COVID-19 has changed home values significantly. In some cities, home prices have increased 25%-40%. Home building prices like lumber have increased 25% to 50%. What has happened to replacement cost on homes? Have you reviewed your homeowners' book to determine if Coverage A is keeping up with these increases?
Inflation guards only go so far. If replacement cost increases 25%, do you have a co-insurance problem? Does your client have a co-insurance problem? Do you then have an E&O problem?
Think about where all that lumber is going. It is going into making homes more valuable. The replacement cost is increasing because the cabinets are nicer, the deck is larger, the basement is being finished, new home offices added, and so on and so forth.
Combine the inflation in the cost of building materials, labor, and the expansion of home/improved quality of accessories, and a high probability exists that your homeowners' book is materially underinsured.
(For all those thinking that the policies they sell protect homeowners from co-insurance issues in these situations, I encourage you to read those policies very, very carefully.)
If you are in business to protect your clients, contact them and update their Coverage A. If you are in business to increase sales, contact your clients and update their Coverage A. If you are just scared of E&O claims, contact your clients, and update their Coverage A. An agent can only succeed by actually talking to their clients about their coverages and changes in their homes.
NOTE: The information provided herein is intended for educational and informational purposes only and it represents only the views of the authors. It is not a recommendation that a particular course of action be followed. Burand Insurance Education, Burand & Associates, LLC and Chris Burand assume, and will have, no responsibility for liability or damage which may result from the use of any of this information.
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