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kitchen being rebuiltTo help guard against inflation, Farm Bureau Insurance home insurance policies include an inflation protection endorsement. The endorsement automatically adjusts the amount of coverage each year based on an inflation factor. This helps your home insurance coverage keep pace with inflation as costs for construction materials and services go up—but it may still not be enough.

Over the last year there have been dramatic increases to construction costs, and as a result, there will be a larger than normal adjustment to the inflation factor starting with policies that renew on and after December 1, 2021. The inflation factor is a standard measurement the insurance industry uses to adjust coverage limits based on an expected rate of inflation. The inflation factor varies by geographical area and varies each year. Even though the inflation factor is meant to help coverage keep pace as costs go up, it may not be enough. You should review your policy and coverage carefully and discuss any concerns you have with your Farm Bureau Insurance agent.

Home Improvement Projects

Over the last year, homeowners have been busy tackling a variety of home improvement projects. If you have made enhancements to your home, you’ll want to make sure you update your policy and your coverage to take any upgrades into account. Improvements and high quality finishes all impact the cost to rebuild or repair should you have a loss. A few examples of improvements you’ll want to review with your Farm Bureau Insurance agent include:

  • Adding square footage to a home
  • Significantly altering the floor plan of a home
  • Renovations to home systems
  • Remodels of kitchens and baths
  • Finishing basements or attics
  • Adding decks, patios or porches
  • Upgrading interior/exterior finishes

The Difference between Insurance to Value and Market Value

When reviewing your home insurance coverage, it is also important to understand the difference between insurance to value and market value. Insurance to value represents how the policy coverage amount compares to the cost of rebuilding. Insurance to value matches the amount of coverage that is needed to rebuild based on current construction costs. Insuring a home at less than 100% insurance to value could mean you may not have enough coverage to replace the home in the event of a total loss.

Market value is based on what someone is willing to pay for the property and includes the value of land. There may be a market premium or discount based on supply and demand of housing in the area, and it is also influenced by factors such as schools and crime. Market value does not represent what it will cost to rebuild a home.

Get an Account Review

Your Farm Bureau Insurance agent can help answer questions you may have about the cost to rebuild based on your home’s unique construction characteristics and based on current costs for materials and services. A lot can change over the course of a year. Setting aside time each year to complete an annual review with your agent will help ensure your coverage is updated routinely based on your current needs and based on the increasing cost to repair or rebuild your home. You can find a Farm Bureau Insurance agent or office near you online or reach a customer service representative at 1-800-799-7500.