In the wake of the Covid-19 pandemic and other economic factors, Texas homeowners insurance companies and their insureds are facing unique, challenging times.
Construction costs are surging due to shortages stemming from production and supply chain breakdowns as well as other problems, all of which have created a trickle-down effect through to homeowners and commercial insurance agencies and their insureds.
What this means for homeowners or commercial building owners is a need to meet with insurance agents to reevaluate existing policies and increase coverage where necessary to avoid problems going forward as many structures are now vastly undervalued based on current economic conditions.
Construction Costs And Homeowners Insurance
There is a direct correlation between construction costs, home or business property valuation, and homeowners or commercial property insurance, with the latter two rising when the former does.
Typically, the increments by which insurance agencies increase premiums are based on inflation predictions and an expected gradual increase in construction costs, among other things.
When inflation skyrockets due to extraordinary circumstances such as what we are seeing today with the drastically rising costs of construction that markedly affects commercial buildings and homes, those premium changes cannot happen fast enough.
Policyholders making claims to their insurance companies may be left unable to get all repairs or replacement completed, even on policies that were originally written to include a certain degree of natural inflation.
Quickly Rising Costs Leaving Many Underinsured
The financial effects of the COVID-19 pandemic, low supply production rates, and supply chain breakdowns coupled with lower interest rates have had a significant negative effect on the construction industry today.
Supply and labor costs have skyrocketed to as much as 50% higher than the previous year, leaving insurance agents in a crucial position of needing to address this from the standpoint of home or business property valuation and what it will actually cost to repair or replace those structures.
Many policyholders and their homeowners or commercial insurance agencies are now seeing an extensive imbalance of insured value versus the actual replacement cost if a major loss happens.
To protect all involved parties, the solution is to get a new valuation of a home or commercial building to ensure adequate coverage is carried.
Having Enough Home and Business Property Insurance Coverage
In the vein of alleviating this issue of having inadequate coverage for repairs and/or replacement, homeowners and commercial insurance agencies across the board are now notifying their clients of the situation and asking them to take action.
Policyholders must have their home or business building reassessed for its value under current construction costs and then submit that information to their insurance agents so that policies can be adjusted.
As would be expected, an increased home or business building valuation will equate to premium increases in many cases.
Failure to revalue homes or business property and modify policies leaves the home or building owner responsible for valuation changes to their property that could make current coverages inadequate for extensive losses.
Review Your Homeowners or Commercial Policy Now!
There cannot be anything worse for a home or business owner than suffering a major loss to their property only to discover that the amount of coverage carried under their homeowners or commercial insurance policy does not actually cover replacement for incurred damages.
Based on widespread changes in the construction industry due to skyrocketing materials and labor cost increases, homeowners and commercial insurance agencies need their insureds to have an updated replacement cost valuation done of their insured property to protect it with adequate insurance coverage.
Contact your commercial or homeowners insurance agent today to discuss these changes and update your policy to reflect the value of your home or business property according to current and expected construction costs.
