Construction Cost Inflation Puts Basic Home Insurance at Risk

by Dec 6, 2022

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Limited Replacement Cost is a Problem

Recent construction inflation numbers indicate that material costs have risen by an average of 36% nationwide! 36% is a problem for many homeowners who have chosen a basic HO-3 insurance policy form that includes the Limited Replacement Cost endorsement.

“Recent construction inflation numbers indicate that material costs have risen by an average of 36% nationwide!”

Construction Cost Inflation Puts Basic Home Insurance at Risk - Shepard Insurance Group

Here is why!

There are many homeowners that buy insurance through nationally recognized insurance companies. Their policies include a building replacement cost endorsement that puts a limit on reimbursement of no more than 25% of the limited listed on the current policy.

As an example, if your home is insured to be rebuilt for $2,000,000 a Limited Replacement Cost endorsement would pay no more than $2,500,000 if your home was destroyed by fire.

That’s a serious conflict if material costs are rising by 36%!

The alternative to a Limited Replacement Cost endorsement is a premium insurance policy with a Guaranteed Replacement Cost endorsement where there is no conflict. What it costs is what is paid!

Yes, a premium contract and Guaranteed Replacement Cost may be more premium, but it seems a small price to pay for what, for many, is their single largest asset. Why scrimp?

If you would like to compare a Basic Home Insurance pricing with a premium contract with a company like Chubb or PURE, drop Kyle an email to get the intel at or call 203.698.9342.

Written by: Kyle Shepard

Kyle’s extensive sales and account management expertise transcends both Commercial and Personal Lines. Coupling that with his finance and life insurance licenses, Kyle serves as full service insurance agent for all of his valued clients. The goal for Kyle is to provide tailored risk management to address his client’s current and future exposures, and to optimize wealth preservation.

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