Inflation, supply chain constraints, and natural disasters—oh my!

Rising construction costs in a time of increased catastrophic events

In the last year, the cost to build a home has dramatically increased, and the factors influencing new home pricing are the same ones affecting reconstruction costs to repair or replace an existing home after a loss. Verisk reported that total reconstruction costs, including materials and retail labor, rose 13.5% between April 2021 and April 2022, which is nearly double the pace of increase for calendar year 2021.

In addition, the U.S. and the rest of the world have experienced an increase in catastrophic hurricanes, earthquakes, wildfires, flooding, and other devastating natural disasters over the past several years. In 2021 alone, there were over $92 billion in insured losses in the U.S. related to natural disasters, the costliest year since record-breaking natural disaster activity in 2017.

Rebuilding and repairing after large regional losses add significant complexity as well as expense that impacts the entire supply chain. The cumulative effects of excessive losses over the past several years contributes to the inflation we are seeing now.

Know what to expect in case of a claim

Whether you have a homeowners claim related to a natural disaster or another event, understanding the current economic factors and marketplace conditions can help you know what to expect and be prepared for during a potential home reconstruction.

Imagine a scenario where your home is damaged or destroyed by a wildfire or windstorm and needs to be rebuilt, it’s likely that your friends, neighbors, and community are facing the same challenges. There are proactive measures you can take to be more resilient and better prepared to navigate a claim and rebuild of your home:

1. Expect longer reconstruction times. Because supply chain issues alone are in some cases dramatically extending the duration of repairs and rebuilds, plan for longer reconstruction times after a loss and make the necessary arrangements to account for this possibility. Keep in mind that supply chain constraints are also affecting the production and delivery times of home appliances and furnishings that may need to be replaced. And, if a catastrophic event damages your home and causes widespread damage to multiple homes in the area, additional construction delays could be a factor. Reviewing your additional living expense coverage limit with your insurance agent or broker is also recommended.
   
   
2. Be prepared to document your loss. Keeping up-to-date records (invoices, pre-loss photos, etc.) of recent remodels or upgrades to your property available and sharing that information with your agent or broker can help expedite a claim. There are additional considerations to keep in mind if a loss occurs.
   
   
3. Understand your policy and coverage limits. Underinsurance happens when the declared values of insured assets (such as homes and other personal property) fall below the actual values determined at the time of the claim. Some homeowners policies include extended rebuilding cost to help hedge against rising costs, so understanding what your policy provides is important when updating your insurance limits. In addition, your policy may need to be adjusted if you plan to make or have made any renovations or additions to your home.

Ensuring you have the appropriate level of coverage for your home and property in place now can decrease the chances of a claim exceeding your policy limits and leaving you underinsured in the future. Schedule a personal insurance review with your agent or broker to discuss your program and how your policies will respond in the event of a claim. If you’d like to learn more about building an emergency plan, download our report for preparedness resources and an overview of potential insurance solutions.

For more information, please request a home quote.