Salmon Arm, Shuswap real estate....."Make sure your home insurance reflects value"

The conversation, earlier this week, went something like this:

Me, to my insurance agent of 20 years: "My homeowner's policy is up for renewal and I'm concerned that my 'dwelling' coverage, you know, the coverage I have should my house burn to the ground, god forbid, is only $278,000. Does that mean that is all the insurance company will pay to have my house rebuilt from scratch?"

My insurance agent, to me: "Yes."

Me: "So, how much is that per square foot?"

Agent: "Let's see. The industry standard for your house is $208 a square foot. Your square footage, finished, is 1,500 square feet, right? So, that's, um, er, that works out to about $185 a square foot."

Leave aside the fact that, for some reason, my irreplaceable (to me, anyway) 1912 heritage house, with all its original first-growth fir floors and moulding and stained glass and ornate craftsman detail, was valued lower per square foot than the unadorned builder's box a block over, and consider what, exactly, you can build today in Metro Vancouver for $208 a square foot.

I don't know where you live, but if it's anywhere within a tank of gas from the West Broadway offices of Wawanesa -- my policy carrier -- it won't be much more than a decent two-car garage with a loft.

So, me, to the agent: "Well, what does the insurance company base that on? How did it come up with that figure?"

And thereby ensued a confusing, often frustrating, series of conversations with agents, insurance experts, appraisers and builders about how every house, and situation, is different, and how, when it comes down to it, the only one you can rely on to ensure you are adequately insured is you.

Think about it. Your insurance company, and likely your agent, has never even seen your house, inside or out. Has never appraised it, or dropped by to see what makes it a better or worse house, insurance-wise, than the one down the street, or even what you've done to improve it over the years.

So how does it know exactly what it would cost to rebuild it?

It doesn't, which is why your policy likely carries the one-rate-fits-all rebuild standard.

That rate, in my case, was determined by a formula created by the BDC Development Consultants, which my agent, a lovely woman who has nothing to do with policy and who would much rather have been sipping pina coladas in a Puerto Vallarta cantina than trying to explain house insurance to me, says is who my carrier uses to determine rebuilding costs for house insurance policies.

BDC is a Vancouver survey company that provides the industry with a cost index guide for home building in B.C., and according to its website, the cost of rebuilding my home -- categorized as "single family home, with basement, up to 2,500 sq. ft., high quality, New Westminster" -- is $208.80 a square foot, an amount that "represents the expected on site construction costs in a normal, competitive environment."

Perhaps in Saskatoon, but not here, not my house, not according to my research, not in this hot market where the cost of construction and materials, and the strain on the building trades, seems to escalate daily.

But if you're looking for conformity of opinion on this topic from the experts, forget it.

Peter Simpson of the Greater Vancouver Home Builders' Association, which represents residential construction in Metro Vancouver, says he is also reviewing his home insurance, fearing he, too, is under-insured, and leans toward the theory that the majority of homeowners are out of touch with the cost of new construction, and thus their insurance coverage, in our current market.

It's buyer beware, to be sure, says Simpson, but "insurance companies need to deal with current realities, and what can be built in Moose Jaw sure can't be built here these days."

On the other hand, Dan Jones, of Campbell and Pound Real Estate Appraisers, cautions against over-insuring. He says $208 a square foot will build a basic house these days, a "Vancouver Special", as he put it. Mind you, if you're looking at a brand new custom craftsman -- perhaps a house like mine -- he says you'll be wanting coverage for about $265 a square foot.

Gary Friend, who's been building single- and multi-family residences in Metro Vancouver for 30 years, and who is also a realtor, agrees that many of us are under-insured, and what's going to get the job done in Abbotsford doesn't apply in Dunbar, and because each house is different, the costs can vary from less than $200 a square foot to well over $400.

"If you're a gambling man," says Friend, "you'll take the $208, but if you're not, go $250."

Over at the B.C. branch of the Insurance Bureau of Canada, the trade association that represents insurance companies, vice-president Lindsay Olson says her organization would like nothing more than to see homeowners take more responsibility for their coverage, and for all agents to do their due diligence on the information front.

She says insurance brokers should be reviewing policy details, every year, with their clients, to ensure that each homeowner, instead of falling into the lowest common denominator-builder's box category, is actually insured for their individual house.

"We know people tend to not want to take the time or energy or make that increase on the premium -- there's a huge reluctance on the part of the insured. People spend more time making a decision about the new flat screen TV they're going to buy than the product that's going to protect their valuables."

And pay you will for that protection.

On Monday, my house insurance premium, including dwelling coverage of $278,000, was $573. On Wednesday, with revised dwelling coverage of $500,000, it was $1,204.

So, a little friendly advice.

Get out your house insurance policy, have a really good look at it, and start asking questions of your agent.

For instance, what, exactly, would it cost to rebuild your house, not the one next door or one in Sicamous, but yours? There's a formula your agent can walk you through, detail by detail, and when I did it Wednesday morning, the figure that came up for my house was $509,000. Not $278,000.

Or, what, exactly, does "guaranteed replacement" mean? It likely means that your house will only be rebuilt to the cost of what you've insured it for, not what it might actually cost to rebuild it, a huge consideration in this market.

And, who picks the architect, the contractor, and the tradesmen for the rebuild? Who controls the money? That would be the insurance company, which may not share the same workmanship, or materials, standards as you.

If there's one thing the experts all agree on, however, it's that the vast majority of us never ask these questions, and have no idea if our house insurance will actually cover our real costs in the event of disaster.

(prepared by Shelly Fralic/Vancouver Sun)


SALMON ARM residential insurance brokers

BARTON INSURANCE
150 Hudson Ave. NE
PO Box 307
Salmon Arm, BC V1E 4N5
832-2143 832-6343
rroberts@barton.ca

LAKESIDE INSURANCE
290 Alexander St NE
PO Box 2890
Salmon Arm, BC V1E 4R7
www.lakesideinsurance.ca
Phone: (250) 832 8103
Fax: (250) 832 1132
E-mail: info@lakesideinsurance.ca

BROWNING & MATTHEWS INSURANCE
310 Hudson Ave. NE
PO Box 3067
Salmon Arm, BC V1E 4R8
832-2134 or 832-5186

BRITISH COLUMBIA ADJUSTMENT CORP
206-290 Alexander St. NE
P.O. Box 639
Salmon Arm, BC V1E 4N7
833-4984 or 833-1486
bwhitehead@bcadjusters.com