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Do You Have Enough Coverage to Rebuild Your Home?

August 4, 2021 By Monte Burstad

Newly sheetrocked room

If you haven’t reviewed your homeowners insurance in a while, now is a good time to do so. Specifically, you need to look at your limits for Coverage A, also called dwelling insurance. Due to a perfect storm of factors, rebuilding costs are spiking. As a result, limits that used to be adequate might not be sufficient anymore.

What’s Included in Coverage A?

A standard homeowners insurance policy provides a lot of protection. The policy can be broken down into different types of coverages, including dwelling coverage, personal belongings coverage, liability insurance, and additional living expenses.

Coverage A refers to the dwelling coverage part of a homeowners insurance policy. It covers the physical structure of your house. Homeowners are advised to purchase Coverage A with limits that are high enough to cover the cost to rebuild the house. Because the cost to rebuild can change, it’s important to review your limits periodically.

Home Values Are Up

Home values in the United States have surged. CNBC reports that the median price of an existing home was $350,300 in May 2021. That’s a 23.6% increase from May 2020. You’ve probably seen similar increases in your area.

If you own a home, you may be happy to hear that the value has increased, especially if you’re thinking about selling it. When it comes to insuring your house, however, this increase in value can be an issue.

The Cost of Materials Has Increased

It’s not just existing homes that have increased in value. The cost of building materials has also increased dramatically. Supply chain issues created or made worse by the pandemic have caused prices to rise.

In June 2021, the National Association of Homebuilders reported that building material costs had increased an average of 26.1% over the previous 12 months. Some builders were reporting cost increases of 50% or more.

This should be a major concern for homeowners. If your home needs repairs, the costs may be significantly more than you anticipated.

A Labor Shortage Is Complicating the Situation

The construction industry is also dealing with a shortage of skilled workers. According to the Q2 2021 U.S. Chamber of Commerce Commercial Construction Index, 88% of contractors say they are having moderate to high levels of difficulty finding skilled workers. Because of the worker shortage, 50% of contractors are putting in higher bids and 35% of contractors are turning down work.

If your house needs to be repaired, you’ll need skilled construction workers to do it. The labor shortage means that you might have to pay more for the work.

Prices Can Skyrocket After a Natural Disaster

Wildfires, hurricanes, ice storms, and other natural disasters can impact large areas. When this happens, it’s not just one person who has to rebuild. It’s dozens or possibly even hundreds of thousands of people. This sudden surge in demand can cause building costs to surge even more.

When this happens, some people may complain of price gouging, and that might in fact be an issue. However, even if intentional price gouging isn’t involved, prices may go up as contractors get booked to the max and local supplies sell out.

Your Limits Might Not Be Enough

Let’s say you bought your home five years ago. At the time, the value was $300,000, and you got a homeowners insurance policy with limits that were high enough to cover that. In the five years that have passed, you might not have thought much about your coverage limits – but you should.

Between rising home values and surging construction costs, your limits might not be high enough to cover the cost to rebuild anymore. If building costs go even higher after a natural disaster, the difference between what you have and what you need could become even greater.

The Consequences of Not Having Enough Coverage

So, what happens if you have to file a claim and you find out you don’t have enough coverage?

For example, let’s say you have a Wisconsin homeowners insurance policy with a $300,000 limit. Your house is destroyed in a fire and you need to rebuild. That’s when you find out that the cost to rebuild will be $400,000. That’s a $100,000 difference. To rebuild your house, you’re going to need to come up with the funds.

But inadequate limits aren’t just a problem when a total loss is involved. Many homeowners claims are for partial losses, with damage that is significantly below the policy limit. However, because of the coinsurance clause, you might not receive the full amount of the claim if your limits are too low.

The coinsurance clause penalizes homeowners for having inadequate insurance limits. It states that the policyholder must purchase a certain amount of coverage, often 80% of the home’s value or claim payouts on partial losses will be reduced, even if the claim is less than the limit of the policy.

For example, if your home is worth $500,000 and you have an 80% coinsurance requirement, you need to maintain coverage of at least $400,000 ($500,000 X .80). If you only have $300,000 in coverage or 60% of the value, you are not meeting the coinsurance requirement. As a result, your claim payments will be reduced, even if the claim is less than your $400,000 limit.

Actual Cash vs. Replacement Cost

Another issue to consider is whether your policy is for the actual cash value of your house or the replacement cost. Because of depreciation, the actual cash value of your house (what it’s currently worth) might be less than the replacement cost (what it would cost to repair or rebuild your house now).

Some policies provide a guaranteed replacement cost or extended replacement cost. These policies can pay claims that are greater than the coverage limit if the cost of repairs increases. However, you may still need to pay attention to your limits. If you have an extended replacement cost policy, your coverage will be capped at a percentage of your policy limits, often around 125% of your dwelling coverage limit.

Check Your Wisconsin Homeowners Insurance Policy Now

This is a good time to check your homeowners insurance policy. Make sure your policy limits have kept up with the recent increase in home values and construction costs – you might find that you need to raise your limits.

Also, find out whether your policy operates on an actual value, replacement cost, guaranteed replacement cost, or extended replacement cost basis, and whether you are happy with your terms.

Contact Burstad Insurance for help with understanding your coverage needs.

Author

  • MOnte Burstad
    Monte Burstad

    Monte Burstad is the owner and an agent at Burstad Insurance in Menomonie, Wisconsin. He can be reached at 715-235-6479.

    View all posts

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Burstad Insurance
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Jeremy B.
If I could give 0, I would
Eric C.
Do not do business here. We were mislead about the coverage provided to our business by Missy Kraemer. When this came to light, we went to change providers and find adequate coverage. Missy acted extremely unprofessional and refused to send us the documents we needed! She said it wasn't her job to help us. A terrible experience with a rude, unprofessional person. Do yourself a favor and find literally any other insurance provider.
Sam C.
After waiting a week for someone to get back to me about my request for quotes, they sent me an email saying “We can’t find you coverage because you have a pitbull mix dog. Sorry.” Which doesn’t make sense because somehow I currently have insurance and I’ve gotten 3 quotes on my own now that will all cover my dog. Complete waste of time.
Jr S.
Such nice people I love the insurance rates so amazing.
carrie M.
Thanks for your always friendly and fast service! I appreciate what you do!
Kathleen T.
Bursted has had my business for years. When I lived in town, I appreciated stopping in to get quotes so I could talk to the owner about business and community. The staff is helpful and friendly, and I appreciate how patient they are when answering my questions about insurance. Insurance is not my favorite adult chore to tackle, but everyone at Burstad makes me feel like I’m connected to a human that knows how to explain what will serve my needs. They’re also a brokerage and have the ability to check multiple providers at once for you! Yay!!!
Nick E.
Great customer service and caring staff.
Tammy T
We too had a horrible experience with Doug! Unfortunately we had to find out the hard way when we had a small fire/smoke damage in our office space. Not only were we under insured, we were overcharged on our commercial policy for years!!!!! He and the owner of this agency were absolutely zero help when it came to dealing with this claim, the tenants insurance company and the insurance adjuster that would never return our calls, it was a complete NIGHTMARE! We were all on our own and we feel that once this happened, they knew that our agent screwed up when it came to this policy that he put together or lack there of and thought if they would just ignore us we would walk away. Not only did we walk away, we ran!! Had 3 other agents review it and could not believe how much we were under insured and several gaps in the policy that were missing, like loss of income, loss assessment coverage, just to name a few, things that are no brainers when it comes to commercial insurance. The only good that came out of this entire experience is that we learned alot about insurance and now have a very competent agent that physically went to all our properties, took pictures and sat down with us, at our home and a 3 page checklist to see what we needed or didn't need for our insurance needs. He even pointed out that our agent had our rate almost 3 times higher than it should have been, meaning we were getting ripped off, big time!!! We would have filed a complaint with the insurance commissioner of WI but reviews said not to waste your time, they wont do anything. Now we have double the coverage for our properties for HALF of what we were spending with this agency. Oh and our home and auto policy was lacking as well but was also reviewed and now has the proper coverage for our needs. Our advice, go somewhere else for your insurance so this doesn't happen to you!! This agency doesn't even deserve 1 star!
Jeanne R.
I really appreciate their friendly, prompt and knowledgeable assistance. We have been with them for years, and are consistently happy with their service.
Sephonia T. C.
This insurance company allows its employees to be racist. Doug treated me as if someone had a gun to his head every time he dealt with me. During a conversation I overheard him call me the “N” word and say how he wish he didn’t have to deal with my kind. The new management didn’t care how I was being treated so I switched insurance agents all together. Furthermore, I have asked numerous times for them to STOP harassing me by sending me emails and mailings but they have refused. I unsubscribed 4 times from their emails but the emails keep coming 2 years later. I’ve made numerous phone calls asking them to remove me from their lists but that hasn’t happened yet either!!!. My next step is to file an official report of Harrassment with the state of Wisconsin. I wouldn’t use this company to insure bubblegum lil less a boat, car or your home. I’d give them a zero rating if I could. There’s no place for racism in this world.
Roxanne S.
Valorie provided excellent service and quickly found us the best insurance policy and rates available. Thank you, Burstad Insurance!
Mindy A.
Family and Burstad worked their magic and found insurance even cheaper than what I was paying. They are very responsive when adding or changing things to a policy and they stick up for their customers when a bank may try to manipulate the home insurance for no apparent reason. Well done Burstad. I highly recommend.
Jason W.
Good service they work at finding you the best insurance
Dale B.
Easy to work with
Carla O.
Good insurance company
Happy Home I.
Easy to work with and great rates. Sent a lot of friends here. All are happy with it!
Dave T.
Melissa and her staff have always treated me right! Often finding better rates for me! Thanks
Peter T.
Great place
Jeremy M.
Monte and his team are great to work with. They were extremely helpful in getting our business up off the ground and getting the needed items to be successful. I would highly recommend them for your business!
Denise V.
Great to work with!
Dawn B
Everyone here has been very helpful, knowledgeable and friendly! Whenever I contact them, they get back to me quickly and are sure to get me the best rates possible. Thank you! The Baldwins
Kelly S.
I'm giving them 3 stars only because I was insured by them for 11 years..I changed insurance providers when my daughter got her license. they automatically put her on my insurance policy as a first time driver weather she was now driving or not but just because she was a licensed driver in my household. $287.00 jump from the $64.00 what I was paying for myself was crazy. Yes I called them and tried to dispute this but they refused to remove my daughter and started taking payments out of my account... so I was done with them ,cancelled my insurance policy, and got a better insurance that same day for half the cost plus I now have better coverage.
Isaac F.
I visited this office for a quote. During a pandemic, no one was wearing a mask or distancing. For a company preaching safety and preparedness it seemed strange. I turned around and left when I overheard an employee, who I assumed was an office lead, espousing her religious beliefs were going to save her rather than science. Who works in insurance with an attitude like that?
Response from the owner:Isaac, I am so sorry about your experience in our office, although we do not require masks by our staff being that they are all at least 6ft. feet socially distanced, we will always respect the views of our walk in customers. I am sorry that you had a negative experience at our office, but we would love the opportunity to set up a meeting with one of our highly experienced agents. We would make sure that everyone would be masked so that you feel comfortable. Thank you for your feedback.
Drillbit S.
They just want your money, Our agent was quite condescending when he would talk with us we were a new business. Prices were OK, But our agent definitely thought he had a chip on his shoulder.
Joshua E.
Great response time, #1 in the area
Wedam Enterprises L.
Very responsive all around good business and friendly service. Highly recommend.
Lee B.
Excellent customer service
Kent Elkin goes above and beyond
Also the rest of the staff is very accommodating
Barbara B.
They are professional and responsive
Li K.
great place and nice service
S M.
Great place. Emily is very helpful as well as all the rest of the people I have encountered there.
Tamara K.
Didnt respond to my request for a quote.
Bill I.
Best prices. Best customer service!
Steven G.
Top notch service. Will recommend to all.
Ana B.
Yes! I want to tell you something. If you need a car insurance - this is the place where you will find the best offer.
Have done car insurance for two trucks. The price was so good, even less than I expected.
My agent was Angie. I want to say thank you for caring! She is the nicest and kindest person ever!
Definitely will return for the nest year insurance
Jason L.
Excellent rates and service. Friendly staff and helped in a timely manner
Alicia B.
Neil is awesome!
John A.
Very helpful agents and staff. They got me a great deal on homeowners and auto insurance.
Jody L.
I have had policies thru the Agents, at the Menomonie office.

Their prompt response, patience, amazing customer service and thoroughness, is the greatest I have ever had with an agency!
Valorie M.
Great staff!
Brian H.
I have been a customer for many years and love the personal customer service experience that they provide. I know that when I call, I will get a real live person! I also know that the person I am working with will have an understanding of my history and my policy. Highly recommend! Thanks and keep up the good work!
Joshua E.
I recently purchased a new vehicle and had Teresa add it to my policy. She told me she added it and i was all set to go. 3 weeks later i find out she did nothing and i had been driving my brand new vehicle around without any insurance coverage. She said on several different occasions that she would email me new quotes, but i never heard back.
marcy M.
Corey Burstsad Insurance is great!! Neil always goes out of way for his clients, very trustworthy and efficient.
Soleil R.
Very friendly and helpful. Got is a great deal and we were refered there by a good friend after not being able to find what we wanted elsewhere. They made the process very easy and didn't mind us popping by last minute to get the details figured out.
Response from the owner:Hello Soleil, thank you for your review! We strive to provide great service to our community.

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