Why Is the Replacement Cost of Your Home Increasing?
If you lost your home and had to rebuild it, do you know how much it is worth? The dollar amount may surprise you. No one wants to think about the catastrophic event of losing their home, but everyone must prepare for it. Conner Insurance helps customers prepare for this scenario. Let's take a closer look at this, along with why homeowners insurance premiums are rising.
How Insurance Coverage Works
Insurance on your home begins with "Coverage A," or the coverage of your main structure. This dollar amount is the total cost to rebuild your home from the ground up, including materials and labor at today’s prices. The coverage that is assigned to your home is often more than what you paid for your home, and it has substantially increased in recent years for a few key reasons. This, in turn, is creating homeowners insurance premiums to rise.
Severe Weather Events
The number of weather-related events in the US is increasing. In 2018 and 2019 combined, there were 28 disasters, however, in 2020, that number rose to 22. Last year was not far behind, at 18 events with losses exceeding $1billion in damage. This increase in severe weather caused 39% of all U.S. home claims.
Higher Material Costs
With the cost of building materials up an average of 26%, homes have become more expensive to fix and replace. Surprisingly, homeowners forged ahead with their home improvement projects during the pandemic, purchasing lumber in large quantities. Since sawmills were closed, the wood supply dwindled and created an ongoing shortage. According to Forbes, lumber prices are up 188% since the beginning of the pandemic, and the National Association of Home Builders says the higher lumber prices have added at least $24,000 to the price of a typical new single-family home.
Increased Labor Costs
The rising material costs alone would play a heavy role in a claims situation if your home needed to be repaired or rebuilt. Unfortunately, that's not the only increase. Nearly 90% of contractors are having a hard time finding craft workers, and 88% of firms are experiencing project delays. As a result, high labor costs drive up the price of rebuilding your home, leading to a rise in home insurance.
Why Rates Cost More
With the increased volume of claims and the rising costs of materials and labor, insurance companies pay out more for homes to be repaired and/or rebuilt. When an insurance company must pay more, they have to then increase the premiums on all insurance. This rate increase is generally a percentage that every insured party should see and expect at renewal. For example, some rate increases in the past ranged from 1% to 5%. This year, we have seen an increase of 15% or more.
Call to Discuss Your Coverage Today
At Conner Insurance, we have kept our customers well protected for over 70 years. Contact us at (317) 808-7711 to request a quote. We are locally owned and serve multiple cities in Indiana, including Carmel, Westfield, Fishers, Indianapolis, and Brownsburg. We also partner with carriers to provide comprehensive commercial, personal, and benefits insurance solutions coverage for customers in all 50 U.S. states.