Increasing Construction Costs!
A significant Challenge to Home Replacement Cost.
Almost every home insurance policy includes replacement cost language that becomes very important if you ever have a claim. And now with inflation hitting the construction of new and renovated homes, the language is becoming even more important.
“when you are insuring a vital asset like your home, make sure you have full replacement cost coverage and avoid the cap”
Here is what you need to know
There are a couple of versions of replacement coverage for a home insurance policy. There is full replacement and then there is Limited replacement cost. You need to know the difference.
Full replacement cost written by companies like Chubb, PURE & AIG provide a total guarantee to rebuild a damage property without regard to the final cost. A repair or a replacement is dictated by the cost to restore your home.
A limited replacement cost policy written by Allstate, State Farm or GEICO establishes the rebuild of you home with the inception of your policy, but then puts an upper limit on any restoration or rebuild, normally 25%. So, if you home is insured for $2m, your policy limits you $2.5m to rebuild.
In our eyes that is a problem for 2 reasons.
First our experience has been that homes rebuild for a much higher number because of the urgency of rebuilding. Imagine the cost to pull a builder and or architect off his current job to take over your project. Our experience is the number typically fall 40% above the policy limit.
And two, now there is inflation.
When you are insuring a vital asset like your home, make sure you have full replacement cost coverage and avoid the cap.
If you have questions about Replacement Cost Coverage, drop Kyle an email for some feedback or call 203.698.9342.