Not too long ago renovated? It’s possible you’ll must rethink your home insurance – cash

High purchase prices are a hallmark of today's housing market. But they're not why you may have to spend more on your home insurance than you did before the pandemic.

According to Richard Lavey, President of Hanover Agency Markets at The Hanover Insurance Group, based in Worcester, Mass.

“If the market value increases by 40%, it does not mean that your insurance needs increase by 40%. It could just be land value or demand or lack of supply in a particular zip code, ”he says.

For your insurance company, Lavey explains, it is important to know whether the cost of replacing your home has increased more than usual. That's because your coverage is calculated based on how much it would cost to rebuild your home – with the same or similar materials and workmanship – if you were to suffer a catastrophic catastrophe like fire.

Two factors have caused these costs to skyrocket during the pandemic: more expensive construction costs and an explosion in home renovations and additions.

Here's how much each could have affected the cost of rebuilding your home – and the potential need to adjust your insurance coverage upwards.

High material and personnel costs

Most home insurance policies have a provision that automatically adjusts the insured value of a home to inflation – for example, it increases by 3% from year to year. But those standard increases may not be enough right now as rebuilding costs have escalated.

"It's about the supplies, the materials – they have increased significantly due to the pandemic," said Robin Jaekel, vice president of personal lines at real estate agent Glenn Insurance, based in Absecon and Malaga, N.J.

Earlier this year, it was estimated that the then higher wood prices could add nearly $ 36,000 to the cost of building a new home compared to usual years, according to the National Association of Home Builders.

Although wood prices are about 70% lower than the stratospheric level they reached in early 2021, they are still above pre-pandemic norms – and the prospect of further increases cannot be ruled out if the delta variant sees labor shortages or wildfires triggers violating supply chains.

And lumber isn't the only building material where scarcity is affecting prices. Since May 2020, the cost of steel mill products has increased by over 75% and the cost of prepared asphalt and tar roofing and siding products has increased by nearly 15%, according to the National Association of Home Builders.

According to experts, labor costs have also risen as there is increasing demand for renovation work and, in some areas, extensive reconstruction work after forest fires and other natural disasters.

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