How Inflation Affects the Cost of Replacing Your Home

couple standing outside of their home

The country’s economy depends on various variables, which include inflation. Inflation has a negative or positive impact on the local industries. Among the sectors affected by the fluctuation of prices is the construction industry. The following is an overview of how inflation affects the cost of replacing your home and how this impacts your home insurance premium.

How Does Inflation Affect the Construction of a House?

As a result of inflation, the building material rates, machinery rates, and labor wages increase annually. The prices of most house equipment also rise due to inflation. When replacing a home, the changes in rates cause a deviation between the initial project budget and the final budget.

The high cost incurred during house construction results in an increase in the insurance premium. The insurance companies raise their premiums to cover and keep up with the increasing repair cost caused by inflation or annual property tax increase. Homeowners should have their property valuated regularly. The new data can be used in the settlement process if the house is damaged.

Home Replacement and Its Effect on Insurance Premium

While determining the initial home insurance premiums, insurance companies consider factors such as the square footage, the year it was built, the number of stories, the number of kitchens or bathrooms, flooring, and roof covering.

During property replacement, the insurance company will replace the lost asset with a similar replacement of the same value and functionality as the original one. However, quality items and luxury add-ons such as swimming pools are expensive to fix or replace if damaged.

The increase in the new items’ prices and the risk of maintaining them force the insurers to increase their premiums.

Vargas and Vargas Insurance is one of the premier local independent insurance agencies. We work for our clients and not the insurance company. We will customize your insurance coverage to your specific needs at the right price. Also, we are here to answer all of your insurance questions. Contact us today.

Here’s What Happens When You Make a House Insurance Claim

Homeowners going through the house insurance claim process

Having your house insured can save you a lot of trouble. House insurance usually covers your house and its contents. However, policies vary, and some may cover the structure alone. In case a risk materializes, you should put in a house insurance claim for compensation from your insurer. Settlement can take days, months, or even a year, depending on the damage.  

Making a house insurance claim can be very complicated. Most insurance companies expect you to fill a claim form, giving a detailed description of the incident. You may also have to attach proof of purchase to have damaged items replaced or repaired (depending on your policy). Here’s what happens when you put in a claim on your house insurance. 

1. Determination of the House Insurance Claim

Once you put in a claim on your house insurance, your insurer is expected to respond within two weeks. The insurer may contact you for more information within this period. In extreme situations, the company can hire a loss adjuster to investigate the incident. The adjuster will examine the property and ask you questions about its state, before and after damage. The adjuster’s report will then guide the insurer’s decision to accept or deny the claim. 

If your claim is denied, your insurance company should send you a detailed report clearly explaining the reasons for the denial.

2.  Compensation for Property Damage

Based on the information provided, your insurer makes compensation arrangements. This decision is based on the loss adjuster’s report and your past adherence to the insurer’s policies. The insurer determines the amount of compensation based on the degree of damage and the pre-established policy amount. 

The insurer can decide to pay through a bank deposit or by cheque, depending on the claim. However, if you acquired your house through a mortgage, your insurer will wire a payment check directly to the mortgage company. Therefore, you should inform the company of the insurance claim early in the process.   

3. Urgent Financial Need and Preventive Repairs

In the event of peril, you may have financial hardship due to the damage to your property. Your insurer should make advanced payments to help you overcome such difficulties. Additionally, any costs you have from making emergency repairs to prevent further damage should be reimbursed by your insurer. 

Getting compensated for damage to your home can be quite a headache. Working with a local independent insurance agency can help you avoid this headache. An independent insurance agent represents you and does not work for any insurance company.

Vargas & Vargas Insurance is a premier local independent insurance agency that solely serves your interests and not those of your insurers.  At Vargas & Vargas, you will get custom and affordable insurance coverage for your specific needs and have all of your insurance questions answered. Contact us today to get started.

What Is Personal Property Insurance?

Personal property insurance is part of a home insurance policy. It provides coverage for the items in your home that are damaged or lost due to events, called named perils, such as fire, lightning, smoke, theft, and vandalism. In this article, we’ll discuss what types of coverage you can have and what you need to know as you shop for a policy.

couple playing on an insured piano in their home

Personal Property Types of Coverages

There are two types of personal property coverage:

  1. Actual Cash Value (ACV)
  2. Replacement cost value

An actual cash value policy is where an agreed-upon amount is decided upon when drafting your policy, which is the replacement value of the item minus depreciation. This amount is what you will be paid if the property is damaged or stolen. The insurance company will reimburse the agreed upon actual cash value in qualifying circumstances. 

Replacement value is the second type of coverage. This coverage allows you to replace the item with another item of “replacement value.” In other words, it covers the cost of replacing the item with another similar item — a TV for another TV, for example. To get reimbursed by your insurance company with this method, you must generally buy a replacement item and submit your receipts to the insurance company for payment.

Personal Property When You Have a Home, Condo or Renter Insurance Policy

Personal property is covered differently depending upon whether you have traditional home insurance or condo or renter’s insurance. Home insurance will usually cover your personal property for an aggregate amount of up to 50% of the dwelling amount, or the amount your home is insured for. So if your home is insured for $240,000, your personal property will be insured for $120,000. If you’d like to have more insurance for your personal property, you may have the option to choose more than 50%, but with a higher premium. 

Renter’s or condo insurance provides coverage amounts a bit differently. You will be able to pick the amount of insurance you want based on your estimate of coverage needed. This amount will depend upon what you own and how much it is worth. The coverage amounts vary by the insurance provider and by the specific type of policy offered.

More Valuable or Expensive Personal Property

If you own items that are more valuable, such as antiques or collectibles, you might invest in additional insurance for this coverage. You may hear terms such as floater, endorsement, or scheduled personal property. These actually refer to additional coverage that you may purchase to cover valuable items that might not be covered specifically under your home owner’s insurance coverage limits.  

Contact us and let us help you with your personal property insurance needs. Vargas & Vargas Insurance provides friendly assistance with all of your coverage needs.

Understanding Homeowners Insurance: What Is Loss of Use Coverage?

happy couple planning home repairs

As Massachusetts insurance agents, the best part of our day is helping first-time homebuyers get a home insurance policy. It’s an exciting and stressful time for young families, and Vargas & Vargas Insurance is here to help.

If this is your first time shopping for home insurance (or if you’ve been a homeowner for years but haven’t read your policy), then it might seem a little overwhelming. We’re here to explain some important points about your policy, and why it’s crucial to have a strong insurance policy in place. In this article, we’ll discuss Coverage D, Loss of Use.

What Is Loss of Use Coverage/Living Expense Coverage/Coverage D?

A strong home insurance policy will protect your investment from a covered loss, like fire. 

Imagine your home was to burn down to the ground. If it’s a smoking pile of debris now, then you’ll need to rebuild your home from the ground up. Coverage D is there to pay for your living expenses elsewhere while you rebuild. It will cover things like:

  • Meals at restaurants
  • Hotel stays
  • Renting an apartment

All you need to do is let your claims adjuster know that you’re staying elsewhere and keep copies of all your receipts. 

Loss of use coverage will also protect you if you suffer a partial loss. Examples would include:

  • The city’s sewer system overflows while you’re gone on a business trip overnight. You come home to a basement full of raw sewage. So you can’t stay in the home — it’s a health risk. Coverage D will pay for your hotel stay and meals. 
  • Your neighbor’s house burns down completely, and one wall of your home is burnt and damaged. If you can’t stay in the home while a wall is replaced, then your coverage will pay for your living expenses somewhere else.

How Much Loss of Use Coverage Do I Have?

Loss of use coverage is based on a percentage of replacement cost (Coverage A). Most basic policies start at 10%. For example, a home valued at $200,000 replacement cost may have $20,000 coverage for loss of use. But every policy is unique, so talk with a licensed insurance agent to understand yours.

As a homeowner, you must understand which coverage you have and what each element does. Read your declarations page carefully, and give us a call at 617-409-0329 if you need a homeowners insurance quote today.

Home Insurance FAQ: Purchase Price vs. Replacement Cost

couple looking up home insurance information in their kitchen

Here at Vargas & Vargas Insurance, our goal as licensed insurance agents is to provide competitive homeowners insurance policies to Massachusetts families. Part of our job is educating first-time homebuyers and investors about how homeowners insurance works. 

This article is going to address a home’s purchase price versus replacement cost as it pertains to insurance. We’re also going to answer two specific questions we get all the time:

  1. Why am I insuring a home for replacement cost instead of the purchase price?
  2. What is “dwelling replacement cost,” and how does it work?

Why Am I Insuring a Home for the Replacement Cost, Not the Purchase Price?

Homeowners insurance is designed to help you replace a home and its contents from the ground up in the event of a loss.

Imagine your home burns down to the ground. Homeowners insurance is there to rebuild that home completely and replace your belongings. Replacement cost is our best estimate of what it will take to rebuild that home, in your neighborhood, per square foot.

However, it’s important to know that the purchase price of a home is not equal to replacement cost. Purchase price includes the land the dwelling is sitting on, for example, which doesn’t need to be replaced after a fire.

What Is Dwelling Replacement Cost, and How Does It Work?

We figure every dwelling’s replacement cost individually with a formula: square footage by replacement price (sqft x rp). Replacement price depends on factors like:

  • Your location
  • Current labor costs
  • The expense of materials like wood, brick, carpet, and roofing

As a result, dwelling replacement cost changes from time to time. We also consider:

  • Special enhancements like moldings, architectural finishes, columns and more
  • Fireplaces and stonework
  • Systems like central heat and air, central vacuuming, and sprinkler systems
  • Anything else special or unique about your home

In many cases (but not all), a home’s replacement cost is higher than the purchase price. This is good news for you as a buyer. If there is a total loss, you will come out financially ahead if you have a mortgage.

If you’re buying a home for the first time, congratulations! It’s a tremendous accomplishment. The staff at Vargas & Vargas Insurance is ready to help you get the homeowner’s insurance you need. Reach out to us today at 617-409-0329 for a homeowner’s insurance quote, and check out our blog for more great Massachusetts insurance topics.

What’s the Difference Between Condo Insurance and Home Insurance?

Insurance is vital, regardless of whether you own a home or a condo. It can help offset damages to your property, so you don’t have to worry about paying for those damages out of your pocket.

happy young couple buying a condo and talking to the property manager
Protect your new condo by learning how condo insurance is different from home insurance.

However, the type of insurance you choose will dictate how any damages to your property will be handled. While both home and condo insurance might cover your property, there are some subtle differences between the two. Here is how home and condo insurance differ:

Condo Insurance

Condo insurance covers any non-communal property that you use as a property owner. Ideally, it should cover certain ‘walls-in’ losses, replacements, and repairs, as well as your personal property. For any damages that happen outside your unit walls, the condo association’s master insurance policy should offset them. But you should always verify the details before you purchase a condo or change your insurance policy.

Condo insurance also comes with loss assessment coverage. In situations where the condo association levies condo damage fees on all unit owners, this will cover the ad hoc fees. Condo associations will typically do this if the cost of offsetting damages to the communal assets is more than what their master insurance policy covers.

Home Insurance

Traditional home insurance tends to be for single-family dwellings, and it can be as simple or complex as mortgage lenders allow it to be. It should cover your entire home structure, including construction materials and other permanent elements. Most insurance policies also cover any personal property that is valued at 50% or greater of the insured home itself. The insurance can also cover other structures within the vicinity, such as detached garages and sheds.

Filing Claims

Filing claims is typically easy for home insurance, as it can be made directly with the insurers. On the flip side, there are some complexities in filing claims through condo insurance, and the specifics will depend on the situation.

For instance, the condo association insurance should take care of water damages as long as they are as a result of burst pipes outside your condo walls. Your condo insurance will, however, take care of damages arising from burst kitchen sink pipes, as they are within the unit’s walls.

Insurance policies tend to have rules that property owners have to adhere to for an easy claiming process. Regardless of the insurance policy you have, it pays to follow these rules. Be sure to read through the fine print of your insurance policy documents to choose the right coverage. If you have any questions about condo insurance or you’re looking for a new policy, we’re here to help. Contact us online or at 617-298-0655 to talk to our team.

Keep Your Homeowner Policy Safe

Dangers are abound in even the simplest of repair situations, so steer clear of the contractor’s work zone. 

When you hire the right contractor to do repairs or renovations or maintenance at your home, you want to maintain a respectful distance from their work area.

The contractor has been trained and, through long experience, knows how to maintain a safe work zone for themselves.  When you intrude across the boundaries of that zone, you introduce an unexpected variable in the contractors work process.

And that is when it can get messy. Be prudent when you’re hiring a contractor. How?

Request evidence of insurance. 

Speaking of safety and experience, don’t forget to collect the necessary certificates of insurance from your contractors. If anything happens on your property, you don’t want to give anyone any reason to abnegate responsibility to seek remedy for their injuries under YOUR homeowners insurance policy. 

Yes, you read that right.

If your state doesn’t require Workers Compensation coverage, the Homeowners policy could apply to cover lawsuits filed by an injured worker or to pay for medical expenses incurred if they don’t file a lawsuit. 

While the work area may appear to you to be perfectly safe, it is after all, your house and you know your house better than anyone, you still cannot anticipate hazards known all too well to the contractor through their possible training and experience. 

Respect the contractors’ work zone and, if you have a coffee or other tasty treats to share, let the contractor know where you’ve placed it easily accessible in your kitchen.  Then the contractor can enter the work zone and you can be comfortable the premises are safe.

Please schedule a call with us to discuss the very complicated process of your homeowners policy being exposed compared to the contractors’ workers compensation policy.

You want to ensure that your homeowners policy is updated and accurate to protect you in the event hired workers do not provide proof of insurance.

Flashback Blog: Boston is No Stranger to Fire

The city of Boston has been destroyed by large blazes multiple times. The first devastation of fire occurred in 1631; just one year after Boston was officially established.

Here are a few tips to keep you from having to file a fire damage claim on your home insurance.

The first thing you should cement in your mind is to never leave a flame burning where it cannot be seen. Enjoying an aromatherapy session with some scented candles? Even if you need to leave the room for just a moment, blow them out. You never know if something will delay or distract you from returning immediately.

Keep pets, especially agile cats, away from lit candles, scented oil burners, and other open flames. They could bump or knock over the materials, causing a fire that could have been avoided. On the same train of thought, teach your children proper fire safety. Flames and the resulting smoke can be very dangerous.

In case a fire does occur, despite your best efforts to handle flames safely, make sure you have up to date insurance in Boston, MA. Boston boasts median home values above $100,000. 

Without coverage, how would you repair or rebuild your home after a fire ravaged your property? Avoid this potential financial burden by requesting a free insurance estimate today and putting your coverage in place. 

With Vargas & Vargas Insurance, you can get the coverage you need for your home. Click here to contact us today for more information!

DIY Has Its Limits

Our society has become enthralled with the concept of “do it yourself” or “DIY.”  So much so that entire industries have grown up around the idea that anyone, anywhere, with access to tools, materials and knowledge, can do just about anything they set their mind to.

This DIY mentality extends to our home.  Repairs, renovations and other home improvement projects abound in this mindset. 

The traditional craft of repair and renovation has been upended with this modern consumer concept.  Imagine you’re an electrician and you’ve entered a Big Box Home Hardware store.  As you walk down the aisle filled from floor to ceiling with electrical supplies of all types, you see a person standing in front of a display of electrical outlets.  This person clearly is not an electrician, and clearly is struggling with the selection of the appropriate outlet which you’re pretty sure they’re going to attempt to install themselves. 

Imagine the horror in your mind as that electrician thinking of the potential visit to the Emergency Room for that person when the wrong wire gets crossed.

And, yet, these traditional industries still thrive.  The reason?  No amount of online videos, tutorials or DIY books can replace the wisdom that comes from specializing in a task and learning the “tricks of the trade from experienced professionals.

If you have trees on your property, it’s your responsibility to think about the maintenance of those trees to protect your home in the event of a severe storm that could topple in close proximity to your house. 

If you’re thinking about trimming, or even taking down trees for that maintenance and protection. Should you do it yourself? 

The best way to answer the question is to watch a professional tree-trimming crew in action.  You’re likely to very quickly realize that such work…taking down or trimming a tree…is best left in the hands of the experienced professionals. 

Those “tricks of the trade” that come from the traditions and wisdom handed down in the craft become very quickly obvious as you watch the crew scale up a tree and easily slice away branches and limbs.  And then when they have to take down an entire tree, the process seems at once intricate and yet elegantly simple.

Yes, sometimes it’s really best to not do it yourself and to leave it to the professional.

One of the most FAQs we receive is when a tree falls on your property but doesn’t hit your house or any physical structure, there is no insurance coverage to pay for the removal of the tree.

Call us for any recommendations you may need to help with your home improvement projects.

Please read our other blogs related to home maintenance projects.

You can reach us by calling 617-298-0655 or text us at 617-409-0329 for a free, no-obligation annual review. Click here to Visit our Contact Us page.

Archive Revival: Why Is Renter’s Insurance Important?

Most people fall into one of two categories: They either own their home or they rent it.

If you rent your home, you don’t need a homeowner’s insurance policy.

You need what’s called renters insurance. This type of insurance policy will ensure that you have the right coverage when you need it the most.

We’ve outlined below how homeowner’s insurance and renter’s insurance are similar and and how they differ. Here is our quick summary:

Property Protection

When you rent your home, you don’t own the physical property. As a result, you are not responsible for insuring the property. Instead, the insurance policy is the responsibility of the property owner.

This means that if there is damage to any part of the exterior and interior of the property including walls, ceilings, floors, doors, or windows, you are not responsible for filing or paying for an insurance claim.

Coverage for Belongings

Similar to a homeowner’s insurance policy, a renter’s insurance policy provides coverage for your personal belongings. You need to take inventory of your belongings to give an estimate on what it would cost to replace your belongings.

When you make your home inventory, make sure that you include everything that you own, including items like electronics, furniture, clothing, and jewelry. Also include any of your own personal appliances that are not owned by your landlord or apartment complex. That way, all of your stuff will be protected against perils like fire, smoke, theft, water damage, and more.

We recommend keeping the receipts of high valued items. We also recommend storing photos of each of your rooms so you have documentation of your belongings. This will help to ensure that you are covered in case of a total loss, but aren’t overpaying for coverage that you don’t need.

Reimbursed Living Expenses

If something happens to the place where you live, your renter’s insurance typically covers your living expenses for a comparable place until the damage is repaired and your home is once more inhabitable.

If your rental home or apartment is destroyed or deemed uninhabitable, call your insurance agent right away to find out what you should do so that reimbursement is allowed.

Liability Insurance

Another type of coverage that is typically included in both renters and home insurance is liability insurance. With this coverage, you are financially protected from the costs that rise if someone is injured at your home.

Depending on your insurance provider and the policy that you choose, this can include both medical costs and legal costs, which can get very expensive, depending on the injury sustained.

As always, all of the information above depends on your insurance provider and your specific policy.

We search several insurance providers to find the one that will give you the best coverage at a price that works for you and your budget.

Cost?

On average, the cost of a renters insurance policy is $120.00 per year for $10,000 of contents, including loss of use and liability coverage, Click here for more details) in Massachusetts.

If you package your automobile insurance policy with your renter’s insurance, most times, the savings by doing so more than covers the cost of the renter’s policy.

If you have any questions about the coverage included in your current policy, or if you need a new top of the line renters insurance policy quote, please call 617-298-0655 to speak with a representative here at Vargas and Vargas Insurance Agency.