Replacement Cost vs Market Value: Most insurance carriers require Replacement
Cost coverage these days. Replacement Cost refers to the cost of reconstructing
your home and its unique features in today’s marketplace using similar materials,
design and technique at your current location up to today’s building code. That
you may be able to buy a similar home for a different price on the market does not
matter.
Material Cost Increases: According to the National Association of Home Builders,
even though the cost of materials is beginning to stabilize, they are still up 35.6%
overall since 2020 and continue to rise above the general cost of inflation.
According to The Washington Post, lumber and plywood alone are up over 100%
and 21% respectively since 2022.
Skilled labor shortage: A shortage of skilled labor can increase the cost of
repairing a home, lengthen construction timelines, and extend the amount of time
you need to live somewhere else – all of which increases the cost of insurance. In
July 2023 it was estimated that 363,000 construction jobs remained unfilled, and
543,000 workers were needed to just meet existing housing demand. And
depending on where you live, the shortages can be even greater.
Storms becoming more costly: Even if you’re not in a flood zone, you may have
experienced excessive wind and rain leading to flooding and had to deal with the
damage it caused. In the last two decades, the U.S. has experienced double the
number of storms or other natural events that produce damage of $1B or more
since 1980.
Contributed By: Jonathan Wolman of Insurance Office of Central Ohio
jonathan@ioco-columbus.com
614.939.5447