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Even if you aren’t moving or remodeling, the increased cost of building materials will affect your home insurance coverage in multiple ways.
How Pandemic-Triggered Home Inflation Costs Are Impacting Premiums
The real estate market is HOT! And prices for new and existing homes are at record highs. With everyone moving, upgrading, and remodeling, home insurance is more top-of-mind—and more important—than ever. But despite Covid protocols starting to ease, pandemic-triggered lifestyle changes have caused insurance premiums to spike. Let’s take a closer look at what’s behind these sudden rate spikes:
Homeowners Insurance, Inflation, and the Rising Cost of Building Materials
While we hope no one ever has to experience a total loss, it’s important to consider the financial impact of having to rebuild your home and how these costs are tied to inflation. Rebuilding a home after a loss requires a lot of raw materials—and recently the prices have risen to alarming levels. According to the U.S. Bureau of Labor Statistics, the cost of some construction materials tripled in the last decade. And in the last year alone, the price of copper—used for wiring and plumbing—has increased more than 50%, while the cost of lumber has doubled.
Demand vs. Supply
So what’s driving the rising cost of materials? Covid shutdowns, labor shortages, tariffs, renovation and building demands have all played a part. People are spending more time at home—working, studying, self-isolating—and making spaces more utilitarian, multifunctional, and comfortable has become a top priority. Covid-driven home renovations and upgrades have created a massive increase in demand for building materials, and supply has not been able to keep up, causing prices to spike.
The Impact on Homeowners
Even if you aren’t moving or remodeling, increased cost of building materials will affect your home insurance coverage in two major ways:
- Rate Increases. The rising costs of building materials—coupled with the recent uptick in natural disasters—have, in turn, caused home insurance premiums to increase, as policies up for renewal are often adjusted for inflation.
- Inadequate Replacement Cost. In addition to the effect on premiums, another repercussion of home inflation is that current replacement cost limits may be too low as a result of these dramatic increases. In other words, since your cost to rebuild now is likely much higher than it had been pre-Covid, you may not have enough coverage to protect your home and finances should you experience a loss.
The Bottom Line
While this incredible increase in building material costs may be temporary, no one knows just how temporary this situation will be. Prices may remain high for months or years following a return to “normalcy” within the supply chain. Until then, ask your agent to ensure you have adequate policy limits and protections in place. Be sure to inform them of any recent upgrade or improvements you’ve made—plumbing, electrical, roof, alarm system, etc.—to ensure you’re taking advantage of any and all available discounts.
Forest Insurance welcomes your insurance-related questions. Visit us at www.forestinsured.com or submit a question to info@forestinsured.com.
