How Inflation is Affecting your Homeowners Insurance

Don’t shoot the messenger…but your home is likely underinsured.

One of, if not the, most important coverage on a homeowners policy is “Coverage A-Dwelling Limit” otherwise known as “Reconstruction Cost”. Hopefully you never need to use this coverage, but if you ever do, you’re going to want to have enough of it.

So, what exactly is Coverage A and what does it cover? Coverage A, or Dwelling Limit, is the part of your policy that will help rebuild or repair the physical structure of your home after it is damaged by a covered hazard/peril. For example, your house catches on fire and burns down. Now you need to rebuild and repair the home. “Well, that’s why we have insurance” you say. Only to find out that your home is insured to a value of $500k BUT with inflation affecting the cost of materials and there being a labor shortage it’s now going to cost you $700k to rebuild your home back to what it was before. Forcing you to come out of pocket. I’d imagine that doesn’t sound very good to you, does it?

Your life is unique, and so is your home. It’s important to understand what your insurance coverage does and how it applies to you and your situation. As insurance professionals, it’s our job to not only make sure you get the proper coverage but also for you to understand what it does and why you’re paying for it.

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