Homeowners Underinsured Due to Rising Inflation: APCIA

A survey by American Property Casualty Insurance Association (APCIA) found that most homeowners have not taken the necessary steps to insure their insurance coverage keeps pace with rising inflation and increased building costs. This survey that included 1000 homeowners with home insurance highlights the risks of being underinsured if catastrophe strikes!   

APCIA’s survey also revealed that 64% of homeowners are unsure or believe that their coverage limits are based on the real estate market value rather than rebuild costs. Another survey by the Harris Poll found that only 30% of homeowners with insurance have purchased more insurance or increased their coverage to account for rising building costs. Less than 40% of the insured homeowners who completed renovations or remodels during the pandemic had updated their insurance to include those changes.  

U.S insurers paid out a record-breaking $176 billion for natural catastrophe claims in 2020 and 2021, making it the highest total during those two years periods of time as well!  

Inflation, recent supply chain issues, and increased demand for skilled labor and construction materials following unprecedented natural disasters in the last two years have recently contributed to a significant increase in the costs of rebuilding homes and businesses. The cost of construction materials also has increased by 44% from 2019 to December 2021. This has resulted in longer rebuilding time and staggering high prices.  

Add A Few Features To Stay Prepared 

APCIA suggests adding a few coverage features to avoid surprises during the recovery process following a natural disaster:  

• Additional Living Expenses coverage can help cover hotel costs, food, and other necessary items like medical equipment if it takes longer than expected for your home reconstruction project’s timeline!  
• Extended replacement cost coverage means that your policy will increase to cover rebuilding costs when labor and material expenses skyrocket due to natural disasters.  
• Replacement cost coverage pays for your home and property when an emergency forces you out, like a natural disaster or fire. The company will pay up so that they can build it again from scratch – all without taking away any of its value in depreciation!  
• Automatic Inflation Guard protects you from rising healthcare costs by automatically adjusting your coverage amount at each renewal. However, during periods of extreme market stress, it remains essential to review these limits as they may change drastically!  
• The best protection against costly fines and penalties is ensuring your home meets all local codes. Building Code coverage helps ensure that you comply with any new regulations, which could save both time and money on unnecessary repairs or replacements!  

APCIA also suggests you make an inventory of all your home’s contents. If any disaster or unexpected event arises, you can swiftly account for all your property and report the losses to your losses. You can always use your smartphone to take photos or videos for the inventory. Many insurers also know free tools that can help you in this process. Whatever route you take for inventory creation, save everything to a safe, accessible place like the cloud. 

- Doug Myrick