When was the last time you sat down with your insurance agent for a review of your insurance coverage? Do you simply rely on an estimate of the personal property coverage the company calculates based on your home’s worth? That could be an expensive mistake. Simply stated, inflation is a loss in the purchasing power of the dollar due to the constant upward increase in prices. Each year the dollar buys less than the previous year.

Virtually all economies experience inflation to some degree. Sometimes price rises get out of hand and the economy is trapped by hyperinflationary pressures. In Germany in the early 1920s prices doubled every 49 hours. Workers were paid daily so they could buy food. Hungary experienced so much hyperinflation after World War II that at one point prices doubled every 15 hours! More recently, inflation in Zimbabwe has similarly soared. Even a small steady rise in prices erodes the currency making it more expensive to replace lost or destroyed items. A set of dinnerware purchased for $200 in 1970 would cost $1,100 to replace with the exact item today!

If your insurance coverage hasn’t kept pace with inflation you need to update it. Begin by making a realistic inventory of your household items. Don’t forget your clothing. Depending on where you shop, replacing a closet full of clothes could amount to thousands of dollars. Engage an independent appraiser to value your personal property for insurance purposes. It will be money well spent!