2022 Homeowner Insurance Trends

12 Jan

It now appears that Covid will still be with us in 2022, and that can have a major impact on a variety of life issues. One of those issues may be homeowners insurance as Covid continues to impact the supply chain and inflation pushes up the cost of just about everything. Keep reading to see how homeowners insurance may be impacted by various trends in 2022. 

Supply Chain Issues May Impact Insurance Claims

Supply chain issues will most likely continue to impact home insurance claims for repairs and rebuilds. While the lumber and labor shortage has eased a bit from the beginning of 2021, demand for new homes and renovation projects as people spend more time at home has continued to make it difficult to find home building supplies as well as the labor needed to complete home repair projects. 

This issue can be compounded if a disaster such as a hurricane or wildfire hits the area where your home is located. In addition to repairs or a rebuild being delayed due to supply issues, as the cost of rebuilding skyrockets, you may find that your current coverage levels will not cover the cost to rebuild your home. Unfortunately, you will be on the hook for any costs once you go over your coverage limits. 

You may want to review your coverage levels with your agent or insurance company to make sure you are still properly covered even with rising construction costs. Another option is to add extended or guaranteed replacement cost coverage which will cover the cost to repair or rebuild your house regardless of the increase in building supplies cost. 

Inflation Pushes Up Cost to Replace Belongings

As inflation continues to climb, it could have an impact on your ability to replace your personal possessions if your home is seriously damaged or destroyed. According to the U.S. Bureau of Labor Statistics (BLS) the annual rate of inflation was 6.8 percent from November 2020 to November 2021.

In addition, the cost of furniture, for a living room, kitchen or dining room has gone up by 14 percent across the nation according to the BLS. This can impact your ability to replace all of your personal possessions if your home is damaged or destroyed. Due to the increased cost of all goods, it is a good idea to check your personal property coverage levels to make sure they will cover the cost to replace all of your personal items in the event your home is completely destroyed. 

If you are currently carrying actual cash value coverage on your personal possessions, you should absolutely consider moving your coverage to replacement value. Actual cash value will take depreciation into account when valuing your property. Replace value coverage will cover the cost of a new item, regardless of depreciation. 

Insurance Industry Will Get More Involved With Combating Climate Change

In 2022, the insurance industry will be getting more involved with climate change and how disasters prompted by climate change impacts its customers now and in the future. Recently, the National Association of Insurance Commissioners (NAIC) and state regulators released a report that looked at how insurance companies can better deal and manage climate related risks for their customers. The report looked at managing climate-related risks, as well as insurance availability and affordability, and consumer education and outreach.

In addition, the Consumer Federation of America, the Center for Economic Justice, the Maryland Consumer Rights Coalition and Consumer Federation of California have all asked the Federal Insurance Office (FIO) to take a more active leadership role in the industry when it comes to climate change. 

While the industry is looking to up their engagement with climate change, it is also up to homeowners to make sure they are fully prepared for the severe weather that may be increasing due to climate change. 

As an example, the NOAA recently changed the definition of an “average” Atlantic hurricane season from 12 to 14 named storms. In 2021, the hurricane season concluded with 21 named storms, this followed the record breaking 2020 Atlantic hurricane season where there were 30 named storms.

If you live in an area that is seeing more frequent storms you may want to upgrade your home with wind resistant roofing and windows to help protect your home (and lower your insurance premium) and make sure you are fully prepared for more severe storms. Flood insurance may be a necessity in these areas as climate change continues to change the nature of storms. 

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