Keep an Eye on Inflation and Your Home Insurance Coverage
Due to the economic impact of COVID-19 we’ve seen lumber prices spike, reaching new, all-time highs. Costs have also gone up across the board for other building materials as supply chain problems and labor shortages continue to impact the nation’s economy. While 2021 is behind us, it appears economic uncertainty will continue for some time. Unfortunately, there is no escaping inflation and the impact it has on how much home insurance coverage you need.
Inflation and How it Affects Home Insurance
If your home insurance coverage is not adjusted over time to account for inflation, you could be faced with not having enough coverage to rebuild or make repairs should your home be damaged or destroyed by a loss covered by the policy. To help guard against inflation, Farm Bureau Insurance home insurance policies include an inflation protection provision.
The inflation protection provision is a standard measurement the insurance industry uses to adjust coverage limits based on an expected rate of inflation. The inflation factor varies by geographical area and varies each year. Even though the inflation factor is meant to help coverage keep pace as costs go up, it may not be enough. You should review your policy and coverage carefully and discuss any concerns you have with your Farm Bureau Insurance agent.
Click HERE to see recommendations the National Insurance Crime Bureau (NICB) and the Rocky Mountain Insurance Association (RMIA) are providing to avoid contractor fraud while rebuilding.
Home Improvement Projects
Over the last year, homeowners have been busy tackling a variety of home improvement projects. If you have made enhancements to your home, you’ll want to make sure you update your policy and your coverage to take any upgrades into account. Improvements and high quality finishes all impact the cost to rebuild or repair should you have a loss. A few examples of improvements you’ll want to review with your Farm Bureau Insurance agent include:
- Adding square footage to a home
- Significantly altering the floor plan of a home
- Renovations to home systems
- Remodels of kitchens and baths
- Finishing basements or attics
- Adding decks, patios or porches
- Upgrading interior/exterior finishes
“If your home insurance coverage is not adjusted over time to account for inflation, you could be faced with not having enough coverage to rebuild or make repairs…”
The Difference Between Insurance to Value and Market Value
When reviewing your home insurance coverage, it is also important to understand the difference between insurance to value and market value. Insurance to value represents how the policy coverage amount compares to the cost of rebuilding. Insuring a home at less than 100% insurance to value could mean you may not have enough coverage to replace the home in the event of a total loss. The current coverage amount is not a guarantee that you have a sufficient amount of coverage to rebuild your home, should it be destroyed by a covered peril.
Market value is based on what someone is willing to pay for the property and includes the value of land. There may be a market premium or discount based on supply and demand of housing in the area, and it is also influenced by factors such as schools and crime. Market value does not represent what it will cost to rebuild a home.
Click HERE to hear Mandy Connell at KOA Radio speak with Farm Bureau Insurance®’s State Sales Manager, Monty Peterson about the importance of sufficient coverage on Homeowner’s policies.
Get an Account Review
Your Farm Bureau Insurance agent can help answer questions you may have about the cost to rebuild based on your home’s unique construction characteristics and based on current costs for materials and services. A lot can change over the course of a year. Setting aside time each year to complete an annual review with your agent will help ensure your coverage is updated routinely based on your current needs and based on the increasing cost to repair or rebuild your home. You can find a Farm Bureau Insurance® agent or office near you online at cfbinsurance.com or reach a customer service representative at 1-800-315-5998.