Does Inflation Mean Your House is Not Fully Insured?
We can easily see the effects of inflation at the grocery store and gas pump. But inflation impacts so many other aspects of our lives as well, including homeowners insurance.
Most houses are insured with replacement coverage, which means that the policy pays for how much it would cost you to replace your house and personal property. Homeowner's policies typically have a coverage limit -- the maximum amount the insurance company will pay.
The recent spike in housing costs, such as building materials and labor, may mean that your policy is inadequate because the coverage limit is lower than the replacement cost. You could be stuck with the difference in cost if damage to your house occurs.
While you are reviewing your homeowner's insurance, don't forget the "80% Rule." As Investopedia puts it: "The 80% rule means that an insurer will only cover the cost of damage to a house if the owner has purchased insurance coverage equal to at least 80% of the house's total replacement value."
So give your insurance agent a call and make sure you are sufficiently covered.
The obvious choice -- Talking Heads and "Burning Down the House."