Inflation has risen again, causing a stir in this country and affecting nearly every industry, with a potential impact on property insurance.
Inflation is again rising, and its impact has reached nearly every industry. You may wonder, is inflation affecting property insurance — and if so, what can homeowners do about it? Property insurance inflation is a cause for concern. However, rising construction costs have translated to rising home replacement costs.
Inflation Impact
There are several actions to take to understand your options, ensuring that you aren’t underinsured. Consider how inflation may impact your property insurance. Then, look at how you can cover the exposures that may result.
Assess the Impact of Inflation
A U.S. Congress Joint Economic Committee report revealed that inflation is the highest in decades. Families in states such as Arizona, Colorado, Montana, and Idaho are facing the worst of the problem. Although the entire nation is being affected by inflation, some states are certainly more heavily impacted. Thus, it’s essential to assess how severely
it may impact your property insurance. For example, if you live in a state in the Mountain West, you may be significantly underinsured due to your state’s high inflation rate.
Understand Replacement Cost
Inflation affects property insurance rates and coverage for several reasons. One of these is the correlation between inflation and higher home replacement costs. Inflation causes the cost of labor and materials to rise. Thus, it means that the expense of replacing a home will increase, too. If you need to file a property insurance claim, but your policy only extends coverage up to $250,000. However, inflation may make it so that this sum is insufficient. Thus, necessitating a higher coverage limit or additional endorsement.
Consider Your Current Coverage
To determine whether you’re underinsured, you should examine your current property insurance policy and its coverage limits. In some cases — for example, if you live in a state with a relatively low inflation rate — you may still be sufficiently covered. Conversely, if inflation has impacted your state, it’s time to assess whether you may need additional coverage. If you need to replace your home and your current policy can’t cover the costs, you may have to deal with numerous construction costs.
Research Additional Options
If inflation has left you underinsured, it can be challenging to bridge the gap between your current coverage and the level of coverage you need. There are several options to consider, though, including adding an endorsement. There are generally two options: guaranteed replacement cost coverage or extended replacement cost coverage. Though these cost a higher monthly premium, they raise your coverage level if you file a replacement claim on your property insurance policy.
About Haughn & Associates
Founded by Michael Haughn in 1986, Haughn & Associates is a full-service, family-owned, independent insurance agency based out of Dublin, Ohio. H&A strives to provide the best possible price and unique insurance solutions across a myriad of industries, including construction, IT, Habitation & Commercial Property, Agriculture, and Engineering. Devoted to providing the best of business insurance, life and disability insurance, personal insurance, employee benefits, and bonds, H&A is proof that success lies in long-standing client relations and satisfaction. To learn more about how H&A can be of service to you, contact us at (877) 802-2278.
