Weather events provide reminder to check homeowners’ insurance

News Enterprise (Elizabethtown, KY)

In the last few months, Kentucky has seen a significant amount of severe weather. The December tornadoes that swept through the western and central parts of the Commonwealth devastated multiple communities, causing much loss of life and property damage. Earlier in the year, Kentucky also saw powerful ice storms causing downed trees and power outages.

During these times, we are reminded to ensure our homeowners' insurance is up to date and covers our needs.

To make matters more complicated, the cost of building a home — referred to as "reconstruction cost" in the insurance world — has risen significantly recently. According to the National Association of Home Builders, lumber and other construction materials costs have risen so significantly that the cost of building a new single-family dwelling has increased by $18,600 in just four months as of Dec. 29, 2021. This represents an issue for homeowners, particularly regarding their homeowner's insurance.

Most homeowners' insurance policies are what is known as "replacement cost" policies, meaning the insurance company is obligated to pay the cost of the reconstruction of your home — not simply pay the market value — in the event of a covered loss, such as wind or fire. However, this replacement cost coverage still has a limit on it.

For example, your homeowner's insurance may guarantee replacement of your home, up to $200,000. This may have been acceptable two years ago, but today, your home may cost $250,000 or more to rebuild. If you have a covered loss, your homeowners' insurance might not have enough coverage to rebuild your home.

A recent review of a homeowner policy showed a home was covered for $80,000. According to calculations, it would take approximately $240,000 to rebuild his home. Strong recommendations were made for some changes to his homeowners' insurance.