We have found upon reviewing coverages for our customers recently that many of the homes we insure have been underinsured, some of you have may have received calls from us and increased the coverage on your home.

A nationwide survey found that 64% of the homes surveyed were underinsured by an average of 27% below what it would cost to replace them.  Most homeowner’s policies cover up to an estimated replacement cost (as determined by a Marshall & Swift/Boeckh cost estimating system, a standard program used in the insurance industry).  Others add extended replacement cost protection of up to an additional 20-25%.  With building material prices continuing to increase and other construction costs on the rise, many Spokane-area homeowners are underinsured and would be unable to rebuild their homes if they’re lost to fire or another catastrophic event.  Especially vulnerable are people who have made substantial improvements to their homes and haven’t made their insurance professional aware of the improvements.  In the market today, even though we apply an inflation-based increase, sometimes annual coverage increases are simply not enough.

The reason for this gap between coverage and construction cost in some cases is the building-materials market, in which many types of building materials have increased in price sharply in recent years, with some even being in short supply.  For example a recent survey showed that the cost of panel wood products have surged 85%, compared to a year earlier.  Cement shortages in the Inland Northwest and elsewhere in the U.S. also are well documented.  In addition to material-cost increases, home builders have seen increases in fuel, equipment, labor and liability insurance.  This is all passed onto the consumer in increased replacement cost factors.

People are often shocked at the cost of rebuilding their homes and have made comments that they could never sell their home for that much why should they insure it for that amount.  You must remember however that you are insuring your home for what it would cost to rebuild a brand new home for you, not what you could sell your home for.

So what do you do if you are concerned that your home is underinsured?  How do you determine the cost of rebuilding your home?  We recommend contacting us for a review of your coverages, making us aware of any special features or changes you have made to your home, accurately describe your homes details – built-ins, antique wood, glass or special windows, upscale kitchen appliances, marble/granite and/or solid surface counter tops.  Make sure you have given us the correct style and square footage of your home. If the basement is finished include that information, along with how many bathrooms - full, half and three quarter baths.

Another option you might consider is contacting a builder in your area that for a flat fee will go through your home and provide an estimate.  Try to find someone who builds individual, custom homes that don’t benefit from the economies of scale that tract homes offer.  Even if your home was built as part of a tract development, it will not be replaced on the same scale and costs will vary as a result.  If you want the same antique moldings, stone fireplace, and plaster-and-lathe walls as before make sure the builder takes that into account.  Otherwise, the estimate may reflect less costly modern materials.  Make sure you let us know what the estimate is, so that we can adjust your coverage accordingly.