Rising Cost of Raw Materials, Contractors and Quality Repair Work.
The cost of raw materials—including wood, concrete, nails and insulation—are also rising. Part of this increase in demand is the number of natural disasters the United States has seen this summer, from Hurricanes Harvey and Irma to the wildfires in California.
Perhaps more than anything, the cost of labor for reliable contractors is increasing day by day, as the demand for licensed contractors and repairmen is at an incredibly high level.
But with the increase in the demand-to-supply ratio, be hyper aware of scams. Always ask for references and to see licenses. Despite the higher rates, you should never choose a contractor or repairman who has a lower rate, but lacks the reputation, recommendations, references and licenses that you trust. Before you hire a contractor, ask for references from other customers. Also seek bids from multiple contractors to compare rates and what is included in their services. Each bid should be incredibly detailed, including specific plans the contractor has for the repair procedure, the materials he or she will use, and a line-by-line description of the materials, labor costs and prices associated with each.
But don’t expect the demand to decrease anytime soon. One longtime contractor told CNBC news that there are more burned homes than there are contractors in Northern California. Even before the fires hit, there was a shortage in the supply of skilled labor, contractors and tradesmen. Now, it’s even more difficult to secure a quality contractor.
Replacement Cost versus Actual Cash Value.
Your insurance company may differentiate between the replacement costs of an item, versus the actual cash value.
The replacement cost is the dollar amount that is required to replace a damaged item with a new one of similar quality and kind. This replacement cost does not account for the deduction in depreciation—or the decrease in value over time due to wear and tear, age and market value. In contrast to the replacement cost, an actual cash value payment under your policy will pay you the amount you need to replace the item at the current market value.
For example, imagine that you had a dishwasher in your home that was 6 years old, and it was destroyed in the fire. Under a replacement cost policy, your insurance company would need to pay to replace your old dishwasher with a new one. But under an actual cash value insurance policy, your insurer would only be required to pay for a percentage of the cost of a new dishwasher; that’s because the value of a dishwasher with 6 years of wear and tear is worth less than its original cost, at the current market value.
Regardless of the way your policy calculates your replacement costs, be sure to keep detailed records and receipts of all of your repair work, contracts with repairmen and contractors, materials purchased for repairs, and goods you buy to replace your damaged property.
Consult an attorney.
If you’re not sure how to deal with your insurance company, contractor receipts, and replacement cost calculations—we’re here to help.
Our team of insurance attorneys can help you understand your policy terms, the coverage your policy will provide, its limitations, and—importantly, your rights. We help victims of fire damage navigate the process of repairing and replacing their damaged property so that they can rebuild their lives—and be compensated for the costs associated with rebuilding. We work alongside you to ensure that you aren’t misled by overwhelming insurance company policies and paperwork and aren’t taken advantage of by insurance companies focused only on the bottom line. And, most importantly, we will advise you throughout the process to ensure that you receive the maximum compensation to which you’re entitled for your losses.