Page 31 - BusinessWest July 11, 2022

On the Rise
How Inflated Material Costs Affect Insurance Premiums
By Lisa Johnson
You have probably noticed higher prices in many areas of your life. From gas to grocer- ies, prices are going up, with the U.S reaching inflation levels never seen before — and the insurance industry is not immune to this trend. Across the industry in most markets and with most insurance companies, whether you’ve had a claim or not, home-insurance premiums are rising due to a variety of factors.
Many of these factors are out of your control, as well as your agent’s and insurance company’s. Many cur- rent conditions, including increased costs of material and labor, as well as an ongoing shortage of workers, mean you may see a rise in your premiums at renewal time.
Home-insurance rates are deter- mined by the likelihood of a homeown- er filing a claim and the potential risks involved. Rates are driven by numer- ous standard factors, including amount of coverage needed, age of the home, location, liability issues, and previous claims. Other influences caused by national trends also contribute to rates.
“Many current conditions, including increased costs of material and labor, as well as an ongoing shortage of workers, mean you may see a rise in your premiums at renewal time.”
Why are home-insurance rates going up? The biggest cause is the rise in inflation. When prices rise, the cost of living and owning a home increases, which in turn influences home insur- ance rates. These rate increases are happening in insurance companies across the country.
Home-insurance premiums can be affected by influences outside of your control. Various nationwide factors are impacting the cost to rebuild homes, leading to the need for more coverage in case of a claim. Some of the trends that are driving up costs include higher material costs and supply-chain issues. For instance, materials to rebuild homes are up 26%. Labor shortages are resulting in longer construction and claims-handling times, which also impact the cost of claims.
Higher Material Costs
From record high prices to short- ages of materials, the home-building industry has seen lengthy delays, increased prices, and a large number of postponed projects. These higher pric- es for construction projects, renova- tions, and repairs lead to higher costs
for homeowners.
With the price of building materials
— such as drywall, shingles, lumber, and copper wiring — up an average of 26%, homes have become more expensive to fix and replace. Accord- ing to a survey by the National Assoc. of Home Builders, this is the largest
single-year increase in the survey’s history. Ninety-three percent of con- tractors are impacted by the increased price of materials, which leads to high- er replacement costs when insurance claims are filed.
Insure
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