May 11, 2022
The real-estate market has seen unprecedented demand over the past few years, and the rising cost of homes is expected to continue. This is great news for homeowners, however, many don’t think to review the coverage on their homeowners policy every year to make sure that they are not underinsured.
Home values across the country have risen due to high demand and limited houses on the market. While the value of your home may be going up, you may not need to purchase additional coverage. Your homeowner’s policy premium is based on what it would cost to repair your home if it becomes damaged, so this not directly affected by fluctuations in the housing market.
Often, variations in the value of the land itself are what drive housing prices up, so this has little to do with the amount of insurance coverage on your house. However, a metric that you should pay close attention to is the cost-per-square-foot to rebuild your home, as this is what your coverage is based on.
In this case, rising construction costs are something to keep an eye on, as well as any added square footage or value generated through renovations. These changes, if significant, would have an effect on your homeowners policy.
We recommend that you speak to your insurance agent and check your house every year to make sure that you’re not underinsured. Your agent can also help you understand coverage and policy limits and answer any questions you may have.