One collateral effect of the Covid-19 pandemic might be the protection offered by your homeowner’s insurance.
You’re no doubt aware that two consequences of the pandemic are increased demand for homes and shortages of many building components and supplies. Skilled labor to build homes also is in short supply.
The result is that the cost of building a home increased. The increase has been dramatic in some areas. That means the cost of rebuilding or substantial repairing your home due to a casualty loss probably increased.
You need to review the coverage limits in your insurance policy. Most policies say they will pay for the cost of rebuilding the home if it is destroyed. But there’s usually a maximum amount the insurance company will pay.
Many insurers automatically adjust the maximum each year when a policy is up for renewal. Others don’t.
In either case, you need to look at the limit in your policy and learn how much rebuilding costs have increased in your area. Determine how much it would cost to build your home in today’s market.
You’re likely to find that the maximum coverage limit in your policy is 20% or more below what it would cost to rebuild the home completely if it’s destroyed by a fire or other catastrophe. Adjusting the policy limit will increase your premiums a bit. But that will be less expensive than having to reach in your pocket to pay part of the cost of rebuilding the home.
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