Under insurance can happen to anyone. Are you prepared when disaster strikes?

Flooded laundry room

Increases in materials costs, supply-chain disruptions, and a tight labor market have made life hard for new home buyers—but they can also have a disastrous impact on current property owners when an unexpected problem arises.

The Associated General Contractors Association of America reports that the overall price of construction materials increased more than 20 percent from 2021 to 2022, and prices are still rising. Those costs typically get passed on directly to consumers. But did your insurance coverage increase by 20 percent too?

Unless you’ve reviewed your insurance policy recently, there’s a good chance that your coverage hasn’t kept up with changes in repair and reconstruction costs. In fact, a recent report from the American Property Casualty Insurance Association found that the majority of homeowners are under insured for current economic and construction cost conditions.

How under insurance happens to homeowners

There are several reasons a homeowner could end up underinsured. Consider these scenarios:

  • Your city, township, or homeowners’ association adopts new building codes that require upgraded specification, materials or compliance with green energy ordinances for all new construction.
  • A natural disaster strikes, such as a hurricane, tornado, or earthquake. The amount of reconstruction in your area is massive, leading to sharp spikes in labor, material, and equipment costs.
  • Inflation drives up prices across the board well beyond the standard inflation adjustments applied by your insurance company (2-4 percent in most cases).
  • Your household gradually accumulated valuable electronics, musical instruments, art, sporting equipment, and business equipment not accounted for when you initially established your coverage.

It’s possible that your current insurance policy covers some of these eventualities, but do you know? If not, don’t feel bad. Two-thirds of homeowners aren’t sure whether their coverage adjusts for scenarios like these.

What doesn’t your insurance cover?

Homeowners are often unpleasantly surprised to find out that their insurance doesn’t cover certain events. Coverage gaps vary by area and insurer, but these are among the common causes of damage excluded from coverage:

  • Floods
  • Earthquakes
  • Landslides and sinkholes
  • Drain or sewer backups
  • Animal or insect infestations
  • Mold and fungus
  • Power failure

Too many homeowners have faced the trauma of significant property damage and loss only to get an additional shock when the expected reimbursement doesn’t apply.

Make sure your coverage is sufficient

As a public adjuster, I see many insurance policies underwritten with policy limits that aren’t realistic for today’s reconstruction costs. I regularly work with contractors who know firsthand the price of labor and materials in their market for the wide variety of homes they work on. And I regularly work with clients to help them maximize their reimbursement based on the coverage they already have.

I would be happy to apply my knowledge and experience to a comprehensive review of your insurance policy, so you understand what you’re covered for today and what, if any, coverage you may want to add based on your property’s location, age, original building materials, and current contents. As a public adjuster, I represent homeowners, not the insurance companies. It would be my pleasure to have a no-obligation meeting with you to discuss our services.  Please contact me at justin@grenierpa.com or call 774-239-6822 anytime.