Is Your Home Properly Insured?
Living in the Pacific Northwest may require surprising considerations to your home insurance coverage.
Natural disasters, building code updates and the red-hot real estate market are just a few of the reasons homeowners in our region might unexpectedly find themselves underinsured when it matters most.
Natural Disasters: Earthquake damage is not covered by standard homeowners insurance, so you’ll have to purchase earthquake insurance if you want protection against “the big one” or more frequent events like the 2001 Nisqually Earthquake that damaged nearly 300,000 homes. Wildfire risk is climbing, and while fire damage is covered by homeowners insurance, living in wildfire-prone area can have ripple effects. If a massive fire destroys a large number of homes in your area, limited construction resources may increase the cost of materials and also cause long delays in rebuilding your home, adding to your temporary living expenses. Increasing your coverage for dwelling value and living expenses can help you address these issues.
Building Codes: Residential construction standards are constantly changing, from safety features like fire sprinklers, tempered glass and seismic provisions for earthquakes to flood-resistant designs and efficiency requirements for energy and water. Unless you’ve recently purchased or built a new home, your current dwelling is likely not fully up to code and the cost to rebuild to modern standards may significantly exceed your coverage limits. That means you’ll have to choose whether to rebuild smaller or pay out of pocket. Your insurance agent should know how much to increase your coverage to handle code changes.
Rising Real Estate Values: In the hottest real estate markets of the Pacific Northwest, construction materials and labor costs are high and continue to increase as demand for homes outpaces the supply. If you haven’t reviewed the value of your home insurance for a few years, the replacement cost of your home (should you need to rebuild it) might have increased beyond your coverage, which means you’re underinsured and should take a look with an agent. The good news? Increasing the coverage of your home’s replacement value is unlikely to lead to a substantial increase in your premium, because insurance covers the replacement value of the structure but not the land, which holds much of the total market value.
Everybody’s situation is different, but now you know some of the big questions to ask your insurance agent if you want to avoid being one of the underinsured when disaster strikes.
– Michael Riley, director of sales at AAA Washington Insurance Agency, has more than 20 years of experience in the insurance industry and is a guest lecturer at Washington State University.