What does today’s hot real estate market mean for your homeowners insurance?

Since the pandemic began, house prices have risen dramatically. Houses are selling faster, spending less days on the market and the reasons are many and varied. People want to make a change after the “lockdown”, interest rates are low, and the stock market is high.  There is also the influence of supply and demand on pricing. 

Home construction slowed to almost a stop during lockdown resulting in today’s the low inventory of new homes on the market. With high demand and low inventory, the prices have taken off. Building supplies have been disrupted by shortages in the supply chain around the world, yet another factor adding to the rising cost of homes. Also contributing to the demand here in Middle Tennessee are the people moving here from California, New York, and other states. 

With their own interest rates being low, builders have shifted into high gear to meet this increase in demand we now have. When builders are busy, all contractors in general along with sub-contractors are busy, and building materials are at a premium, it all means higher prices.  

So, what does all this mean for a homeowner with homeowner’s insurance?  On your policy, the primary coverage is the Coverage A, which is the insurance company’s estimate to rebuild your home if it is destroyed by fire or storm. If you do experience such a tragedy, then you have to step into the world of contractors, sub-contractors, and material suppliers who are currently running at full speed.  Reconstruction costs are higher now than they have ever been before.   

So the question is, in today’s market, do you currently have enough insurance on your home? Is your Coverage A limit high enough to rebuild your home if it should be destroyed? Check in with your insurance agent to get this question answered. Obviously, if the limit of reconstruction on your home is increased, your premium will also increase. 

Most policies are a package of all the coverages a homeowner needs. Other limits of coverage on your policy, like Additional Structures, Contents, and Loss of Use, will also increase because they are a percentage of the Coverage A amount. If the new premium after these changes is outside your budget, you can increase the deductible to decrease the premium. 

If you’d like to have a conversation about this and explore your options, please give us a call.