Will My Homeowners Insurance Rebuild My Home In The Event Of A Total Loss (2022)

By: Mile High Insurance

07/01/2022

As an agent, I'm personally amazed at how much insurance has changed over the last couple of years. Since the massive hailstorm on May 8, 2017, the Marshall Fires, the pandemic, increased cost of lumber and labor, and labor shortages, a lot has changed with homeowners insurance. As a result, many people have been asking, "Will my homeowners' insurance rebuild my home in the event of a total loss?"

The Average Cost to Build a House

Any time you ask for a broad average like this, there will be variation depending on the source of the data. However, here are some rough, trustworthy estimates. To build a new single family home in the U.S., the average price tag is...

$311,455, according to HomeAdvisor's 2020 estimates
$296,652, according to the National Association of Home Builders (NAHB) 2020 study
$281,700 (median contract price), according to the U.S. Census Bureau's 2019 data

This average figure alone doesn't tell you much. Home building costs vary widely depending on several factors, the most significant of which is location. HomeAdvisor says the typical range is between $163,333 and $483,868, which is a fairly large gap. Even with figuring costs by square footage, new construction can vary between $100 and $200 a square foot. Customized and luxury homes will cost $200 to $500 per square foot. Reference

Colorado Cost To Build A House

Custom home prices vary greatly. In general, the average cost per square foot is about $235 for the construction of the home (land, site development, and financing are additional costs). Construction of a basic custom home will cost around $150 per square foot, while a high–end/luxury home will be closer to $400 per square foot.

In the last few years, a few contractors can recall building 5,000–square–foot homes for only $120 per square foot. This is nearly impossible today because of the natural increase in prices due to the pandemic. Since the start of 2020, everything has gone up, from lumber to labor prices.

For starters, one can have a value–conscious home built for $200 to $275 per square foot in Denver, while the average–sized homes can range from $275 to $350 per square foot. Meanwhile, high–end luxury homes can range from $350 per square foot to much more. Building a house in Fort Lupton, one of the less expensive areas in Colorado, can start at $165 per square foot. Boulder's price per square foot ranges near the $230 mark.

From a state–wide perspective, the average cost of building a house in Colorado is $230 per square foot. This cost includes an estimate of $1 per square foot for framing, $6 per square foot for concrete, and $82 per square foot for trim.

In the past decade, construction cost in Denver has been synchronous with the increase that the national construction cost is experiencing. However, according to Mortenson Cost Index, the 5% jump for the first quarter of 2021 is the most significant single–quarter increase since its commencement. Contributing factors to this increase are the significant drop in construction employment and the overall rise in raw building materials after the supply shortage.

On the graph presented below, we can observe that from 2020 to the first quarter of 2021, construction prices have experienced small changes. Major fluctuations occurred in the second quarter of 2021. Lumber prices have shown the most vulnerability, and this is because it is not just Denver that experienced the effect of this shortage but the majority of the construction market in the country. Forbes stated that prices of wood products fluctuate more than most goods, as homebuilding is a fast–paced industry. Although wood products are also used in crates and pallets, its largest consumers are still new housing, home repairs, and remodeling. The high costs of lumber and plywood are expected to fall in 2022, then return to their pre–pandemic prices by 2023.Forbes stated that prices of wood products fluctuate more than most goods, as homebuilding is a fast–paced industry. Although wood products are also used in crates and pallets, its largest consumers are still new housing, home repairs, and remodeling. The high costs of lumber and plywood are expected to fall in 2022, then return to their pre–pandemic prices by 2023.

What Leading Custom Home Builders and Architects that Serve Denver Say

Home Builder Digest sought the help of Ascent Builder, Revolve Design–Build, Thomas Sattler Homes, Blue Horse Construction, BONSAI Architect–led Design + Build, and Sustainable Design Build in determining the current prices of home construction in the area. Based on their responses, the typical range of value–conscious to high–end custom homes in Denver ranges from $200 to $450 and more per square foot, excluding the land/lot cost. At first glance, these numbers seem pretty big compared to other cities in the U.S. Yet this is justified by the recent price hike for labor and lumber.

According to these builders, material and labor prices have consistently increased over the past four years. Gabriel Wilson of Revolve Design–Build expressed that this increase has resulted in homes built at a higher cost and over a longer time. Trent Minshall of Thomas Sattler Homes further supported this by saying, "The supply chain disruptions have increased lead times and challenged production schedules to stay on track. Material shortages have also impacted production schedules and in some cases limited selection options for some projects."

What to do if you're unsure about your homeowners insurance coverage

You can talk with your agent. We have access to reconstruction cost calculators that are very accurate when we receive detailed information on a home. Unfortunately, getting accurate information isn't always that easy. People are busy and sometimes see agents asking for detailed information as a means to upsell, or the information isn't readily available.

I think the Marshall Fires reminded us all that tragedy could occur at any time, and when it does, it's imperative to have correct and proper coverages in place. Doing so ensures that when tragedy happens, you will be made whole. At Mile High Insurance Brokers, this is our number one goal. We believe communication is magic! The more we communicate with our insureds, the better the odds are that nothing gets overlooked. We ensure you have the right coverage at the right price, and when you call us in your time of need, Mile High Insurance Brokers and your insurance will come through for you.

If it's been a while since you reviewed your insurance, or you'd like a second opinion feel free to reach out to us at any time at (720)996–1975

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