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Only 9% of Homeowners Adjusted Limits for Inflation, Supply Costs

While construction costs on single-family homes were up nearly 17% in 2022, 56% of homeowners have not reviewed their homeowners policy in the last year.
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only 9% of homeowners adjusted limits for inflation, supply costs

Despite 40-year-high inflation rates and record home construction costs in 2022, more than half of U.S. homeowners haven't even checked whether their insurance coverage is keeping up, according to Policygenius' “Home Insurance & Inflation Shopping Survey."

While construction costs on single-family homes were up nearly 17% in 2022, according to the U.S. Census Bureau, 56% of homeowners have not reviewed their homeowners policy in the last year to see how much coverage they had, Policygenius reported. And only 9% of surveyed homeowners increased their home's coverage limit in the last year to account for rising construction costs and inflation.

Most homeowners are a bit shaky about whether they have enough insurance to cover their home. Only 1 in 3 homeowners claimed to be “very sure" their homeowners coverage limit is high enough to cover their home's entire rebuild cost. Additionally, 83% of homeowners either don't have or aren't sure if they have inflation guard coverage to automatically increase their coverage each year to keep up with inflation.

This may come as a shock, but homeowners who proactively checked their policies last year were more certain of where they stand. Forty-five percent of homeowners who reviewed their policy were very sure their house was fully insured, compared to only 24% of those who didn't check.

And 2 in 3 homeowners who reviewed their policy knew they had either guaranteed replacement cost coverage or extended replacement cost coverage, with 20% still unsure whether they had either coverage and 12% not having either. But among homeowners who hadn't checked their insurance in the last year, 42% did not have either guaranteed or extended replacement cost coverage, with 44% being unsure and 15% not having either.

Those who reviewed their coverage were much more likely to increase their limits or have at least one coverage feature in their policy that accounts for high rebuild costs. Of homeowners who did check their coverage, 22% either increased their coverage limits or added a new coverage feature.

However, those who checked were also more likely to take action to lower their insurance costs. They were more likely to get rid of coverage features they no longer felt they needed (7% versus 3%), increase their homeowners deductible (5% versus 2%) and bundle their home and auto policies (14% versus 10%).

Cost-saving actions were the most common among homeowners ages 18 to 34, who were also nearly twice as likely as other age groups to switch insurers for cheaper rates, at 31% compared to 13% for 35-to-54-year-olds and 7% for those over the age of 55. Additionally, 14% of 18-to-34-year-old respondents said they got rid of extra coverage features they didn't need to lower their costs, compared to only 3% of homeowners ages 35-54 and 3% of those over 55.

AnneMarie McPherson Spears is IA news editor.  

Thursday, April 27, 2023