The State of Colorado has always been an attractive destination for people who enjoy the outdoors. Now more than ever, it seems people are choosing Colorado not just for a winter getaway, but as a place to call home. As a result of the market pressure that the ever-increasing population has caused, property values have skyrocketed in the Rockies. For homeowners that means two things: 1) your home is likely worth a lot more than when you purchased it; and 2) you could be woefully underinsured.
So, how do you make sure any increase in your home value remains a gift and not a curse? Two words: inflation protection. Does your current homeowners’ policy provide inflation protection? How do you find out? First, get a copy of your policy from your insurance carrier if you do not already have one, and review it to see if it includes an “inflation guard” endorsement. An inflation guard endorsement provides an enhancement to your insurance coverage over and above the written policy limit to cover increase in the cost of repair or replacement.
Okay, you have an inflation guard endorsement in your policy. Great! But, has the protection provided under the policy kept up with the inflation in your town? Inflation guard endorsements are typically written to account for an average expected inflationary rate of property values and will provide for annual incremental increases in insurance coverage. Unfortunately, for those attractive markets like Denver, your inflation guard coverage may not keep up with the actual inflation. So now what? Do your research and find out the current value of your property. There are many online tools to check the value of your property or you can engage a professional property appraiser to provide you a current appraisal, which is likely the most accurate option.
Your next step is to call your insurance company, agent, or broker to validate that your insurance guard coverage provides sufficient insurance to match the current value of your property, and if not, increase your coverage to a sufficient amount.
Under many insurance policies, your insurance company may not have a duty to tell you that you are underinsured. For that reason, and many others, you have to be diligent in protecting your home or a total loss of your property could also mean a devastating financial burden.
