Today I had the pleasure of our office being the call center for Tom Martino’s radio show
on KHOW. Our phone lines here at the office were inundated with calls. The questions that were posed were wonderful, and I was so glad to
get to answer them. There are three in particular that stood out for me and I think they are deserving of a blog post.
Lets answer them one at a time:
Q: How is the dwelling value of my home calculated?
A: There are quite a few factors that go into the determination of the dwelling value of your home. First, I would like to tell you that dwelling value and market value are two very different things. Dwelling value is the projected cost to rebuild your home in the event of a total loss. This is gauged by many factors: the materials your home is made of, upgrades to your home, how large is your home etc. As insurance agents, part of our job is to ask you questions about your home, look at your home, and view assessor reports. We put all of the information together to get a good picture of everything that can affect your dwelling value. This sounds a bit daunting, but your agent will take the extra time to go over the details to assure that you are properly covered and protected.
Q: In a time that my homes market value is less, why am I paying more for homeowners insurance?
A: Since we went into a recession the housing retail market has been depressed, this has lasted several years. The average selling price of homes has fallen. Even though the market value of a home may be less, the cost of materials, particularly anything oil based has increased which has risen the overall cost of construction. This is one of the key factors in recent rate increases for home insurance. We are at an odd point in history where the home that you buy may actually cost less to purchase than it would cost to rebuild. However, this anomaly is starting to change as we come out of our recession and home values start to increase. Another contributing factor of rising homeowners insurance rates is major losses Nationwide (Hurricane Sandy is a good example of this), in Colorado hail and forest fires have been devastating. The insurance industry has paid out substantial amounts of money due to the changing weather and its affect on policy holders. As the number of claims rise there must also be a proportionate rise in rates to assure that these companies stay financially solvent.
Q: Why is it that having multiple policies with a company gives me discounts?
A: Benefits of bundling is that an insurance company can distribute risk over multiple lines of business. Where one line of business may not be profitable (homeowners insurance in Colorado) the other is (auto insurance in Colorado). Again, this allows the company to stay profitable, solvent, and maintain their ability to pay claims. When you bundle your personal policies you are seen as a better overall risk by insurers and you are rewarded with better rates.
