Marshall fire victims face high reconstruction costs

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As they get quotes from builders, some residents find they are underinsured for hundreds of thousands of dollars.

LOUISVILLE, Colo. – People who lost homes in the Marshall Fire are beginning to realize how much it would cost to rebuild.

Some residents are hundreds of thousands of dollars underinsured due to high construction costs and their insurance policies.

“We had a plan, and that’s not what we planned,” said Jill Ruggles.

Jill and her husband, Rick Ruggles, have lived in the Cornerstone neighborhood of Louisville for nearly 30 years. The Marshall Fire took it all, and nothing has been easy ever since.

“With all the variables that exist, it’s kind of terrifying,” said Rick Ruggles. “A lot of the time you don’t know if you’re going to go back to your own house.”

The price to rebuild is more than their insurance policy will cover.

Right now they think the coverage gap will be at least $200,000. They applied to take out a $244,000 loan from the Small Business Administration to help cover costs that insurance won’t cover.

Going into debt is not what the couple prepared for when they retired.

“A builder we trust is giving us more or less $300,000 to fix the house. If it’s on the plus side, we can’t afford to be here,” Rick Ruggles said.

One of their neighbors has also applied for an SBA loan and he intends to take legal action against his insurance company.

Michael Lappin bought a house in the Cornerstone neighborhood in 2006. He said he interviewed more than a dozen builders, and the one he decided to go with gave him an estimate of $325 a square foot. According to Lappin, his insurance policy will cover less than $200 per square foot.

“What that represents is a discrepancy of about $600,000,” Lappin said.

He said he has already spoken to several people who are trying to buy some of the lots in Superior and Louisville.

The Home Builders Association of Metro Denver hears from builders that rebuilding can cost between $300 and $350 per square foot for homes between 2,000 and 2,400 square feet. It’s just the cost of materials and labor, if this work were to start today.

Reconstruction cannot begin until the debris is cleared, the foundations are checked by engineers, and the HOAs make decisions on monitoring issues. Once that happens, builders will look at changes in inflation and fee costs.

Ted Leighty, CEO of the Home Builders Association of Metro Denver, said a second review could increase the final cost per square foot when reconstruction actually begins.

“The Home Builders Association of Metro Denver has launched its Marshall Fire Rebuilding Task Force to provide the public with reliable rebuilding information, identify ways the HBA and its members can help expedite rebuilding, and offer strategies to manage logistics, costs and other factors that will impact reconstruction,” Leighty said. “Reconstruction cost estimates are precisely one of the topics discussed by members of the task force.

What to look for in your insurance policy

Morgan Lloyd is an insurance agent who has reviewed a number of policies from people who have lost homes in Boulder County. He said the main problem he saw was that people were underinsured.

“I think the big problem is that people didn’t have effective extensions,” he said. “People with inefficient extensions may not have enough money to rebuild given the current high construction costs.”

He said an extension to the home insurance policy provides additional cover in the event of a total loss. Lloyd recommends adding a 50% to 100% extension to a policy.

“Make sure you have the highest level of extensions possible,” he said.

He also recommends getting a rebuild estimate every year.

“It provides an accurate accounting of what’s in the house and what it will take to rebuild the house,” Lloyd said.

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