SEATTLE - Home prices are down nearly 26 percent in
the Seattle area since 2006, but the cost to rebuild a home
in Washington has gone up more than 17 percent over that same
time period. In a difficult economy it may be tempting to
save a few dollars by reducing your Homeowners Insurance or
coverage for your commercial building to match decreased market
values. However, lowering your coverage amount is a risky
Insurance and insurance for commercial buildings is designed
to cover the cost of rebuilding, not the market value of a
home or commercial structure. Recent studies show that rebuilding
costs have climbed during the recession, even as market values
"In past decades, market values were always ahead of rebuilding
costs. That trend has reversed dramatically," said Karl Newman,
NW Insurance Council president. "We encourage homeowners and
business owners not to lower their insurance to match market
values. If your home or business is destroyed in a fire, you
could be stuck paying the difference between your insured
amount and the actual cost to rebuild."
Instead work with your agent or insurance company annually
to determine the cost to rebuild and insure accordingly.
Research from Xactware,
a leading rebuilding cost estimator for the construction and
insurance industries, reveals that between 2006 and 2011average
reconstruction costs in Washington rose 17.55 percent. During
that same time period, data from the National
Association of Realtors shows median home sales prices
fell 25.9 percent in the Seattle-Tacoma-Bellevue area and
14.13 percent in the Spokane area. The only areas that experienced
a net increase in median home sales price were the Yakima
area with prices rising 28.13 percent and Kennewick-Richland-Pasco
prices rising 16.14 percent.
According to Xactware, the national average cost to rebuild
rose 15.17 percent between 2006 and 2011. The national median
home sales price fell 21.6 percent, according to the National
Association of Realtors.
A 2008 survey by Marshall
& Swift showed that 64 percent of homeowners in the United
States don't have enough insurance to rebuild their homes
if they are destroyed. Of those without enough coverage, the
average homeowner only has enough insurance to rebuild about
81 percent of the home.
Although most insurance companies periodically update your
replacement cost coverage amount, it is your responsibility
to make sure you have enough coverage for your home or business
and its contents.
NW Insurance Council
offers the following tips to help you keep your insurance
coverage up to date:
- Contact your agent or insurance company annually to evaluate
the current replacement cost of your home or commercial
building. Be sure to include any large remodel projects
or additions that could add a substantial amount to your
rebuilding costs. Also ask about special coverage for high-value
items such as jewelry, art, antiques and coin collections.
- Marshall & Swift offers homeowners an affordable way
to check home replacement costs using their online Accucoverage
tool. For $7.95, Accucoverage evaluates your home and
gives an estimated rebuilding/replacement cost.
- Consider separate optional flood
insurance. Flood and earthquake damage is specifically
excluded from standard Homeowners insurance policies and
most business insurance policies.
- Keep an up-to-date home inventory with Free
Home Inventory Software from the Insurance Information
- Prepare your business to survive a disaster, get Open
For Business from the Institute for Business & Home
For more information on Homeowners and business insurance,
visit NW Insurance Council
or call (800) 664-4942.
NW Insurance Council is a nonprofit, public-education
organization funded by member insurance companies serving
Washington, Oregon and Idaho