TWIA warns of larger than usual building cost adjustment for 2021

The Texas Windstorm Insurance Association (TWIA) will make a larger than usual change to its adjusted building cost (ABC) endorsements in 2021.

TWIA said the annual automatic adjustments to the dwelling limit of liability will be around 2 percent in 2021, though it will vary according to location. Between 2018 and 2020 the annual adjustments were always below 1 percent.

The change affects all residential renewal policies with an effective date on or after September 1, 2021.

The ABC endorsement, which is automatically included in all TWIA policies, is commonly referred to as the inflation guard endorsement, and is designed to ensure the limit of liability amount remains aligned with increases to local building costs. It does not guarantee the dwelling is adequately insured for its full replacement cost.

The ABC endorsement adjustments are tied to the Marshall & Swift/Boeckh (MSB) building cost index. This year the US has experienced large increases in the cost of lumber, raw materials, and labour. TWIA noted that building costs in its coverage area increased by between 4.4 and 6.2 percent.

TWIA advised policyholders who wish to reinstate their previous year’s limit of liability to contact their agent. Lowering the limit of liability may affect eligibility for replacement cost coverage, it noted.

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