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Why Your Coverage Limits Might Be Too Low in 2025: What Every Homeowner Should Know


Home under renovation
Inflation, cost of materials, and labor have driven up the cost of rebuilding homes. Has your insurance kept up?


Your Policy Might Not Be Keeping Up With 2025 Costs


Inflation. Labor shortages. Material price spikes. If you haven’t reviewed your homeowners insurance policy in the last year or two, there’s a real chance it doesn’t reflect what it would cost to rebuild or replace your home today.


Why your coverage limits might be too low in 2025 isn’t just an insurance trend — it’s a growing concern for New Jersey homeowners.


At Overmyer Insurance Agency, we’re seeing more and more situations where clients thought they were fully protected... until they weren’t.


Here are the five most common questions we get from homeowners just starting to explore this topic.


1. How do I know if my current coverage limits are high enough?


Start by looking at your dwelling coverage — this is the amount your insurer will pay to rebuild your home in the event of a total loss.

Ask yourself:


  • Has your home been renovated or upgraded in the last 3–5 years?

  • Has your insurer completed a replacement cost estimate (RCE) recently?

  • Are your limits rounded or outdated (e.g., stuck at $400,000 when rebuilding would cost $600,000)?


You should also check your personal property (contents) and liability limits. These may have been set years ago and never revisited, even as your lifestyle or assets changed.


💡 Tip: A quick policy review with an agent can uncover gaps and help ensure your limits match today’s risks.

2. What’s the difference between market value and replacement cost?



Many homeowners assume they should insure their home for its market value — what it would sell for in today’s real estate market.


But that’s not what your insurance is for.


Insurance is based on replacement cost — what it would cost to rebuild your home from the ground up using similar materials, craftsmanship, and labor today, regardless of location or market conditions.


In 2025, that number could be significantly higher due to:


  • Increased labor rates

  • Material shortages

  • Supply chain delays

  • Local code upgrade requirements


💡 Tip: If you live in an older home, your rebuild costs could far exceed what a buyer would pay — especially if you have custom finishes or historic details.

3. Why did my insurance company increase my dwelling coverage this year?


Many NJ homeowners have seen their policies renew with higher dwelling limits — and higher premiums. While it might feel like a rate hike, what’s happening is actually a protective adjustment.


Most insurance carriers use inflation guard endorsements and updated valuation tools to automatically increase coverage based on national construction trends and localized building costs.


This helps ensure your policy keeps pace with inflation — without you needing to update it manually.


💡 Tip: It’s a good idea to confirm that these increases are accurate for your specific home. Sometimes the formulas over- or underestimate actual rebuild costs.

4. Will my policy cover the full cost to rebuild if there's a total loss?


Not always — and that’s the scary part.


If your coverage limits haven’t been updated, you could be left with tens or even hundreds of thousands of dollars in out-of-pocket expenses in a worst-case scenario.

Some policies also have:


  • Coinsurance clauses, which reduce claim payouts if your home is underinsured

  • Coverage caps, limiting your payout to a specific dollar amount

  • Excluded upgrade costs, such as bringing electrical or plumbing up to code


Extended replacement cost or guaranteed replacement cost endorsements can help — but they must be added to your policy.


💡 Tip: Ask your agent to explain how your policy would respond in a total loss. The time to find out is before you need it.

5. What should I do if I think my limits are too low?


If any of this feels familiar — or if you haven’t reviewed your policy in a few years — now is the time to act.


Here’s what we recommend:


  • Request an updated replacement cost estimate from your agent

  • Review your dwelling, personal property, and liability limits

  • Ask about inflation protection and extended replacement cost endorsements

  • Consider whether your valuables (jewelry, fine art, etc.) need to be scheduled


And most importantly — don’t just auto-renew your policy without reviewing it. A 15-minute conversation can prevent a six-figure gap.


💡 Tip: At Overmyer Insurance Agency, we offer free policy reviews — no pressure, just clarity.

Let’s Make Sure You’re Covered for the Realities of 2025


Homeowners insurance isn’t set-it-and-forget-it. With the cost of everything rising in 2025, your policy should evolve, too.


At Overmyer Insurance Agency, we specialize in helping NJ homeowners make sense of their coverage and adjust it as needed — so they’re fully protected when it matters most.


🏡 Let’s review your policy and make sure your limits still make sense.📞 Call us at (908) 840-4335 or 📩 email us today for a free coverage check-up.


 
 
 

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