By ALLEN MCQUISTON
The Jemez Agency
I came across an article in one of the publications I read and wanted to share my thoughts about it.
Soaring construction costs are giving victims of the recent California wildfires a nasty shock on top of their fire losses – their insurance may not cover all of the damage.
Many who lost homes in the Northern California wildfires may be forced to sell because they’re underinsured – thanks to the area’s skyrocketing construction costs. In the Santa Rosa, Calif., neighborhood of Coffey Park, for instance, rebuilding costs could be between $600 and $800 per square foot.
Insurance broker Jay Zemansky told NBC Bay Area that $800 per square foot is twice what building costs were just two years ago. For that matter, it’s a good deal higher than it was two months ago.
“They’re talking about $800 a square from where six weeks ago they were talking $500 a square foot,” he said.
The problem, broker Cheryl Fessenden told NBC Bay Area, is that construction prices are rising so fast that people may not realize their coverage is no longer adequate.
“People get a policy and then they stick it in a drawer, and it renews every year, and nobody’s taken the time to review it,” she said.
The moral for homeowners, obviously, is to regularly review their fire policy – but with the caveat that even insurance companies may not realize their clients are underinsured.
“Sometimes when you’re working with a company that’s out of state, they don’t have a real good sense of what that would take to rebuild,” Fessenden told NBC Bay Area.
Kind of shocking to think that it might cost someone $800 a square foot to rebuild their home. That’s not the market price. That’s the cost to rebuild. Those can be two very different numbers. Now we are fortunate that the cost here is nowhere near that price in California. But it may surprise many what is does cost to construct a home here. I have been told by contractors here that the cost to rebuild a home with average construction materials is in the range of $175 – $200 per square foot. Build a home with nicer amenities and the price goes up. Also, look at what the article says about the prices in California. It’s a good deal higher now than it was two months ago. Contractors are in high demand there. They can charge whatever they want and they clearly are. What would the cost to rebuild homes here become if we had another Cerro Grande fire and lost a couple of hundred homes? Scary to think about.
We get calls all of the time from folks who want to save money on their homeowners insurance by lowering the insurance value of their home. We remind them that it doesn’t matter what price your home could sell for, it’s what it would cost to rebuild it. And that number never goes down. Also, as the article states, when there is catastrophe like in California, that price can be hiked up almost overnight.
Talk to your insurance agent to make sure you have the right amount of coverage on your home. It only takes a few moments to give you the peace of mind you deserve.anything or anyone.