What does the housing crisis have in common with the rising cost of coverage on homeowners insurance policies?
Turns out, the mea culpa is the spike in building materials desperately needed for constructing new homes. So what do building materials have to do with existing homeowners insurance policies?
“Our customers will usually question why coverage A is going up,” says Jennifer Jackson of Michigan-based Ron Jackson Insurance Agency. Coverage A is the part of the policy that addresses estimated replacement costs.
Perhaps one of the biggest spikes in building materials has hit the wood products the hardest. The price of lumber (framing) has jumped an estimated 40 percent in just six months. So if a tornado or winds have done extensive damage to your home, it’s also gonna cost more to rebuild any areas of your house-especially if framing is involved.
The sharp increase in building materials can be blamed on a lack of demand which hurt the production of building materials.
“We, in insurance, have been dealing with the rising estimated replacement cost (coverage A) on a homeowners policy,” adds Jennifer.
