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As far as the real estate 'run up', i'm not sure you need to carry more insurance. *Just because my house is worth more this year than last doesnt mean it would cost more to rebuild it after a fire. *That increase is speculative in nature, not physical.
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That's a good point. The drivers for new building costs are probably related in some ways to housing purchase costs, but not correlated completely.
As a side note concerning demolition. A friend of mine just had his house demolished so he could build a new one. He found that the local fire department was willing to do this for much less than he could get anyone else to bid provided they could burn it down and use it to practice. Of course, that requires that your house is not already burned to the ground.
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