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My best friend in college was Sam. After we graduated college together, I headed South and he headed to the West Coast. Sam now lives in an area of California susceptible to wildfires and contacted me for advice on how much his house should cost to replace. Since he’s also in an earthquake-prone area, we discussed coverage for that peril also.

He received two quotes, one for $485,000 replacement cost and the other $385,000. However, last year we ran through our estimator and the replacement cost was in the neighborhood of $700,000. Costs have gone up, not down. Both quotes are a little light. Should anything happen to his home, he might only be able to rebuild 55%-70% of his home.

There have been many California homeowners who learned how underinsured their home was—after a fire. Sam has read the many articles about this issue and wants to avoid being underinsured.

The whole point of any insurance policy is to protect the buyer from an unexpected turn of events like water, fire, wind, hail and trees damaging the biggest asset most people have. Recovery from those events should not ruin the buyer financially. Often we are tempted by lower premiums, which typically mean lower replacement costs and/or coverage.  But at the time of a total loss, is that small difference up front worth hundreds of thousands that you need to pay to get your house back?  Sam didn’t think so. 

Sam and I checked the data that was entered for each quote. There were a few differences, but even after correcting for the differences, the replacement costs did not approach the e2Value estimate of $700,000.

Your insurance agent is a great place to start having discussions on values and coverage, but in Sam’s case, he didn’t get all the answers he needed.  How can Sam and I—and you, if you are attempting to determine replacement costs on your own—start the review? The idea is to let the data tell the story. It is not helpful to have an interested party spin any data to that party’s benefit. Collect the data, review the data, but don’t cheer for any data. It is what it is. 

However, that doesn’t mean any data collected is great. If five people say they paid $5.00 for a burger at a restaurant and a sixth says they paid $25.00 on the same day for the same thing, that data may need to be pulled out until that drastic difference can be fully explained.

We started collecting data to determine both the most appropriate replacement value and coverage. Does Sam have enough coverage? Let’s have a look at the data. See Part 2.

e2Value keeps up with changes in costs to provide fast, cost-effective and accurate replacement cost valuations. e2Value’s estimators allow you to quickly and easily value homes of any size or age. You are able to value the smaller older homes and newer larger high value homes and everything in between.  Contact us for more information about our estimator tools.

Does Sam Have Enough Coverage? Part 2