Think About Your Homeowners’ Coverage As Building Costs Rise

Homeowners should consider rising construction and maintenance costs when choosing their insurance, especially as risks associated with weather and climate increase.

Homeowners insurance repair and replacement costs may be impacted by increasing interest rates and ongoing disruptions in the supply chain for building materials. According to a recent American Property Casualty Insurance Association (APCIA) survey, however, about two-thirds of homeowners who are insured may not have certain essential supplemental insurance policies, such as automatic inflation guard, extended replacement cost, and building code/ordinance coverage, which could better protect their investment.

The cost to rebuild homes and businesses has significantly increased, according to Karen Collins, assistant vice president of personal lines at APCIA. “Inflation, recent supply chain issues, and increased demand for skilled labor and construction materials following unprecedented natural disasters in the last two years have contributed to this increase,” she said. “Homeowners must review and, if necessary, update their insurance before hurricane season to keep up with rising costs.”

Today, the majority of homeowner’s policies cover structural damage replacement costs, but it’s a good cost to check your policy—especially if you have an older home. Damaged property will be repaired or replaced using materials of comparable kind and quality under a replacement cost policy.

The Declarations Page’s Section I, Coverages, A. Dwelling section typically lists the policy limits. Up to this amount, your insurer company will pay the cost of rebuilding your home. Even if you haven’t upgraded your home since you bought it, you might be underinsured if the policy’s limits haven’t changed.

When policies are renewed, many insurance policies have a “inflation guard” clause that automatically changes the limit to reflect local construction costs. Purchase to see if you can add this clause as an endorsement if your policy doesn’t already contain it.

The consistent increase in natural disaster losses over the past few decades has increased the risk and potential costs. The Atlantic hurricane season this year is predicted to be “well above average,” and wildfires are starting earlier, causing more damage, occurring in more states, and needing more time to put out.

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