The housing market is HOT and the cost of materials to build a home seem to be even HOTTER. I am not sure if you have heard, but the cost of a piece of wood is about four times what it was a year ago. FOUR TIMES!
One of the insurance companies we work with, has already advised us that their inflation guard of 4-6% may not be enough to keep pace with what it would really cost to rebuild a home in the event of a total loss. So what does that actually mean?
As we look into the crystal ball to try to predict what is coming down the road from insurance companies, we believe the cost of insurance will rise. It will rise due to the increase of coverage needed to rebuild a home. We know materials are not 100% of the cost to rebuild, but it will significantly increase the amount of coverage necessary to insure you properly. The question is how much will your coverage increase? In recent weeks, we have seen an increase in coverage of about 10-25%. By this time next year, we could see an increase of 25% or maybe more. We are hopeful there is not a direct correlation with the cost of insurance, however, I think it will be fairly close. The one item that could help slow the increase down is if there is more supply that becomes available, which would hopefully return costs to what they were a year ago.
As we prepare for summer and the fun that comes with it, I do not share this to put a damper on that excitement. We can't predict the future, but hopefully, by sharing what we know, we can help you be prepared for it. As a friendly reminder from your local insurance agent, when your home insurance renews, you will most likely see an increase in your coverage due to the increase in cost of materials. In the meantime, if you have any questions, we are always here to help you.
