With home values rising at record paces in the years following the pandemic, along with the noticeable increases in construction and replacement costs, 2022 might be a good time to consider increasing your home insurance coverage.
Pandemic-induced labor shortages, inflation, and home inventory and demand caused a 15-year high in home construction backlog. A demand for both new homes and renovation projects has meant increased costs.
In today’s world, if a natural disaster like a hurricane or wildfire hits a region, the resulting increased demand for repairs results in a spike in rebuilding costs that is higher than ever. Coupled with supply chain distributions, this poses a problem for homeowners and the cost it would take to rebuild after a partial or catastrophic loss. Many home insurance policies cover the purchase price or appraised value of a home at the time of purchase.
What could this mean for you?
This may mean that the amount of homeowners insurance policy you have for your house is now inadequate. If a disaster strikes at home, you’ll be responsible for any repair and rebuild costs that are over your insurance limit.
What can home owners do?
Now is an ideal time to do a home inventory to assess whether your personal property coverage is still an adequate figure. A homeowners policy is like a real estate contract that states the values and consideration. The homeowner pays an annual premium (consideration) for a guarantee amount from the insurer; that is what the insurer is obligated to. If you bought your policy, for example, assuming a $300,000 value for your house in 2014 and it’s now worth $650,000, your policy will likely not cover the cost it will take to rebuild your home in the event of a fire or other unforeseen disaster. You’ll really want to assess how your home value has increased since you bought your policy, and a knowledgeable real estate agent is a great resource to obtain this information. From there, we recommend reaching out to your insurance provider to further discuss how your property, family, and investments can be sufficiently covered with today’s economic realities.
Another recommendation is to work with a local insurance agent who knows your area and the cost realities there. If you’re working with a larger insurance company and generically call the 1-800 number, all call centers use generic computer models that don’t always match up with local markets, especially like we see in Western North Carolina. Advice from local insurance company agents always tends to be the most reliable when considering increasing your home insurance coverage.
Thanks to Wesley Greene of State Farm in Asheville NC for his contributions to this article. Wesley can be reached via email or by calling 828-277-5877. As always, please reach out to us with any questions, comments, or if you are seeing expert guidance on the Western NC real estate market. We are glad to be of service! email@example.com or 828-782-5582.