Inflation Woes: Time to Ensure You're Covered
Among the many milestones in our lives, purchasing a home is one of the biggest financial steps we can take. It’s only fitting that to protect this investment we ensure we have enough insurance to protect our new investment. But what happens when inflation rises and prices on just about everything, including construction costs, go up as well?
“This is what happened to a customer recently. Their home was a total loss in a fire, and when they tried to replace it inflation had pushed the cost of their home more than $100,000 higher than what their insurance was anticipated to cover,” said Matt Youngsma, Director of Personal Lines Underwriting at Rockingham Insurance. “This is when we decided to start talking about it with agents, reminding them to review policies with their customers.”
Recent government data provides us with the effects of inflation on the construction industry:
- Fabricated structural steel is up 42%
- Iron and steel products are up 127%
- Softwood products are up 24%
- Construction employment fell by 9,000 jobs; this, in turn, drives up labor costs
- Continued supply chain issues due to the COVID-19 pandemic
In addition, home prices are on the rise. Recent data we’ve examined shows that the cost of homes has gone up 19.2% year-over-year as of January 2022.
So how do rising costs due to inflation affect your coverage? Let’s say you purchased a policy for $250,000 to rebuild your home. Due to rising inflation, which affects the cost of labor and building materials, the cost to rebuild your home could now cost $300,000. The cost may be even higher for home owners who live in high-risk areas.
“Homeowners should definitely consider the rising price of labor and materials, if the unforeseen happens and they need to rebuild,” said Craig Tolson, executive director of the Home Builders Association of Virginia. “Even if they don’t need a full rebuild, just replacing a fence can be more costly than expected.”
If your homeowner’s insurance coverage is not adjusted to take in the costs associated with inflation, you might not have enough coverage to rebuild due to unforeseen incidents. The good news is that your local Rockingham agent is here to provide you with expert advice and help you protect what matters most. Contact an agent today to find the best insurance policy to fit your needs.