At Haughn Insurance, we believe in being proactive—not reactive—especially when it comes to protecting your home. In Ohio, recent years have seen sharp increases in the costs of labor, materials, and regulatory compliance. Those increases affect more than just your building budget—they also affect your insurance coverage, particularly replacement cost coverage. Understanding those effects can mean the difference between being covered—or being underinsured—if disaster strikes.
What is Replacement Cost?
When your homeowner’s policy includes replacement cost coverage, what it means is this: if your home is damaged or destroyed, the insurer will pay to rebuild your home using similar kind of materials and construction—rather than simply paying current market value or what it would sell for. It’s about restoring your home, not selling it.
That said, replacement cost needs to be enough to match today’s construction environment. That’s where the challenge lies.
Inflation & Construction Costs: What’s Happening in Ohio
Ohio has been feeling the pinch of rising costs, just like many other states:
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Material Costs: Lumber, concrete, steel, roofing, electrical, plumbing supplies—these have all climbed significantly in recent years.
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Labor Costs: Skilled labor is more in-demand than ever. Sometimes there are shortages, or regional wage increases, which push cost of construction upward.
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Regulatory & Code Requirements: Building codes evolve. When older homes are rebuilt, they often need to meet newer, stricter standards. That means added costs for everything from foundations and framing to electrical or plumbing systems.
These pressures combine: material + labor + administrative/regulation = higher cost per square foot to rebuild or repair.
Why Replacement Coverage Can Lag Behind
Because of inflation and escalating construction costs, many policyholders are discovering that their replacement cost limits haven’t kept up. A few reasons why:
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Coverage Set Years Ago: If your coverage limit was determined just a few years back and hasn’t been adjusted, it may now be too low.
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Inflation Guard or Indexing May Be Insufficient: Some policies include an inflation guard or automatic adjustments, but these often assume a modest growth rate. In times of rapid inflation or supply-chain stress, those increases may lag actual cost increases.
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Misunderstanding Between Market Value vs Replacement Cost: The “value” of your home on the market often includes land, location, etc. Replacement cost is strictly what it takes to rebuild. Market value can rise (or fall) for many reasons, but that doesn’t always correlate with what replacement will cost.
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Endorsements & Limits: Many policies have endorsements (add-ons) for extended replacement cost or guaranteed replacement cost. But these come with higher premiums and sometimes more restrictions. If you don’t have those, you may be carrying risk.
Consequences of Being Underinsured
Being underinsured means that if you have to rebuild (from, say, fire, storm damage, etc.), your policy may not cover all the costs. What that looks like:
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You may have to pay out of pocket to complete repairs or reconstruction to original size or quality.
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You might have to make compromises (lower quality materials, simpler design) just to stay within policy payout.
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In more severe cases, you may be left with unresolved damage, which can reduce property value, affect resale, or compromise safety and comfort.
What Ohio Homeowners Should Do Now
At Haughn Insurance, we recommend taking these steps so your replacement coverage stays strong and relevant:
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Review your policy annually
Don’t wait until renewal time only. With the fast pace of change in construction costs, even a year can make a big difference. -
Talk with your agent about inflation guard and endorsements
Ask whether you have an inflation guard in your policy. Ask if extended or guaranteed replacement cost is an option—and what premium difference that makes. -
Get accurate rebuilding cost estimates
Rather than relying on past estimates, get current estimates based on Ohio’s material, labor, and regulatory costs—especially for your area (urban vs rural, zoning, permitting costs, etc.). -
Document improvements & updates
Have you renovated or upgraded part of your home? That adds to its replacement cost. Plumbing, roofing, siding, HVAC systems—keep receipts, plans, permits. All of these matter when adjusting your coverage. -
Compare coverages broadly
Not all insurance companies offer the same options. Some may offer more generous guarantee or upgrade endorsements. Some may have limits or exclusions you weren’t aware of. Be sure you understand what’s included and what’s not.
How Haughn Helps
Because we’re based in Central Ohio and work with many clients throughout the state—including homeowners and contractors—we’ve seen firsthand what these cost pressures can do. Here’s how we help:
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We tailor insurance policies to reflect actual local replacement costs—not generic or out-of-date nationwide estimators.
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We work with a variety of carriers to find endorsements (guaranteed replacement, extended cost, ordinance & law coverage) that match our clients’ needs.
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We guide clients through the decision trade-offs: what extra premium is involved versus the peace of mind and financial protection.
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We provide tools and resources so clients can stay informed—about material cost trends, labor shortages, building code changes in Ohio.
Key Takeaways
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Rising inflation and construction costs in Ohio mean replacement cost values must keep up—or you risk being underinsured.
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A policy that was sufficient a few years ago may now leave gaps.
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Proactive annual reviews and adjustments are essential.
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Endorsements like inflation guard, extended or guaranteed replacement cost, ordinance or law coverage can add cost, but they may keep you from paying far more out of pocket in a loss.
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Working with a trusted, local insurance agency (like Haughn) who understands Ohio’s market can make a significant difference in ensuring that coverage fits your actual risks.
