Inflation has been a topic at the forefront of developing news. According to the U.S. Bureau of Labor Statistics, the Consumer Price Index for All Urban Consumers rose to 7% in 2021.
Insurance Companies are experiencing the effects of inflation as well. They now require additional funds to repair or replace buildings, equipment, and/or autos during claims. This has to do with several market factors involved in settling claims:
Many people are unaware that it is their responsibility to confirm the value of their property is correct, not the insurance company’s. If property, which including dwellings, outbuildings, and farm equipment, is under-insured (by more than 20% for most policies) at the time of a claim, most policies include a "co-insurance" clause, in which the percentage at which you were under-insured is calculated and deducted from the claim payments.
Keeping up with correct property values becomes a more urgent concern during periods of high inflation because rapidly rising values can increase the likelihood that the co-insurance clause could get applied.
As if that wasn’t complicated enough, the insured value of your property can be different depending on if your insurance policy has a Replacement Cost settlement (which does not depreciate your home or property’s value based on age) or Actual Cash Value settlement (which applies depreciation based on age).
Our Agency can assist in correctly determining the insurance value of your home, outbuildings, and other property to help minimize the chance of being under-insured. Reach out to us today to set up your policy review.