Let’s talk about something a lot of property owners haven’t checked in a while—your insurance limits.
Reconstruction costs have quietly soared over the last decade. And by “soared,” I mean they’ve increased by more than 60%. Whether you own a home, an office building, or another commercial property, that statistic should make you pause. If your policy hasn’t kept up, you could be underinsured—and that can lead to major problems at claim-time.
Why the Huge Jump?
We’re seeing the fallout from a mix of supply chain disruptions, rising labor costs, and material shortages. According to a recent report from Verisk, residential reconstruction costs jumped 63.7% from 2014 to 2024, while commercial reconstruction rose 58.4%.
To put that in perspective, general inflation over the same period was about 33%. That means construction costs have nearly doubled inflation. So a $500,000 rebuild in 2014? That same project could now run you closer to $800,000. Even something like a $10,000 roof repair in 2014 could now cost $16,000 or more.
This isn’t just about total losses—it’s everyday repairs and claims, too.
Insurance Is Feeling the Pressure
Insurance companies have taken a hit as well. With claims costing more across the board—and natural disasters growing more frequent—the industry has been bleeding financially. In fact, AM Best reported a $2.6 billion underwriting loss for the U.S. property and casualty sector in 2024. That’s an improvement from 2023, but still not sustainable long-term.
To keep up, insurers are raising premiums. It’s not ideal, but it’s a direct response to the rising cost of paying out claims.
The Bigger Problem: Many Policies Haven’t Kept Up
Even with rising premiums, a lot of policies haven’t adjusted their limits to match today’s reconstruction values. A 2025 study found that 74% of property owners are underinsured, and 36% are severely underinsured.
This becomes a major issue when policies include co-insurance clauses. These clauses penalize you for being underinsured—even if your claim doesn’t exceed your policy limit. For example, if you’re required to carry insurance equal to at least 80% of your property’s value, and you only carry 70%, your claim payout could be reduced, even if your claim is less than your policy limit. That’s an expensive problem.
Three Steps to Protect Yourself
Here’s what you can do to make sure you’re protected:
1. Check Your Coverage Limits
Haven’t updated your property limits in a while? Now’s the time. Make sure your insured value reflects today’s reconstruction costs. And be aware of any co-insurance clauses in your policy.
2. Understand How Your Claim Would Be Paid
Not all policies pay out the same way:
- Actual Cash Value: Factors in depreciation—meaning a lower payout.
- Replacement Cost: Covers rebuilding, but only up to your policy limit.
- Extended Replacement Cost: Covers the full cost to rebuild, even if it goes over your limit, up to a designated % over that limit. This is helpful in a volatile construction market—but you still need a solid base limit to start with.
3. Ask Smart Questions
Ask your agent to explain the offers you get—especially how claims would be handled and what’s excluded. If an insurance quote seems suspiciously low, it probably comes with compromises. Make sure you understand what those are.
Don’t Wait for a Loss to Find Out
Reconstruction costs aren’t slowing down anytime soon, and being underinsured can lead to serious financial setbacks when you least expect it.
At Eclipse, we specialize in helping clients navigate coverage gaps, co-insurance pitfalls, and confusing policy terms—before disaster strikes. Let’s take a closer look at your policy and make sure you’re not left footing the bill if the unexpected happens.
Not sure where your coverage stands?
We’re here to help. Reach out to Eclipse for a coverage review that keeps up with today’s reality.
About the Author
Larry St. John is a 20+ year veteran of insurance and risk management for the construction and electronic security industries.
He can be reached at LStJohn@eclipseinsurance.com
