The pandemic has affected almost all areas of our lives, including our homes. If you've looked at the cost of lumber lately, no doubt you've noticed that it has reached new, startling heights. In fact, market experts say lumber costs have tripled in the last year. According to the National Association of Home Builders, "Lumber prices skyrocketed more than 300 percent between April 2020 and May 2021, causing the average price of a new single-family home to increase by nearly $36,000."
There are a number of reasons for the astronomical price increases, starting in 2018 when a 20% tariff was placed on lumber imported from Canada. The tariff was dropped to 9% in 2020, but lumber production decreased dramatically at the same time due to pandemic shutdowns. Now with COVID-related restrictions easing, there is huge pent-up demand and low inventory. Construction industry experts are saying there is no reason to believe that lumber prices will be dropping any time soon.
How High Lumber Prices Affect Your Homeowners' Insurance
You don't have to be building a new home to be impacted by increased construction costs. Home repair costs—whether for repairing a flooded basement or rebuilding an entire home—have also increased dramatically.
As a homeowner, it's vital that your home—the heart of your family—is properly insured. That means as building costs increase, your insurance coverage needs to increase in equal measure in order to adequately cover repairs if something were to happen.
Protecting Your Biggest Investment
The good news is that when you have the proper insurance coverage, you can rest easy knowing that whatever happens, your home will be taken care of. The first step is understanding exactly what your home insurance policy covers. "Full replacement cost" is the most common policy written. That can be tricky because your policy limits may not be in line with today's rising construction costs.
For example, if your home is declared a total loss, the policy may only cover 80% to 60% of the actual rebuilding cost if it hasn't been upgraded to account for construction costs in 2021. Also, if your policy includes "co-insurance penalties," you are required to keep the insured building value within a certain percentage (sometimes as much as 90%) of the total replacement value.
It's also important to understand the different valuations used for your home. For example, the cost to rebuild your home is different from the market value of your home. Both of these numbers are typically higher than your home's tax assessment value.
If you haven't reviewed your home insurance policy in the last year, now is the time to do so. At Keller-Brown, we will review every part of your policy to make sure you have the right coverage. We don't just have you fill out a questionnaire online — we go over the policy with you. After all, nobody knows your home better than you do. And certain improvements—like a new roof or home security system—can save you money on your insurance premium. Click here to schedule an appointment with a Keller-Brown Homeowners' Insurance Specialist.
The Right Insurance for New Construction
Perhaps you're joining the ranks of our Pennsylvania and Maryland neighbors who are having a new home built this year. While it's tempting to just buy the first policy you see on the internet to get through your settlement and closing, that can be a costly mistake. Schedule an appointment with a Keller-Brown homeowners' insurance specialist today and give yourself the peace of mind that comes with knowing your new home is properly insured.
Home Renovations Can Impact Your Insurance Policy
Did you know even some simple home renovations can affect your insurance policy? Learn more about that—including which home improvements will reduce your premium—in this article.
Receive a Free Homeowners' Insurance Estimate
For any insurance questions regarding your Pennsylvania or Maryland home, call or contact Keller-Brown Insurance Services today. Our insurance specialists will work with you to find the right coverage at the right price. We are proud to be an independent insurance company working with top-rated insurance companies.