It’s no secret that construction costs have gone through the roof, literally!
One lesson the insurance industry has learned from the Marshall Fire on December 31st 2021 is that many homes were underinsured, up to 2/3!! We are not surprised, construction cost have increased faster than in any other time in history, it now costs at least 20% more to build a home than it did two years ago.
Insurance companies use inflation guards to increase the coverage on your home each year which are normally around 3-4% . With increases of 15%+ over the last two years the average increase in your policy is just not enough.
What can you do to make sure your Utah home is adequately insured? At Anderson Insurance Group, we want to make sure you have enough coverage to rebuild in the event of a total loss, here are a few things to look for:
Replacement Cost – Your home should be insured for a minimum of $200.00 per sqaure foot, that is for an average Utah home and includes the cost to build the basement. Homes with above average and superior construction will cost more. High Value homes will go through a much more thorough inspection and can cost between $400.00 and $500.00 per square foot to rebuild.
Extended Replacement Cost Coverage – Most property insurance policies include at least a 25% extended replacement for the dwelling, make sure you have at least this amount. Many companies will offer Extended Replacement of 50-100% for a nominal increase, if your company offers that make sure you take it. A few companies offer Guaranteed Home Replacement which will offer the most assurance that you have enough coverage.
ERCC Example: $400,000 in dwelling coverage + 25% = $500,000 max dwelling coverage
$400,000 in dwelling coverage + 50% = $600,000 max dwelling coverage
Extended Replacement Cost Coverage Endorsement has conditions, make sure you have met them! Read your policy or even better, call your Anderson Insurance Group agent to make sure you comply with the ERCC conditions. The conditions can include informing your insurance company if you have made improvements of more than $10,000 or 5% of coverage A, the dwelling. The easiest way to void the ERCC is by finishing your basement. If you have made improvements to your home, call your agent and make sure you have not voided the ERCC. While similar, every company’s ERCC endorsement has its own language, make sure you have met all the conditions so this coverage is in effect.
Detached Structures – Have their own limits and the cost of a detached garage or structure has increased as well, make sure you have enough coverage.
Ordinance & Law – Will help rebuild and bring to code the undamaged portion of your home in the event of a loss. The most common example is an electrical fire where faulty wiring causes damage to part of the home but the building inspector will not give you a permit to rebuild the damaged portion unless you bring the undamaged of the dwelling up to current electrical codes. That can cost a lot of money, make sure you have this coverage, we do see other agencies leave this off for lack of understanding or to simply get a better price.
These recommendations are just a start, to make sure you have enough coverage reach out to a local knowledgeable agent to discuss your coverage. Homeowners insurance is not something you can trust to a 1-800 or online agent, it’s much more complicated than that. Don’t take any risks with your largest investment, call us to review your coverage and make sure you are protected.
