Homeowners may see an increase in their home insurance premiums in the coming year, according to a white paper released by the American Property Casualty Insurance Association. The spike in rates is the result of what experts are referring to as a perfect storm: Costly weather-related disasters, the ongoing impact of COVD-19, and supply chain issues.
This year has already seen 18 climate disaster events with losses costing over $1 billion each, according to the National Oceanic and Atmospheric Association.
The increase in detrimental wildfires, hurricanes, and winter storms has led to a surge in demand for the materials and labor needed to rebuild destroyed homes. And the lumber industry is struggling to keep up — they’re still facing supply shortages due to COVID-19 and the ongoing global supply chain issues.
An imbalance in supply and demand
On top of the increase in demand for building materials and labor needed to repair destroyed homes, 2020 also saw city dwellers fleeing to the suburbs, which resulted in a need for new construction. Essentially, there aren’t enough building materials and laborers to both rebuild damaged homes and build new ones.
This ongoing imbalance in supply and demand has affected nearly every aspect of the construction industry, according to the APCIA white paper.
At one point this year, lumber costs were up by 400%. Steel prices rose 200% this summer. Cement production is strained. The challenges facing global supply chains have also impacted construction, making it even harder to rebalance the supply and causing product backlogs.
What this means for you
How much home insurance coverage you need is directly related to how much it’d cost to rebuild your home from the ground up. Basically, if the cost of building materials and labor is on the rise, insurance premiums will follow suit.
If you live in an area that’s considered high risk, like one that is prone to wildfires or hurricanes, insurers recommend that you review your coverage limits. You may need to add coverage to your policy for an additional safety net.
If your insurance does go up, there are ways to get the cost back down. Most home insurance companies offer discounts, like a “fortified home discount'' if you install storm-proof roof shingles or hurricane-resistant windows. And it never hurts to shop around and compare insurers every year to make sure you aren’t missing out on a better deal elsewhere. Policygenius can help you compare different companies to find the best coverage for you and your home.
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