As we work through a post catastrophe storm world in Kentucky, there are some lessons to be learned that are valuable to our customers. Construction costs are increasing at varying rates depending on the sources. One article cited a 23.1% increase in material costs alone over the 12-month period prior to August 2021. Another chart showed a 123% increase in material costs since 2015. Employment costs have increased 1.1% in just the 3 months ending December 2021 according to the Bureau of Labor Statistics.
The result is that the replacement values on your insurance policy may be woefully inadequate to build back in the event of loss. Most insurance policies impose penalties for underinsuring your commercial property which could reduce the amount of an insurance payment after loss. While coinsurance is sometimes waived in the event of a total loss, you would still not have enough money to pay a contractor to rebuild if you are underinsured. If you have not reviewed your values in a while now is the time to do so.
The best source of true replacement costs is to have an appraisal done based on the cost to build back. While you may not want to spend the money to do that, the benefit in the event of loss far outweighs the cost. If you choose not to have an appraisal done, contact a contractor to give you an estimate for rebuilding. You have the specific info on your building so your insurance values are always your choice.
Even if you were not affected by the recent storms, there is some indication that the frequency of windstorms will increase in our area over time. It is never too late to do a check-up on your insurance program until after the claim.
Contact your producer to discuss increasing your property values today. While the above facts and figures are national ones, our area suffers greater disparity than this. Contractors are booked up for months leaving room for out-of-town companies to come into the area with exorbitant rates to repair your damages. This happens any time there is a major storm. Increasing your policy values will protect you from surprises in the event of loss. We are happy to address your concerns and suggest improvements to your coverage at any time.
BLS Construction Employment costs for construction workers up 1.1% over the 3 months ending Dec 21
Overall, construction costs for the 12-month period through the end of August 2021 rose by 4.5 percent, with material costs leading the way with a whopping increase of 23.1 percent. As noted in the report, the volatility in construction material prices experienced this year is unprecedented in contemporary history.