With peak hurricane season upon us, 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 is having on their home, auto and business insurance coverage. The survey reveals that the majority of homeowners may find that they do not have enough insurance coverage to repair or rebuild their home if a major disaster 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 that homeowners may not be prepared for. Pandemic-related supply chain issues and increased demand for skilled labor and building materials following unprecedented natural disasters over the past two years have contributed significantly to the cost of rebuilding homes. The cost of home building materials rose 19 percent from a year earlier, according to the National Association of Home Builders. These trends are impacting US disaster recovery efforts – leading to higher costs and longer recovery times. Yet only 30 percent of insured homeowners have purchased more insurance or increased coverage limits to offset rising construction costs, according to a recent APCIA survey.

It is extremely important for homeowners to make sure they have the right amount and the right types of coverage during this period of significant inflation. However, the APCIA study found that as many as two-thirds of insured homeowners may be without key supplemental coverages, such as annual inflation adjustment coverage, extended replacement cost coverage, and building code/ordinance coverage that could protect them better in these challenging market conditions. The cost of these optional coverages varies by company and risk level, so homeowners should talk to their insurer and shop around for policies 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 every year, but only 36% of insured homeowners report doing so in the past year. A policy review may include confirmation that any recent upgrades or renovations, such as an upgraded kitchen or the addition of a new room, are reflected in the replacement price. Our survey found that less than half (40%) of respondents indicated that they updated their home insurance to account for recent repairs or renovations during the pandemic.

It’s just as important to create and update a home inventory each year that can help you account for your belongings in case you need to file a claim. A home inventory is easy 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 cushion their property against potential damage. In 2020 and 2021, US insurers paid out $176 billion in natural disaster claims alone, the highest amount for natural disaster claims over a two-year period.

As insurers, we are focused on financially empowering our customers with the tools to protect the things that matter most to them. Because this is the most important thing for us. A homeowners 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 studies show that the majority of insured homeowners are at risk of being underinsured amid high inflation and increased construction costs. As the most active part of the hurricane season approaches, 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 Casualty Insurance Association of America. If you have a possible guest column for The Enterprise, 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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