Perspective Newsletter
2016-October
2016-October

Has your homeowners insurance kept up with skyrocketing home prices?

The answer may surprise you: Likely, yes. That's because the value we use to insure your home is different from its market or tax-assessed value. Insurance focuses on the cost to repair or rebuild your home.

"Reconstruction" contrasts with new-build costs and market pricing in important ways. For example, even though real estate prices have soared (up 12% in the Seattle metro area, for example, in the past year), prices for building materials like lumber, sheetrock, siding, and appliances haven't climbed nearly as quickly.

On the flip side, reconstruction requires certain extras, since room-for-room, it costs more to repair a home than to build a new one from scratch (for example, your repair contractor won't get builder discounts for buying 12 refrigerators at once and he or she will need to take extra steps to preserve your existing landscaping).

The age of your home enters the reconstruction equation, too, since the older it is, the more likely your home will need upgrades during repairs to meet current building codes.

Using the information you provide about your home, PEMCO factors in all those reconstruction variables when you buy or update your policy – regardless of whether the current housing market is up or down.

So I'm good?

Probably, provided nothing else has changed about your home since you last updated your policy. (More about that below.)

For added peace of mind, PEMCO automatically adjusts coverage for your home to keep pace with construction costs through a program we call "Value Up."

Your replacement-cost policy also includes a buffer against the unexpected. For example, if your home suffers smoke or water damage, it will need work (like drying out or demolition) before workers can even begin restoring it to its insured value. Perhaps belongings will need to be removed and placed in storage. Or, in the case of a natural disaster like a windstorm, when many homeowners are impacted, the cushion protects you against hikes in labor and materials costs that are common when heightened demand drives up repair costs.

Have things changed?

Homeowners insurance isn't a "set it and forget it" purchase. Most homes start with the right amount of insurance. However, after a few years, they can become underinsured when homeowners forget to update their policies after they've:

  • Remodeled, added, or expanded rooms
  • Finished a basement or added a porch or deck
  • Upgraded from vinyl floors to hardwoods, laminate counters to granite, or replaced appliances with high-end models. (That's especially important for condo owners. While your original appliances and surfaces are covered by your condominium association master policy in most cases, their replacements aren't.)
  • Built a fence, detached garage, or gazebo (which affects your "other structures" coverage).

Still wondering if your home could be underinsured?

Take a moment to check the "Coverage A" amount on your latest policy renewal. If it seems too low or you're just not sure, call your local PEMCO agent or contact us at 1-800-GO-PEMCO for a complimentary review. While no one knows your home better than you do, you definitely don't have to go it alone when determining the right amount of coverage.

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