3 -MINUTE READ

Why Replacement Cost Coverage Matters: A Guide for Agents

Jan 16, 2025

As an insurance agent, you’re usually the first in line to face a client’s frustration over rising premiums. Yet, what many clients overlook is that premium increases often signal increased coverage protection. Replacement cost coverage — essential for making homeowners whole after a loss — is directly tied to rising construction costs, inflation, and other economic factors. Explaining why replacement cost evaluations matter and how they impact premiums is key to building trust with clients and properly protecting their assets. Here are some helpful talking points when you are educating your clients. 

What Is Replacement Cost Coverage?

Replacement cost coverage goes beyond simply reimbursing a home’s depreciated value. It enables the policyholder to rebuild their property to its original condition after a loss. This type of coverage accounts for everything from current construction costs to labor and materials. However, with inflation and ongoing supply chain issues driving up these home repair costs, homeowners often see premium increases tied to higher replacement cost evaluations.

According to Ricardo Diaz, SVP of Personal Lines at Jencap, “At the end of the day, you’re paying a premium so that if the absolute worst happens, you get your house back. If a client experiences a loss, they’re already in a horrible position. The last thing they want is to realize they’re underinsured and can’t rebuild one of their most prized possessions.”

Why Construction Costs and Inflation Are Driving Premium Increases

In recent years, unexpected spikes in construction costs have occurred. Labor shortages, material price increases, and demand surges following catastrophic weather events have created a perfect storm of rising expenses.

“When catastrophe strikes, the demand for labor and materials skyrockets — not just for a single home but entire neighborhoods,” explains Danny Walsh, Personal Lines National Practice Leader at Jencap. “This drives up costs, inflating replacement cost evaluations across the board. Homeowners need to understand that these increases in coverage are designed to make them whole in the event of a loss.” 

Educating Clients About Premium Increases

While replacement cost coverage provides peace of mind, the rising premiums can sting — especially when clients don’t fully understand what they’re paying for. You can make a real impact by reframing the conversation.

1. Emphasize the Value of Being Insured
Clients often focus on the premium without considering the potential financial devastation of being underinsured. Walk them through scenarios where replacement cost coverage prevented significant financial hardship, underscoring its importance.

2. Connect Premium Increases to Better Protection
Help clients understand that rising premiums reflect the increased costs of rebuilding, not just carrier adjustments. By staying insured to value, they’re investing in their future stability.

3. Provide Context with Real-World Examples
Explain that recent disasters, like the L.A. wildfires and Hurricane Helene, have exposed significant gaps in coverage for homeowners. These events revealed that many property owners outside traditional high-risk zones faced substantial losses because they underestimated their exposure.

Jencap’s Expertise in High-Value Homeowners Insurance

The stakes are even higher for high-net-worth clients. Making sure replacement cost evaluations are accurate and up to date requires expertise and a proactive approach to risk assessment, which is exactly where Jencap excels. “Our carriers trust us because we’ve built a specialized niche in the high-net-worth personal lines space,” says Walsh. “We focus on high-value homes, where the risks are greater and the needs are more complex.”

How Jencap Stands Out:

  • High-Value Inspections: Aside from the professional and detailed inspections from our high-value carrier partners, Jencap’s team regularly reviews coverage limits and replacement cost to proactively ensure clients are always insured to value.
  • Tailored Solutions: Whether it’s tri-county Florida, Manhattan brownstones, or seasonal homes, Jencap can quickly deliver high limits and complex coverage solutions.
  • Fast Turnaround: “Our team can turn around binding authority contracts in-house on the same day, even for $30M limits,” says Walsh. “It’s part of what sets us apart in the wholesale space.”

For agents struggling to find solutions for challenging Personal Lines risks, Jencap offers answers that others can’t. “We should be your high-net-worth personal lines wholesaler of choice,” says Diaz. “We’re not just fast. We’re experts who take the time to understand your clients’ needs and provide the right coverage, no matter how complex.” Reach out to Jencap today to start exploring your options.

The Jencap Personal Lines Insurance Team

The Jencap Personal Lines Insurance Team

Jencap’s industry-leading personal lines underwriters specialize in high-valued homeowners, primary and excess flood, hard-to-place homeowners, and everything in between. The Jencap personal lines team is the one-stop shop for all your monoline and packed policy needs, with access to 30+ admitted and non-admitted carrier partners.
Construction costs | Extreme weather preparedness | Home repair costs | Replacement cost coverage

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