Article written by Adam Heuer, President of Heuer Insurance Agency and submitted by MNG Partners, Inc.
The real estate market in Nevada is absolutely on fire! It should come as no surprise that home values and construction costs are skyrocketing rapidly. It seems like every other week we are seeing both Reno and Sparks post record highs for the median selling price, and many of them are cash buyers. Last year’s forest fires in Oregon, in addition to COVID related impacts, have led to an unprecedented supply and demand problem in the lumber industry, as well as driving costs up. It is a seller’s market, and that fact always brings up the question: How much should I insure my home for?
Keep in mind that there is a huge difference in what a home is valued at in the real estate market, including what it might sell for in this crazy market, and how much it would take to rebuild the same house, in the event of a total loss. The biggest difference in the two scenarios is that a real estate transaction includes the land the house is situated on. In the event of a total fire loss for example, the land is not damaged and does not need to be rebuilt. Generally speaking, the amount of insurance you should carry on your homeowner’s insurance policy needs to be what it would cost to completely rebuild your house. The insurance industry refers to this amount as the replacement cost. With the cost to buy or build a home at an all-time high, there is potential for homes to be grossly underinsured. Your replacement cost at the time your insurance agent wrote your home is likely far off from what your replacement cost is now, even if you reviewed your coverage this last year. It is estimated that 58% of American homes are underinsured by at least 21%.
Your insurance agent can help you decide what this amount should be based on current rebuilding costs, but keep in mind, ultimately it is your responsibility to advise your insurance agent of any remodels or upgrades you do to the house over time. Most preferred homeowners policies sold today include a provision called “extended replacement cost”, with some policies providing “guaranteed replacement cost”. Both of these options provide a little cushion in the event of a total loss, but that isn’t always enough.
The cost of building and the Nevada real estate market is an ever-evolving situation and it is critical to protect your family’s most valuable asset, your home. Now is a great time to take a detailed look at what your current policy affords. If you have questions, or are concerned you might not have enough coverage, please call us right away.
About the Author
Adam Heuer, president of Heuer Insurance Agency, was born and raised in Sparks and is a 4th generation native Nevadan. He attended Safeco University, a specialized insurance school, then on to earn his Certified Insurance Counselor designation shortly after that.
Heuer became the 4th generation owner of Heuer Insurance Agency, who recently celebrated 90 years in business, after successfully purchasing the business from Larry and Starla Heuer in 2016. Heuer serves on several not-for-profit boards including the Nevada Independent Insurance Agents (NIIA), Nevada Young Agents, Rotary International, Trout Unlimited and Entrepreneurs Organization of Reno Tahoe.