In 2022, Canada’s Consumer Price Index hit its highest level in decades. Inflation does more than raise the price of the goods that line the shelves of your local grocery store, it also impacts the insured value of your property. How is that possible, seeing as your home was built years, if not decades ago? Because inflation raises reconstruction value. Reconstruction or replacement value is the cost to replace or rebuild a home to original or similar standards at current material and labor costs within a certain geographical area. So, when reconstruction costs rise, so does the insured value of your property.
When this occurs, the required amount of homeowners insurance will likely increase accordingly. Recently, there has been a rising trend in underinsured claims for both homes and commercial properties. With inflation rates hitting new record levels, it is even more important that you ensure you are adequately covered against a threat (weather event, etc.) that may result in repairs, or even an outright rebuild. What can you do to protect yourself? Keep reading.
What Homeowners Can do to Ensure Adequate Insurance to Cover Increases in Insured Property Value
Speak to an Insurance Broker About Your Current Insured Property Value
If you haven’t completed a home evaluation recently, be sure to speak to a broker at Park Insurance today. Keep in mind that insured value increases may arise not just because of inflation’s impact on construction materials, but other factors such as alterations in building codes, labor costs, and more. For these reasons, you should review your property value and your homeowners insurance coverage annually.
As people spent more time at home due to lifestyle changes brought on by the pandemic, home renovations and additions increased. If you’ve recently made renovations, retrofits, or any upgrade whatsoever, that too may significantly increase the value. Contact your broker immediately to notify them of any changes and ensure that you are adequately protected.
Consider Park Insurance to be your partner, at your side to prepare you for insurable property value increases that may arise.
Consider Inflation’s Impact on Household Possessions Too
While you’re at it, reassess the value of your possessions. Inflation and other economic forces can increase the value of them as well. Simply put, as prices inflate, you need more money to buy the same things. This is especially true if your household has antiques, art, and collectibles along with other appreciating assets. Bring this to the table when speaking with your Park Insurance broker.
Inflation Affects Commercial Properties Too
If you also own commercial property, it is important to understand that the same principles apply to these assets as well. Re-evaluate both your building and contents value with your broker annually to ensure that you are fully covered.
Even if a full rebuild is not required, underinsuring your building is still a significant issue. When only a portion of a building is damaged by an insured loss, and your building is not insured to the full replacement value, the insurer will apply a financial penalty against the claim. This is known as a co-insurance clause. For example, if you are only insured for half the replacement value, the insurance company will only pay half of the cost to make repairs and you will need to pay the difference yourself.
Ensure that your policies are updated to account for anticipated and unanticipated increases in insurable property value. Contact Park Insurance today to schedule a consultation.