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Why You Should be Increasing Your Building or Dwelling Coverage

A subject for discussion that has been brought to my attention a lot recently, is the need for increasing your building or dwelling coverage.

First off, assuming you have Replacement Cost at Agreed Amount for your building or Extended Replacement Cost/Guaranteed Replacement cost for your home (which in both cases I would suggest) the limit of coverage you have to rebuild is based on numerous factors and estimations. It is the amount the insurance carrier and the insured has agreed upon for rebuilding if needed.

One of those factors is the cost of materials. Naturally, the cost will increase as time passes but lumber alone has increased about 37% above the historical average in the past two years.

What does this mean?  We need a higher limit of coverage to rebuild.

Typically, insurance carriers include an inflation guard on their policies.  By doing so they are automatically increasing the building or dwelling limit a little bit on each renewal.  We most often see an inflation guard of about 4%. In the past we’ve asked carriers to reconsider and lower the inflation guard on a particular renewal if we felt the property was already insured to value and to, of course, keep the premium from increasing.  It is not only something I would not suggest doing at this point in time, but I am instead urging you to review your current policy and see how long ago it renewed. Hopefully, you can wait until the next renewal, but in some cases, you may need to increase your coverage midterm.

There is never any harm in speaking with your broker and reviewing your policy with them.

We are here to help guide and advise you on your insurance needs.  The point of insurance is to hopefully never have to use it, but if you do, you want to be indemnified completely.

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