You may be aware of the Marshall Fire in Louisville, Colorado. Most of the homes lost in the Marshall Fire last year were underinsured. Because of this, home insurance would not fully cover the cost of rebuilding. If you live in Oklahoma, an extreme-conditions-prone state, you may be worried about your existing homeowners’ insurance policy. It may no longer be enough due to hyperinflation. So, here’s what you need to know about how to protect your home insurance from the effects of hyperinflation.
What is the replacement cost of your property?
Insurers use replacement cost calculators to calculate how much dwelling coverage is required to rebuild your house. The projected replacement cost includes details about your home, such as its size, building materials, and year of construction.
One way to determine the replacement cost of your home is by multiplying your home’s square footage by the current construction cost per square foot in your area. Also, you can hire a contractor to offer a building estimate or ask an independent insurance agency to gather multiple insurance quotations. Through this, you can get an idea of how much each insurer estimates it will cost to rebuild your house.
Check the declaration page of your policy to see whether replacement cost or actual cash value applies to your personal property. Replacement cost coverage pays to repair or replace your home or your valuables up to the limits of your policy without considering depreciation or the loss of value over time. Your insurance company will cover the cost of replacing your personal belongings with new ones and rebuilding your house to its pre-claim condition. For example, they will pay for a new computer regardless of the depreciated value of the old one.
While actual cash value takes depreciation into account, it will require you to pay the difference between the coverage provided by your insurance and the cost of completely replacing your valuables. If a covered incident damages your furniture, your insurance company will only pay for the value of your belongings at the time of destruction. Not what it would cost to buy brand-new furniture in its place.
Take extended replacement cost coverage.
Although you may be able to estimate how much it would cost to rebuild your home now, it is challenging to project building expenses in the future. Even a severe storm might significantly raise the cost of reconstruction in your area.
Imagine you had $500k in Oklahoma home insurance, but a hailstorm destroyed it. The need for supplies and labor will soar since every homeowner in your area who lost their home because of the tragic storm will also need to rebuild their property. As a result, you might have to pay the difference if the cost of rebuilding your property exceeds the insurance coverage.
A house insurance policy can be extended replacement cost coverage to help cover such uncertainty. Your dwelling coverage limit will pay a share of the difference if it is not enough to pay for a rebuild.
Consider guaranteed replacement cost if you want peace of mind from the effects of hyperinflation, knowing your insurance will pay the cost of rebuilding your house, despite how construction rises. Although guaranteed replacement coverage is frequently more expensive, not all insurance companies may offer it, and it may not cover older properties.
Consider other choices for coverage.
An inflation guard is a feature that many Oklahoma home insurance plans include to help prevent underinsurance caused by anticipated inflation rises. When your insurance is updated to take inflation into account, your coverage limits will increase automatically.
Although the inflation guard may cause your rate to increase, you shouldn’t reduce your coverage limits to only save money on your homeowner’s insurance. Verify your policy for coverage of ordinances and laws if you live in an older house. In the event of a covered claim, this coverage will pay for the cost of rebuilding following current building codes. Without it, even if you have guaranteed replacement cost coverage, you will probably have to pay out of pocket for any work done to comply with building codes.
If you’re still worried that you could be underinsured, talking to your insurance provider or agent will help you understand the specifics of your policy. For them to adjust your coverage limits appropriately, be sure to inform them of any upgrades or renovations you make to your house.
Although inflation cannot be avoided and may give us headaches, we must protect our valuable homes and properties by purchasing homeowners’ insurance. The best Oklahoma home insurance policy can safeguard you from life’s unforeseen inflation hike and, in turn, your house for future generations.
Since nobody can predict the future, and if it still worries you, call a reputable home insurance Oklahoma provider and work with Morris Insurance Agency. Morris Farmers Agency understands how important your home is to you. We are here to help you understand your options for making your policy inflation-proof in Oklahoma. If you want to secure your house the way you want, call us at (405) 367-6130.