Q: I’ve heard the costs for raw building materials have risen rapidly. Will that have an impact on my insurance?


A: Potentially, yes. Most property insurance policies are written on a “replacement cost” basis, or the cost to build new. This is not market value. Most insurance policies include an inflation guard that increases building values by 2-5% every year, but the following reasons indicate that the guard may not be enough: 

  • Lumber costs increased 60% due to high demand and supply shortages related to the pandemic and U.S. tariffs on Canadian lumber.
  • Catastrophic losses including the California wildfires, tornadoes in the Midwest and hurricanes occurring in the Southeast significantly increased construction material demand.
  • Total reconstruction costs, as well as material and labor costs, increased 9.2% from October 2019 to October 2020.
  • A 5% increase in total costs occurred in the third quarter of 2020 alone.

Having an outside industrial appraisal is the most accurate way to get a replacement cost insurance value. Your Liberty Insurance Agency representative can also calculate an estimate using our internal tools.

Proper valuation is critical to ensure that there is appropriate coverage in place in the event of a loss and to avoid a potential co-insurance penalty. Contact us today to have your free building replacement estimator calculated.



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