Inflation can be felt in home prices and more. Does inflation also impact the cost of home insurance? We discuss homeowners insurance inflation in this article.
Blog
August 01, 2024
According to Forbes, inflation stands at 3% as of June 2024. Inflation continues to be apparent on store shelves and in home prices—but do you know the implications that inflation has on home insurance cost?
The Impact of Inflation on Home Insurance Cost
With many new homebuyers entering the market, understanding the relationship between inflation and home insurance cost is important. Inflation can have a significant impact on home insurance cost in various ways. Here are some key points to consider:
Increased Replacement Costs
The cost of building materials, labor, and other construction-related expenses appears to have increased, in part, because of inflation, which means the cost of repairing or rebuilding your home after a covered loss may be higher. If your home insurance policy includes "replacement cost" coverage, which is the amount needed to rebuild your home to its original condition, you should be sure that the limits are sufficient to rebuild or repair your home in light of increased costs.
Potential Higher Premiums
Insurance companies may adjust premiums based on the increased cost of claims. As inflation drives up the cost of repairs and replacements, insurers may increase premiums to reflect the higher potential claim payments. Policyholders may receive notices of annual premium increases as insurers account for inflationary pressures.
Impact on Personal Property Coverage Cost
Inflation affects not only the cost of the structure of your home but can also affect the cost of personal property within it. The cost to replace furniture, electronics, appliances, and other personal items may be higher due, in part, to inflation. It's important to review and update the personal property coverage limits in your home insurance policy to help ensure they reflect current replacement costs.
Inflation Guard Endorsements
An inflation guard endorsement, which may be available on some homeowners insurance policies, automatically adjusts the policy’s coverage limits to keep pace with inflation. This helps ensure that your coverage limits remain adequate over time, taking into account inflation costs. If your policy does not include an inflation guard endorsement, it may be worth discussing this option with your insurance provider or broker.
Impact on Liability Coverage Cost
Inflation can also affect the cost of liability coverage. As the cost of medical care and legal expenses rise, the liability limits in your policy may need to be increased to help provide sufficient coverage.
Regular Policy Reviews
Given the impact of inflation on insurance costs, it's essential to regularly review your homeowners insurance policy coverage with your insurance agent or broker. This helps ensure that your coverage limits are sufficient and reflect current costs. Periodic reviews can also help identify any gaps in coverage and provide an opportunity to adjust endorsements or add additional coverage as needed.
If your policy does not include an inflation guard endorsement, it may be worth discussing this option with your insurance provider or broker.
The Bottom Line
Inflation is an important factor to consider when managing your homeowners insurance policy. Keeping your coverage up to date and making sure the limits reflect current replacement cost value can help protect your investment in your home.
Fortunately for homeowners, Acrisure professionals are well-versed in these and other implications on coverage. Connect with us to talk about your homeowners insurance coverage or request a home insurance quote online now.
