Inflation is sending the price of nearly everything — groceries, gas and many other goods and services — into the stratosphere.
But one of inflation’s biggest threats to your financial well-being may reside in its impact on your homeowners insurance coverage.
Rebuilding costs have soared along with everything else. That means you likely need more insurance coverage than you did a year or two ago.
Yet, just 30% of insured homeowners have increased their coverage to make sure it keeps pace with the rising cost of rebuilding, according to a new Harris Poll survey of more than 1,000 policyholders conducted for the American Property Casualty Insurance Association.
To make matters worse, just 40% of homeowners who undertook renovations or remodels during the COVID-19 pandemic have updated their policies to make sure those upgrades are included in their insurance coverage.
The APCIA warns the grim numbers mean millions of policyholders could be underinsured and face losses if catastrophe strikes their home.
In a press release, Karen Collins, assistant vice president of personal lines at APCIA, says:
“Our survey found that about two thirds of homeowners may be without key additional coverages, such as annual inflation adjustment, extended replacement cost, and building code/ordinance coverage, that can better protect them in these challenging market conditions.”
The notion of rising rebuilding costs is not something that might be coming in the future. Rather, it’s already here.
During 2020 and 2021, U.S. insurers paid out $176 billion in natural catastrophe claims. That was a record for a two-year period.
APCIA says those record costs can be traced to several factors — inflation, supply chain issues and growing demand for both labor and construction materials — that continue to cause prices to move higher today.
For example, APCIA notes that the cost of construction materials shot up 44% in the two-year period ending in December 2021.
Other alarming results from the survey include:
Collins urges all homeowners to make sure they are prepared for these new realities by sitting down with their insurance agent or company representative and discussing any tweaks that may be necessary so their coverage remains robust.
Looking for a new policy? Check out “How to Get the Best Deal on Homeowners Insurance.”
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