Tiffany Hausmann, CPRM December 1, 2021 4 min read

Homeowners Insurance and the Rising Cost of Building Materials

Recent findings from the National Association of Home Builders (NAHB) confirmed that household construction costs have surged over the past year. This rise in construction costs is directly tied to soaring building material expenses—namely, the price of lumber. According to the NAHB, current lumber costs are up 340% from 2020. What’s more, lumber prices have already risen by an additional 67% since the beginning of 2021.

There are several reasons for these higher expenses. Specifically, both the COVID-19 pandemic and the presence of historically low interest rates have contributed to a rise in home purchases and renovation projects—thus elevating the demand for building materials. Nevertheless, this increase in demand has been met with supply shortages throughout the construction industry. In the midst of greater demand and lower supply, building material prices have subsequently soared.

Unfortunately, this surge in costs could pose coverage consequences for homeowners across the country. After all, increased building material and construction prices could lead to higher homeowners insurance claim expenses, seeing as it would currently cost more to repair or rebuild a home following a loss.

As a result, homeowners could discover that their existing policy limits and coverage features no longer offer adequate protection—leaving them financially vulnerable in the event of a loss. Further, homeowners insurance carriers may increase policyholders’ premium costs to account for the risk of elevated claim expenses.

In light of these ongoing cost concerns, it’s important for homeowners like you to respond accordingly. As such, consider taking the following measures:

  • Review your policy. Be sure you fully understand your homeowners insurance policy. Take note of whether you have replacement cost coverage (which can offer compensation for the cost of replacing or rebuilding your home as new) or actual cash value coverage (which can offer compensation for the depreciated value of your home). Ensure your policy provides a correct replacement cost or overall value for your home.
  • Consider coverage adjustments. Consult a trusted insurance professional to help you determine whether you need to adjust your policy to have sufficient coverage in the event of a loss. This may entail changing your policy’s valuation method, increasing your current limits, obtaining specialized coverage or implementing a policy endorsement.
  • Communicate with your insurance carrier. Lastly, make sure to inform your homeowners insurance carrier whenever you conduct renovations or implement other improvements in your home (e.g., adding a new deck or remodeling the bathroom). Update your policy as needed.

For more personal risk management guidance, contact us today.


Tiffany Hausmann, CPRM

Tiffany joined Hausmann Group in 2012. Since then she has enjoyed getting to know her clients and removing the mystery from the insurance process. She works to create insurance programs that put her clients in a better position than what they were in previously, while educating them about their coverage so they feel confident that their homes, automobiles, and personal property are properly insured. Her clients praise her knowledge, experience, and patience in helping them to straighten out complicated insurance situations. Tiffany holds a Certified Personal Risk Manager (CPRM) designation that focuses on the risk management needs of affluent families. Outside of work, she volunteers for the Gilda’s Club Red Door golf outing each year and looks forward to becoming more involved in their board in the coming years. She has also been involved with the Madison Symphony Orchestra League, helping to educate and enrich the cultural life of the entire Madison community. In her free time, Tiffany enjoys playing tennis, walking her dogs, and having Sunday dinners at her parents’ house.