According to the National Association of Home Builders, lumber prices have skyrocketed nearly 250% since April 2020, causing the average price of a new single-family home to increase by nearly $36,000.
This is one of the many contributing factors to the booming housing market in our area.
Construction costs are so incredibly high it is deterring many from building. This leaves the demand for existing homes much higher than the supply. Which is contributing to our current seller’s market.
If you are not in the market to buy or sell or even build a home, you would think the cost of lumber does not affect you.
Two of the biggest factors affecting the price of homeowner insurance are the location of your home and the cost to rebuild it.
Did you catch it? The cost to rebuild it. As in – rebuild your home with LUMBER.
Ahhh.. now it’s starting to make sense.
There is a portion of your Homeowners Insurance Policy that deals directly with replacement cost. This means the cost to rebuild your home with the same or similar materials in the case of a total loss. If the cost of construction is significantly different than it was when you last reviewed your homeowner’s policy, you might find yourself unintentionally underinsured.
Homeowners may mistakenly think home replacement cost is the same as a home’s market value. Instead, it’s the actual cost of rebuilding the home. Often, this amount is very different from the market value.
If the replacement cost has not been adjusted to reflect the current cost of building materials there will be a gap in coverage.
The most prudent thing to do as soon as possible is to call your agent to have a homeowner’s policy review.
We recommend that each of our clients schedule a policy review every 3 years or any time changes warrant a review.
What might those changes be, you ask?
To give you an idea, here is a list of some (but certainly not all) of the changes that might prompt a policy review:
- A home renovation
- Purchasing a riding lawnmower
- An appliance upgrade
- Installing a new sprinkler system
- A new pool or hot tub
- Upgraded landscaping
- Installing a security system
- A new outbuilding
- Adding valuables (jewelry, artwork, antiques, etc.)
- A new roof or gutter system
If you have not recently reevaluated the replacement costs for your home, it is time to call your agent for a policy review.
BDI. Insurance advisors, you can trust.