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The monthly increase in prices has affected almost every aspect of our lives – from buying gas and food to other essentials. And now a recent APCIA/Harris Poll shows many homeowners are unprepared for the rate hikes that affect their home, auto, and business insurance. This study shows that many homeowners may find that they do not have enough insurance to repair or rebuild their home in the event of a major disaster. As we head into hurricane season, homeowners should review and update their homeowner’s insurance to stay protected.
The current inflation crisis is something that no one has faced since 1980. Inflation hit 9.1% in June 2022 – 40 years – but there are other inflationary problems in the market that homeowners may not be prepared for. Epidemic problems and the increased demand for skilled labor and construction materials after unprecedented natural disasters in the past two years have contributed significantly to the cost of rebuilding. The cost of building materials is up 19% from a year ago, according to the National Association of Home Builders. This is affecting post-disaster recovery in the US – resulting in high costs and long rebuilding times. Yet only 30% of insured homeowners have bought more insurance or increased their limits to cover rising housing costs, according to a recent APCIA survey.
It is very important for homeowners to ensure that they have sufficient funds and the right strategies to support them during this period of high inflation. However, the APCIA study found that almost two-thirds of home owners who have insurance may not have additional coverage, such as annual inflation adjustments, property value increases, and building codes/laws, that would protect them better from market pressures. The cost of these products varies by industry and risk, so homeowners should talk to their insurance and purchase products that fit their needs and budget.
There are other steps homeowners can take to be more financially prepared in the event of a disaster. Homeowners are required to review their insurance annually, but only 36% of insured homeowners reported doing so in the past year. A policy review may include making sure that recent upgrades or renovations, such as an upgraded kitchen or adding a new room, are reflected in the replacement cost. Our survey found less than half (40%) of respondents indicated that they changed their home insurance to cover recent renovations or renovations during the pandemic.
It’s also important to create and update a home inventory every year, which will help you calculate your property if you need to file a lien. Home inventory is easy to create, yet only 20% of homeowners with insurance have created or updated a home inventory in the past year. Twenty-five percent of homeowners with insurance have never done a home inspection.
With climate change causing more severe and frequent natural disasters, insurers are also urging homeowners to take steps to minimize damage to their property. In 2020 and 2021, US insurers paid out $176 billion in natural disaster claims alone, which is the highest in two years for natural disaster claims.
As insurers, we focus on empowering clients financially with the tools to protect the things that matter most to them. Because that is what is most important to us. Homeowner’s insurance is there to give you peace of mind that when the unexpected happens, you have the support you need to pick up the pieces and rebuild your home.
People often overestimate their preparation for natural disasters and other emergencies, and this can lead to gaps in planning and insurance coverage. Industry research shows that the majority of insured homeowners are at risk of underinsuring due to inflation and rising home prices. With the most active part of the upcoming hurricane, insurers encourage Texas homeowners to take immediate action, before disasters occur, to review and update their coverage and minimize potential damage.
David A. Sampson is president and CEO of the American Property Casualty Insurance Association. If you have a guest column for The Enterprise, send your opinion or column to Opinions@BeaumontEnterprise.com If you have something to say, we want to hear from you!