Record costs for building materials will soon have an effect on what you pay for homeowners’ insurance.
In March 2020, prices started to increase due to production slowdowns because of the COVID-19 pandemic. Now builders see higher prices for lumber and other supplies that go into building a new home.
If your home catches fire and you need to rebuild or renovate, you might find that you don’t have enough coverage to put things back to where they were, depending on the company you’re with.
Sam McLean, a Lima Allstate agent, says many insurance companies have something they call rebuildable replacement cost factors built into your policy “so we know that we will have enough money to be able to rebuild it in case of a catastrophe, like a fire or tornado or something like that,” McLean said.
Another factor affecting your insurance rates will be higher labor costs.
“What’s going to happen over the next few years is you’re going to see your home insurance costs go up because of that,” McLean said.
McLean said agents can calculate what it would cost to replace your home under current building material prices.
“We have a program built into our system where we take the characteristics of the home size, what it’s made of, how old it is, how old the roof is and that determines what that rebuildable replacement cost is,” McLean said.
McLean says it’s important that homeowners know what to expect when they get their next bill.
“I hope that the word just gets out and helps them understand that what you have your home insured for, you need to have enough money built in to replace it. You will need it to be rebuilt — like kind, like quality at today’s price, brand new,” McLean said. “With the way that labor rates and the cost of materials are going up, we’re talking sometimes 20 to 30%, so that’s going to affect the cost of your insurance.”
McLean said you shouldn’t expect your insurance rates to go up that high, though.
“I don’t think 20 to 30%, but you’re going to see it go up. You’re going to see some small increments. I would not be opposed to 10% to 15%, and you’re going to see it’s going to gradually go up,” McLean said. “People who have current policies should be on the lookout for a price increase on their homeowners’ policy just because of the rebuildable replacement costs.”
This article is written by Sam Shriver from The Lima News, Ohio and was legally licensed via the Tribune Content Agency through the Industry Dive publisher network. Please direct all licensing questions to firstname.lastname@example.org.