Let's Talk About Inflation

Notice a bump in your Homeowners Insurance premiums? Here’s the deal. It’s not because Pioneer is just raising rates willy-nilly. No, it’s because of inflation. Most insurance companies, including Pioneer, have an inflation guard on policies. With inflation at a record high, however, that number has increased even more than normal which means this is a great time to speak to your Independent Insurance Agent about the “Coverage A” limit on your Homeowners Insurance policy.

Coverage A includes coverage for your home and attached structures, and should reflect the cost to rebuild it if something catastrophic happens. When you signed on the dotted line, that amount was likely much lower than it is today. So, it’s probably time to update.

To be clear, Coverage A should be set based on the cost to rebuild your home, not the current value of your home. It’s important to differentiate the two.

To put it simply, if the cost to rebuild your home a year ago was $200,000 but it would cost $250,000 today, you now have a $50,000 gap in coverage that would come out of your own pocket. Yikes.

Another way to think about it is: how much does a two-by-four cost at the store? It used to be two bucks and, at one point, it went up to nine. Now think about how many two-by-fours are in your home. Is your head spinning yet?

Labor shortages, natural disasters, the cost of building materials, record high fuel prices, and distribution issues are all things we’ve heard repeatedly in the news over the last year or so. These are all contributing to the cost to rebuild your home now due to a lack of supply and increase in demand.

While we know this news is not pleasant, it’s important. And, while we’re at it, it’s important to update your policy from time to time anyway. Especially if you’ve done any updates or additions. If you’ve made changes to your home that would increase the cost to rebuild by $5,000 or more you need to let your agent know within 90 days so that we can adjust your policy. These all impact the accuracy of your Coverage A limit.

Pioneer offers a couple of endorsements (that’s insurance talk for policy add-ons) which essentially increase coverage above and beyond your listed Coverage A limit by 25 or 50 percent. This is a great option if you want a little extra sense of security.

We hope we made that make sense, but if not, call your trusty Independent Insurance Agent and they’ll walk you through the rest. That’s it. That’s all you do. Why? Because our agents are awesome. And, also because they have tools to accurately estimate the cost to rebuild your home that you may not have access to.

Disclaimer: This is a general interpretation of processes and coverage. All claims are subject to Insuring Agreements, Endorsements, Exclusions, Terms, and Conditions of the Policy.

Have any questions about what you just read? Please contact your Independent Insurance Agent or email us at socialmedia@psmic.com!