is your home underinsured?

Kalispell agents say that as property values increase, so should coverage on your house

The Daily Inter Lake

Maybe you've been in the valley forever. Your home always has been properly insured. But with all the building and expansion going on, property values are rising dramatically, and you haven't changed your policy to keep up with them.

Or maybe you've added on to your home in the past few years or added custom windows or other unique touches. Even though your home's square footage or overall value has increased, your policy has remained static.

If you fit in either of these categories, it's time to talk with your home-insurance agent.

There are probably many people in the Flathead Valley whose homes are underinsured, said John Horine of Avalon Insurance in Columbia Falls.

"With values going up so much, there can be some big differences between what people have and what they should have," he said.

And it's not just residential properties that are at risk of being underinsured, Horine said. Businesses also need to be concerned about whether they have proper coverage.

"I would guess most people probably don't have what they need," he said.

This isn't just a problem in Northwest Montana, though. As of August 2005, 59 percent of U.S. homes were undervalued by an average of 22 percent, according to Marshall and Swift/Boeckh, a company that tracks building costs.

The best thing people can do, most agents agree, is have their policies reviewed.

"Once a year is ideal," said Marty Gemmer, an agent with All Insurance Agency in Kalispell, "or more often if possible."

This is true, he said, even if homeowners purchased insurance recently.

Let's say that three years ago you bought a house and insured it for $100,000, Gemmer said. You don't see an agent the next year, and the cost to rebuild increases to $110,000.

During the next year, building costs still are climbing, so that insurance should increase to $120,000. The year after that, building costs still are rising rapidly, so when you finally get in to see your agent, you discover that your house should be insured for $150,000.

If something had happened in that three-year interval, that would be $10,000, $20,000 or $50,000 the homeowner would have to pay.

"Being underinsured by $10,000 is too much," Gemmer said. "That's $10,000 out of your pocket."

Gemmer recommends annual policy reviews to keep up with inflation. Building materials and the costs of labor are constantly on the rise, he said.

The latter is occurring because contractors can't find skilled workers to get the job done, Gemmer said. Skilled plumbers, electricians and carpenters are in high demand.

Instead of paying these laborers $40 an hour, Gemmer said, a contractor might pay $50 or $60 just to finish the project.

"And they should take it because in six months, who knows?" Gemmer said. "There may be no work."

Tim Murphy, an agent with State Farm Insurance in Whitefish, talks with local contractors to stay abreast of what it will cost homeowners to rebuild.

"That's really the best resource we have," he said.

It's important for homeowners to remember that insurance agents are not interested in homes' appraisal values. The price of land is driving market values, but for insurance purposes, an agent looks just at the home itself.

"We're looking at what's the cost to rebuild that home," Murphy said.

It's important that people who have made changes to their homes make sure their coverages are up-to-date, he added.

"People are upgrading on customization, everything from home theaters to nice hot tubs," he said. "All that is combined now."

All those additions and special touches need to be included in the policy to get accurate coverage.

This is why Gemmer recommends finding an "active agent."

"Some agencies you walk into don't have an agent that watches over your account. It's handled clerically," he said.

Good agents have a general idea of how much things are worth, Gemmer added, but with property values rising as they are, policies might still be off between 20 percent and 30 percent by the end of the year.

"(Homeowners should) make sure they're actually dealing with an agent who actually inspects the home inside and out," he said, "and make sure it's insured for replacement cost, not sales cost. That's the big issue."

Reporter Kristi Albertson may be reached at 758-4438 or by e-mail at kalbertson@dailyinterlake.com.