It’s no secret the shockwaves of COVID-19 are still trickling through the worldwide market and distribution channels. There are shortages in just about every industry, including the construction industry. The cost of lumber is increasing at an alarming rate. There are shortages of simple materials used in the foundations of the home construction process. And circuitry used in major home appliances, such as water heaters and air conditioning units are becoming harder- and more expensive - to find. The age old tune of “supply and demand” comes into play and all of sudden the cost to construct a new house just increased by double digit percentage points.

Rising construction costs may mean the need for more cosverage.

What does that mean for your homeowners insurance? Well, it means you are likely underinsured. A homeowners insurance policy provides coverage for the home so that claims are settled based on their replacement cost(s), up to the limit of coverage selected. As your policy renews year after year, many carriers include an inflation provision that increases your coverage by a small percentage, typically 4%, each year to account for the expected rise in building costs related to inflation. This means while your coverage may be a little higher then when you selected the policy, it surely doesn’t coincide with todays true building costs given the unstable construction market.

But there’s a solution to this! With most reputable homeowners insurers, there is an endorsement (i.e. an “Add-On”) available that provides additional coverage for this exact situation. Each carrier labels this coverage differently, but generally it is called “Extended Dwelling Replacement Cost Coverage”. With this endorsement included on your policy, should your selected limit of coverage not be adequate at the time of your claim, this endorsement provides additional coverage. Typically, the additional coverage amount ranges from 20-25% of your selected Coverage A limit. So, if your home is insured for a Coverage A limit of $250,000, and you have this endorsement included, you would have an additional limit of around $50,000 for the excess costs to repair or rebuild your home should the initial $250,000 not be sufficient.

This endorsement does come at a cost. Although the exact cost varies depending on your carrier, it typically amounts to an additional 10-15% per year.

Evolve has access to many reputable homeowners insurers who offer this endorsement. If you are interested in a homeowners insurance quote with this Add-On included, please request a quote today and be sure to ask for Extended Replacement Cost Coverage!

Thank You,
Evolve Insurance Agency