The Effect of Rising Construction Costs on Insurance
Building costs aren’t going down anytime soon. In fact, according to this article, total reconstruction costs have increased 8.1% nationwide and costs for materials went up 15.2% while lumber costs went up a whopping 85% and all are projected to keep increasing. Due to this, it’s important to review your home and commercial coverage limits.
If you are already a homeowner, you may not think these costs affect you, but in reality, these increased costs directly impact the amount of coverage you have on your home or commercial building. If your home or building is destroyed by a fire or another covered loss, it’s important to make sure you have the right amount of insurance coverage to take care of the cost to rebuild your home.
Here’s what you can do to make sure you have sufficient protection…
Understand Your Policy
Do You Have Replacement Cost or Actual Cash Value Coverage?
Replacement Cost Coverage is based on the cost of reconstructing the building with a brand new version. This means that if your home is destroyed, the limit of coverage needed is what it will cost to rebuild without deducting wear, tear, and age of your home.
Actual Cash Value Coverage limits are based on depreciated conditions of a building. This, of course, means that the amount you’d receive may not be equal to the cost of replacing your building or rebuilding your home at today’s prices.
Talk to Your Insurance Agent
Ask your insurer to determine whether you need to adjust your policy to have sufficient coverage in the event of a loss. Based on the increase in construction costs, there’s a high chance your replacement cost may not be enough, which could result in your home being underinsured. Your agent can help with replacement cost estimates for your home or commercial building to ensure appropriate coverage levels.
All of this can easily become confusing and it’s important to talk to your agent about reevaluating your coverage before disaster strikes. Our agents at American Advantage – IFS work hard to stay in the know of what’s going on so you don’t have to.