Homeowners Insurance and Inflation
How Much Coverage to Include
With inflation, we know everything is going up. One of the things we are seeing increase greatly is the value of homes. We have been getting many calls asking, “Is my home insured for the right amount?” or “Do I have enough coverage on my house?” To be honest, our software has not been able to keep up with the cost of inflation. We are currently recommending that all of our customers insure their homes for at least $200 per square foot. You may want to ask your current agent if your current policy meets this recommendation.
Endorsement for Additional Replacement Costs
Many policies do have an endorsement added to them called “additional replacement cost” or “extended replacement cost.” Adding this endorsement, will increase the dwelling amount by the amount shown in the endorsement, usually 20-25%. It’s really meant as a “CYA” clause to kick in and cover the difference if your home is underinsured by just a little bit. For example, say you had an additional replacement cost at 25% and your home was insured for $100,000. If it cost more than $100,000 to rebuild your home, the insurance carrier would pay out $125,000. But you don’t want to bank on that endorsement to carry you through these increased construction costs.
In summary, make sure your home is insured for at least $200 per square foot. If you have a custom home, you’ll want to be higher than that amount. Then make sure you have additional replacement cost coverage/extended replacement cost for a buffer on your policy. Have more questions about your home insurance? We would love to help, Contact Us.