It’s no secret that things are getting more and more expensive. From food prices to energy prices, it seems like all corners of the economy are being affected. We’re seeing supply chain issues, raw material shortages and labor supply issues all putting inflationary pressures on most consumables. And one area we’re seeing significant increases is in the cost to build a home.
This is super important because you may be underinsured on your home. You see, when you purchased your home, your insurance company calculated the cost to rebuild your home from scratch and your dwelling coverage most likely met or exceeded this calculation.
However, over the past 24 months, we’ve see a rapid increase with building materials and labor which has increased the cost to rebuild by 20-30% percent or more depending on the location. The net result is that we’re seeing renewals with dwelling coverages $50K-$100K less than the cost to rebuild.
Unfortunately, we’re seeing customer disregard this alarm bell but the reality could be catastrophic to their financial well-being if they experience a total loss situation. In fact, some homeowners run the risk of the insurance company exercising the co-insurance provision within the policy which basically says that if the insured only insures a certain percentage of the home, then the insurance company will only cover that same percentage of the claim.
Therefore, if you’re underinsured you could end up paying thousands of dollars out of pocket even on a relatively small claim due to this co-insurance provision. My recommendation is to contact your insurance carrier or agent immediately and inquire whether you have sufficient dwelling coverage.
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