Inflationary Environments and Your Home
Our current economic environment has changed drastically over the last year. Inflation has affected just about everything as it relates to goods and services. In addition, the real estate market has been on fire which has caused the home prices to significantly increase. The prices of raw materials, labor, and just about everything else it would take to build a home have skyrocketed. So, how do these factors affect you and your home? Let’s look at what you need to consider when it comes to taking care of the biggest purchase that most of us will ever make.
Homeowners need to consider the limits and wording that is contained in your homeowner’s policy. These include the specific limit amounts for the replacement of the contents inside the home as well as the structure itself. Homeowners need to be sure that the limits in place are enough to replace your home and everything inside. You don’t want a shortage in coverage which could be financially devastating.
So, what should you do? First, you should schedule a review with your insurance agent and be sure the information you have is accurate and receive guidance from them. Insurance agents understand the current environment far better than the average person as they are submersed in it every day. Your insurance agent also has a variety of tools at their disposal to ensure you have the proper value. Ultimately the responsibility to have adequate limits in place falls on your hands, your agent has those tools available to assist you as best they can. While a builder may be able to tell you what it would cost to construct a new home, the cost to ‘rebuild’ a damaged home is higher than new construction for several reasons. New construction beginning with a blank slate is least expensive. Repair, including cost to remove damaged materials/debris, working around existing conditions slowing the process which increases labor costs and buying materials on the spot, essentially ‘top down’ construction is more costly.
A homeowner should also consider looking at their personal belongings and what it will cost to replace them. Items such as furniture, clothes, appliances, etc. have also risen in price considerably due to the inflation and the supply chain issues. Since these items are covered on your policy, making sure you could replace them at today’s costs versus what they may have cost 18 months ago is wise.
In inflationary economic environments, not reviewing the limits on your policy could cause a financial disaster if something were to happen. If you’re unsure if your policy covers you adequately or you have general questions about the current policy you have in place, call an agent today at American Advantage – IFS. 262-696-5800 for a free policy review.