How much does it really cost to rebuild your home?

TALLAHASSEE, Fla. – Jan. 9, 2012 – Some homeowners have had to beef up the amount of property insurance they buy to cover what they say are inflated cost estimates to rebuild their homes.

It’s a double whammy for homeowners because for many, rebuilding costs didn’t go down when the economic downturn lowered construction costs over the past few years.

Take John Hutelin, a pilot in Plantation whose premium increased 24 percent, to $3,873, after Citizens Property Insurance recalculated the cost to rebuild his home.

“That’s how they’re increasing premiums,” Hutelin said. Rebuilding costs are one of two ways state-backed Citizens can get around a law capping its annual premium increases at 10 percent.

Citizens spokeswoman Christine Ashburn denied that, and said the insurer wants customers to have enough coverage, which many didn’t have after the hurricanes of 2004 and 2005.

Citizens, the largest home insurer in Florida, started changing its rebuilding costs in late 2010, moving to 360Value, an estimating software by Insurance Services Office. Rebuilding costs determine how much coverage a homeowner has to buy for the main structure of the home, the largest part of a typical policy.

In a recent statement, Citizens acknowledged “publically expressed concerns about some of the replacement cost valuations” and said it would compare the software’s estimates for a sample of homes in South Florida and the Tampa area to those produced by a competitor and by general contractors.

Mike Fulton, an assistant vice president of the ISO subsidiary that produces 360Value, said the scrutiny is welcome: “We are confident this review will ... show that 360Value is the most closely aligned with the actual insurance repair market.”

Many insurers use ISO products, including 360Value. Paul Mack, president of Mack, Mack & Waltz insurance agency in Deerfield Beach, said policyholders with private insurers complain about rebuilding costs, too – even when 360Value’s competitors do the estimates.

But Citizens’ customers have been vocal about the new rebuilding cost estimates.

“I have received a torrent of phone calls, e-mails and letters from homeowners and insurance agents” about Citizens’ rebuilding cost estimates, Sen. Mike Fasano, R-New Port Richey, wrote in a letter last month. He urged the Senate insurance committee to question Citizens.

Americans for Insurance Reform, a national coalition of consumer advocacy and non-profit groups recently produced a report that criticized regulators for allowing insurers to base rates on data from ISO, alleging it’s “industry-controlled” because it was formed by the industry before spinning off into a private company.

ISO denies that insurers control it, describing itself as “an independent advisory organization.”

Fulton said 360Value has other customers, such as contractors, so it can’t be subject to the whims of particular group, such as insurers. It’s also used by insurance adjusters, who have an incentive to charge less.

The problem, Fulton said, is that home values are plummeting but rebuilding costs are not, and many people don’t understand the difference. “This is at the heart of the issue and the concerns voiced in Florida,” he said.

360Value estimates a home’s rebuilding costs in part by using an index that captures changes in reconstruction costs based largely on actual repair estimates.

Homeowners who think their rebuilding costs are high can do what Hutelin in Plantation is doing: appeal to the state and be prepared to shop for insurance.

Hutelin paid $200 for an appraisal in June because he was shopping for insurance and found premiums varied depending on the insurer’s estimate of rebuilding costs. Citizens sold him a policy in August based on the appraisal.

Four months later, the insurer estimated his home would cost $354,400 to rebuild – or 23 percent more – and backdated an increase in his premium to August.

“Imagine getting a bill from the grocery store four months after the fact because produce cost more than they expected,” he wrote in an email.

Citizens’ Ashburn said the estimate increased because photos showed Hutelin’s house is considered “standard,” not “economy,” quality, with wood flooring, granite countertops and a 249-square-foot porch. “The appraiser based his determination on the market value, which we were unable to accept,” she said. Citizens will consider appraisals done following the insurer’s guidelines, she said.

Scott Taylor, president of Taylor Made Appraisals, did the report and said it was done correctly. The report used a replacement cost estimator by a competitor of 360Value and lists the quality of the house as “good.”

He said he did between 50 and 75 appraisals for Citizens policyholders last year and only a couple were not accepted, although some people had to fight the insurer to get them approved.

Hutelin has asked his agent and the state for help, but if that doesn’t work, he says he’ll be right back where he was last summer: shopping for property insurance.

Insurance consumers can file complaints to the state by clicking “Need Our Help?” at http://www.myfloridacfo.com/consumers/. People without Internet access can call 877-693-5236 or 850-413-3089.

Copyright © 2012 the Sun Sentinel (Fort Lauderdale, Fla.), Julie Patel, Sun Sentinel, Fort Lauderdale, Fla. Distributed by MCT Information Services.