With hurricane season in full swing, review your insurance now

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Sustained levels of high inflation month after month have affected almost every aspect of our lives, from buying gas and groceries to other basic goods and services. And now, a recent APCIA/Harris Poll survey shows that many homeowners are unprepared for the impact inflation has on their home, auto and business insurance coverage. The survey reveals that most homeowners may find they do not have enough insurance coverage to repair or rebuild their home if a major catastrophe occurs. As we enter peak hurricane season, homeowners should review and update their homeowners insurance to stay protected.

The current inflation crisis is something no one has had to deal with since 1980. Inflation reached 9.1% in June 2022, a 40-year high, but there are other inflationary pressures in the market to which owners may not be prepared for. Pandemic-related supply chain issues and increased demand for skilled labor and building materials following unprecedented natural disasters in the past two years have contributed significantly to the cost of rebuilding homes . The cost of residential building materials is up 19% from a year ago, according to the National Association of Home Builders. These trends are affecting disaster recovery efforts in the US, resulting in higher costs and longer rebuilding times. However, only 30% of insured homeowners have purchased more insurance or increased coverage limits to offset rising construction costs, according to APCIA’s recent survey.

It is critical that homeowners make sure they have the right amount and the right types of coverage during this period of high inflation. However, APCIA’s survey found that about two-thirds of insured homeowners may not have key additional coverages, such as annual inflation adjustment coverage, extended replacement cost coverage and building code coverage / ordinance, which can better protect them in these difficult market conditions. The cost of these optional coverages varies by business and risk level, so homeowners should talk to their insurer and find policy and coverage options that fit their needs and budget.

There are other ways homeowners can act to be more financially prepared for a disaster. Homeowners should review their insurance policy annually, but only 36% of insured homeowners reported doing so in the past year. A policy review may include confirming that recent upgrades or renovations, such as an upgraded kitchen or new bedroom, are reflected in the replacement cost. Our survey found that less than half (40%) of respondents indicated that they updated their home insurance to account for recent renovations or remodeling during the pandemic.

It’s also important to create and update a home inventory each year, which can help you account for your belongings in case you need to file a claim. A home inventory is simple to create, but only 20% of insured homeowners created or updated a home inventory less than a year ago. Twenty-five percent of insured homeowners have never created a home inventory.

As climate change causes more severe and frequent natural disasters, insurers are also urging homeowners to take steps to mitigate potential damage to their property. In 2020 and 2021, US insurers paid out $176 billion for natural catastrophe claims alone, the highest total over a two-year period for natural catastrophe claims.

As insurers, we focus on financially equipping our customers with the tools to protect the things that matter most to them. Because that’s what matters most to us. A home insurance policy is there to give you peace of mind that when the unthinkable happens, you have the coverage you need to pick up the pieces and rebuild your home.

Too often people overestimate their preparedness for natural disasters and other emergencies, and this can lead to gaps in preparedness and insurance coverage. Industry surveys show that most insured homeowners are at risk of being underinsured amid high inflation and rising construction costs. With the most active part of the hurricane season ahead, insurers are encouraging Texas homeowners to act quickly, before disaster strikes, to review and update their coverage and mitigate potential damage.

David A. Sampson is president and CEO of the American Property Casualty Insurance Association. If you have a potential guest column for The Enterprise, please email your idea or the column itself to [email protected] If you have something to say, we want to hear from you!

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