fbpx

Inflation: How does it affect my Insurance?

Inflation is a hot topic in the US today, with rising costs for commodities such as Gas, Lumber, Food, Over the past 18 months, there has been an unrivaled increase in the cost of construction materials and labor as the economy recovers from a challenging 2020. With the arrival of the Covid Vaccine, the easing of travel restrictions, and stimulus money entering the economy, demand has increased, driving costs up.  

As of the second quarter 2021 update, we are seeing some of the following annual price increases: Lumber     +54.0% Plywood    +42.6% Ready Mix   +3.8% Roofer          +6.0% Plumber       +4.1% Electrician   +4.6%

One thing to be aware of and check for on your current policy is the Dwelling extension. Most, but not all, policies offer at least a 25% extension on your dwelling for just this type of scenario. so for instance, if your policy has a dwelling coverage of $400,000, the extension would provide up to another $100,000 in protection to safeguard the client in times like these. Some companies may offer a 50% extension or what is called guaranteed replacement cost, which guarantees to rebuild your home as it was prior to the loss, no matter the cost. It is now more important than ever to make sure you have this coverage.

As a standard practice, to account for these increasing costs, Carriers apply an inflation factor to every Homeowners policy renewal increasing the coverage A to ensure policies continue to be adequately insured. Normally we typically see about 2-3% increase based on the economical trends. So far in 2021, we are seeing numbers upwards of 10% from carriers. This directly relates to your dwelling coverage.

The increase in Dwelling coverage will be part of the policy’s renewing premium and is needed to cover the rising cost of building materials and labor. So insureds can expect to see an increase in the Dwelling, as well as the Homeowners premium as a direct result.

If your not sure you have adequate protection, you should contact your agent immediately or send us your current declaration page for review.

Michael Vereecke
Michael Vereecke

Agent/Owner of Customers First Insurance Group
Commercial Lines Coverage Specialist (CLCS) Certified

Leave a Reply

%d bloggers like this: