Ensure Your Homeowners Coverage Isn’t Outpaced by Inflation

September 30, 2022 (Reston, Virginia)

Thanks to inflation, chances are good that the cost to repair or rebuild your home have increased significantly since your last policy renewal. If your renewal is coming up, it’s smart to review your coverage with your agent. There are several things you want to consider in a policy “checkup.”

First, a homeowner’s policy typically provides replacement coverage, meaning the cost to rebuild your house as it is and where it is. Even if you’ve made no improvements, the replacement cost for your house and other covered structures (garage, garden shed, fencing) could be significantly higher than your current coverage. That would leave you on the hook to pay the difference, in the event of damage or loss. Ask for an updated replacement cost calculation.

If you’ve made significant improvements, it’s important to communicate them to your insurer. If you completed a high-end kitchen remodel, a room addition, or significant upgrades to HVAC, plumbing, or electrical systems, you need coverage for your investment. While a higher replacement cost and high-end improvements will increase premiums somewhat, some improvements might help reduce them. A new roof, for example, greatly reduces the risk of costly water damage and might earn you a discount. Similarly, a new home security system or smart smoke detectors that automatically contact the fire department may garner discounts.

Certain improvements can fall into the category of “attractive nuisance.” A swimming pool, treehouse, trampoline, play set, or fountain may attract trespassers or increase the risk of an invited guest being injured. You may need additional liability coverage as a result.

If you’re operating a business from home, you may want to get an endorsement to cover additional equipment and limited liability. A home-based business policy provides coverage if you close temporarily due to home damage, including lost income and expenses such as payroll.

Finally, review and talk through policy exclusions and coverage limits with your agent. In our area, hail and wind damage are typically covered by homeowners policies—
but check policy exclusions to be sure. Be aware that roof repair or replacement coverage for these hazards may be based on “actual cash value,” meaning the current worth of the roof. You may want a quote for roof replacement coverage instead.

It’s important to be aware that flood damage is not covered by most homeowners policies. In our area, extensive new construction could pose runoff flooding risk, as does increasingly unpredictable and severe weather.

If you’d like more information, the Insurance Information Institute provides in-depth information on homeowners insurance. For information on flood risk and flood insurance, visit the government’s National Flood Insurance Program.