Imagine that you have decided to go buy a new couch; you know the one you want and have the money saved and ready. The day arrives and you go to the store to get the couch only to find out that the price has jumped 40%. You go ahead with the purchase, but because the cash outlay was much higher, it puts a bigger crimp in your assets than you expected.

Now instead of buying a couch, imagine that we are talking about damage to your home. What if you had a tragic fire that destroys part of your house? When you contact your insurance company, you find out that because of various world events and rising construction costs it now will cost 40% more than expected to make the repairs. Unfortunately, your replacement coverage in your policy is not high enough. Would you be able to fund the additional repairs from your assets? What impact would that have on your future financial plans?

For the past year or more, the world has seen a rise in commodity prices thanks to supply chain issues and other factors related to the COVID pandemic and the war between Russia and Ukraine. Lumber prices increased dramatically in part as a result of demand as many who were home decided it was time to tackle that home improvement project that had been on hold. Prices have stabilized somewhat but they remain higher than they were pre-COVID.

That means it is a good time to review your homeowner’s insurance and see what your current replacement value is on your policy – what the insurance will pay to rebuild your home in the event of a total loss. It is possible that your insurance company has already factored in the price increases and has bumped your valuation. One indication of that is if your premium jumped higher on renewal. Higher replacement value equals higher premium cost because the insurance company is taking on more risk.

However, some companies may be expecting the prices to return to a more normal level and might not be making changes proactively. That puts it back on you to review your policy and contact the company to discuss alternatives with an agent. The last thing you want is to put your head in the sand and hope that everything works out in the end. It is better to be informed and then make the decision to do nothing than to ignore the potential problem and hope it resolves itself.

While you are discussing the policy value, take time to review the rest of the attributes of your home listed in the policy. You may find that you have updated something in your house that is not reflected in the valuation – for example, you switched out your laminate flooring for tile or renovated a bathroom, changing it from a half to a full. Regular reviews of your insurance are essential to avoid surprises.

Who knows, you might find a change that saves you some money on your premium. All companies will offer premium credits. Some of them are obscure and by talking about your home and any changes you have made you might stumble into one that saves you money.

In the end, you safeguard your financial future by preventing disasters in your financial present. Regular insurance reviews, especially when there have been changes in the economy, can help you do just that. If you are interested in talking further about this topic or any other relating to your financial present or future, you can reach out to an advisor at John G. Ullman & Associates, Inc. at any point ( We are here to help!