Changing climate and building insurance in USA

In USA mostly the home insurance policies pay only the sum insured of total loss. This is based on the estimate which is calculated on the basis of cost occurred for rebuilding the house. Customers need to be careful while calculating the rebuilding expense. The customers rely on the insurance provider company to provide the required tools to estimate the cost of rebuild their home. Sometime a situation may occur that a customer insures for a particular amount which finds to be enough but later the rebuilding cost may increase. So this will create a situation of under insurance.

Today many insurers are using the high indexation rate which increase the sum insured for the renewal of home building policy. In USA the average sum insured in 2006 was $220967. This has been an increase of 7.9% from the average amount of $ 209344 in last year.


Many of the insurers who had participated in the review was actively voiced the issue of underinsurance factor. The insurers hardly has made any change to their practises which has been causing the problem of under insurance. Some insurance companies offer a cost per square metre programme to estimate the value to be insured. This feature ignores building conditions, features, ever increasing rebuilding costs.

Every year in USA economic losses occur due to cyclones. It has dramatically increased over the past few years. The climate is changing and people need to protect themselves and their buildings. It has great socio economic effect on the nation’s economy and its developments.