Living in California, we all know that there will be a big earthquake someday in our lives. We too often forget that we live in a chaparral semi-desert environment where wildfires and firestorms are a regular part of our life. The recent fires in both Napa and Sonoma were not in the far-flung outskirts of our counties but were close in and highly distractive to neighborhoods seen that seemed safe and secure.
In California, nothing and nowhere is safe and secure.
Every homeowner has a policy that covers potential disasters such as fires. Too often, these are insufficient to cover the replacement costs of the residence. Many times, owners can request an extended replacement coverage policy that could pay generally 25 percent or more over the policy limits for unforeseen costs.
In Napa, too often the replacement evaluation cost is too low. Too often, policies are written to keep the premiums modest. However, building or rebuilding a home can run $250-$300 a square foot, and if it’s on a hill, the cost could be $400-$500 a square foot or more.
People always ask me, “How much will it cost to build a house?” I respond, “What do you want? A Yugo or a Mercedes?” It’s important to note that in construction there are three major work areas that affect the cost of a house.
The first is the Foundation Complexity: on a hill or in bad soil, the cost can be anywhere from $25-$100 a square foot. And if the exterior design requires a lot of box-outs, complicated foundation configurations or extra steel the cost can go up from there.
The second is the Exterior Envelope Complexity. The “skin” comes with a lot of variables. Is it stucco, which is expensive today , or is it plywood? Will the windows be stock or custom? There is a big cost difference between wood, vinyl and aluminum, which can add up.
Has the architect designed a highly articulated exterior with lots of custom details or is it simple vanilla (pardon my metaphor)? Will the roof be tile or asphalt shingle? All these exterior finishes and animated exterior shell, can vary from $100-$300 a square foot.
The third variable is the interior finishes. Will the kitchens have all stone countertops? Will there be hardwood floors throughout? Will there be high complex ceilings with crown molding with extensive trim through out? All of those items add significantly to the house construction.This can be as low as $50 a square foot or as high as your imagination can take you.
While no longer a variable, energy conservation requirements by the state add $25-$50 a square foot over the same house built 10 years ago. High insulation, super energy-efficient windows, high-efficiency heating and cooling units and new requirements for solar panel play out for less expensive utility bills over the long run but the initial cost is high.
So, here is an architect’s advice about what to consider with your homeowners policy:
1. Make sure you have a policy with sufficient funds to rebuild your house. Check it every year when the premium comes up. Don’t look just at soaring California real estate prices, but also look at the changing construction costs. Ask a local contractor or architect to give you an idea. If you renovate, be sure to update your policy. Don’t be afraid that the County Assessor’s office might change your evaluation. Just like choosing between an inexpensive plastic fixture and a long-lasting precious fixture: it’s worth it.
2. Be sure to ask for actual – cash – value coverage, which should adjust payouts for depreciation and construction cost increases. Consider buying extended replacement coverage, if available. Sometimes called re-insurance, the cost varies but it’s essential in the Napa market.
3. Make an inventory of all your possessions and exterior of the house. Inside and out. The easiest way is to take your smartphone and videotape every room, describing as you go all the contents and perhaps add value as you go. This is subjective, but you will be shocked how it all adds up.
Don’t wait to call your local insurance broker for an adjustment when the wildfires starred to ravish nearby neighborhoods. I understand insurance companies place moratoriums on policy modifications when potential catastrophic events, such as fires or floods, appear on the horizon. Do it ahead of time and be safe.
Remember, possessions can be replaced — lives cannot.