The fall of 2003 brought with it a plague of wildfires that decimated San Diego County. In the aftermath, homeowners worked with their respective insurers to rebuild their homes. The claims process was relatively quick for some. For others, repairs dragged on and temporary housing was scarce. But what was the cause for the sudden strain in home building? The few months of fires caused demand for materials and labor to significantly outpace supply.
Demand Surge is a phrase that includes an array of costs that under normal circumstances wouldn’t be a concern. However, in the wake of a natural disaster, the cost of everything increases. Contractors work for the highest bidder, suppliers provide to the highest bidder, permits are delayed because of a flood of applications, and much more, all leading to claim payouts far in excess of what they would have been under normal conditions.
There is no precise formula for calculating what the extend of demand surge will be until the claim arises. It is prudent to carry a minimum of 25% extended replacement cost to protect against demand surge. Old Harbor is proud to represent carriers that offer up to 100% extended replacement cost, and would welcome the opportunity to discuss the topic further.
DISCLAIMER: This article is provided for general informational purposes only and should not be relied upon for legal advice. Old Harbor Insurance Services, LLC recommends you consult your risk manager, attorney, business advisor, or insurance representative for all questions or concerns.