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Inflation and Your Homeowner Policy

Inflation is also having a huge impact on the cost to rebuild our homes, but most of us aren’t rebuilding a home right now, so we don’t think too much about it.  If you own a home, please read this article twice and call your insurance agent to talk about it!

Your homeowner insurance policy was designed to provide funds to rebuild your home the way it was prior to the insurable event that damaged it.  When you signed your homeowner application you agreed to a limit of funds your policy would provide.  Right now, if your home was damaged, you could be rebuilding your home using materials and labor that cost WAY more than your homeowner policy would pay for.

Not all homeowner policies and insurance companies are the same.  Your agent might have mentioned your policy has an “inflation guard” or a “guaranteed replacement cost” endorsement (which, despite the name, usually is NOT designed to guarantee your policy has enough coverage to rebuild your home).  It’s important that you challenge your assumptions and better understand how your specific policy will work for you on the day you need it most. 

Sometimes I hear someone say “Well, I don’t want to over insure my home!”  What’s the downside for insuring your home for too much?  I’ve thought about that.  Perhaps I’m paying $75/year or so more than I need to.  Maybe.  The only way I’ll find out is if my home burns up or blows down.  So, I hope I never find out!  Meanwhile, I’m confident that I won’t have to explain to Mrs. Michael why our homeowner policy wasn’t able to cover the cost to rebuild our home. 

If you don’t know what the limit of rebuild coverage is on your homeowner policy, and you don’t know how much it would cost to rebuild your home, it’s time to take action.  Now is the time to pick up the phone, connect with your insurance agent and have a good conversation about this.