If you own an income property, you're probably well aware that having the right homeowners insurance policy in place is key. Without proper coverage, you could wind up responsible for costly damage in the event of a weather-related incident.
In fact, as this year's hurricane season kicks off, now's a really good time to review your homeowners insurance policy and make sure you're satisfied with your level of coverage. In recent years, storms have grown increasingly intense, and even if you don't happen to live in a known hurricane zone, you never know when a major storm might pay a less-frequented city a visit (just think about Hurricane Sandy, which battered parts of the country that normally don't have hurricanes on their radar in 2012).
In 2020, between storms and wildfires, there were 22 separate billion-dollar weather- and climate-related disasters, according to the National Oceanic and Atmospheric Administration. There also were 30 named Atlantic storms, which is a seasonal record, and 12 of those wound up making landfall in the U.S.
But while reviewing your homeowners coverage ahead of hurricane season is always a good idea, this year, it's even more important than usual. Here's why.
Make sure you're adequately protected
There's a reason new home construction has grown exponentially more expensive in recent months -- the cost of lumber and other common building materials has soared in the past year as a result of supply chain disruptions and shortages. As such, the homeowners policy that was once sufficient for your property may now fall short as far as replacement coverage goes.
Homeowners insurance policies include replacement cost provisions, but some policies are capped at a certain level. And that could prove problematic if your home sustains damage and it now costs more to fix it.
Lumber prices are already up 67% this year and a whopping 340% from just a year ago. As such, the cost of repairing or replacing your home may be much higher than you'd normally expect, and so now's the time to make sure your insurance policy offers enough coverage in light of that. The last thing you want is to see your property sustain weather damage only to have your insurance policy fall short, leaving you on the hook for the difference.
Don't forget flood insurance
In addition to checking on your level of coverage for your homeowners policy, you may want to take the opportunity to reassess your flood risk. It's estimated that 25% of flood insurance claims come from outside of what's considered a high-risk zone, so if you've held off on flood insurance due to the cost involved, now's the time to reconsider -- before those harsh summer storms really kick into gear.
When you own an income property, there are different costs to bear, and insurance is only one of many. But it's also an expense you shouldn't skimp on. Doing so could prove disastrous if a weather event strikes, so take the time to assess your coverage now -- before it's too late.