The Impact of Lumber Costs on Property
The increase in lumber costs brought on by the COVID crisis has had a substantial impact on both commercial and residential property markets. This dramatic increase is the result of a number of pandemic-spawned problems, including costly labour shortages and serious delays in transportation. When you consider the high demand in home and property construction, it’s no wonder an increasing number of owners have taken the DIY approach.
Jasen Ericksen, Commercial Insurance Manager and Account Executive, offers insights into what consumers should know to help protect themselves and their investment from potential cost increases when it comes to building materials and more.
Are you underinsured?
“If you own an income or commercial property,” Ericksen explains, “you might not be aware that the rising cost of lumber, for example, can leave you underinsured. A property estimated at $500K to rebuild, for instance, could now cost you a great deal more a considerable challenge for both you and your insurance company.”
But it’s not all doom and gloom.
As Ericksen emphasizes, most home insurance contains an important safeguard: a GRC a.k.a. Guaranteed Replacement Costs clause. Put simply, the GRC is a condition obliging your insurance company to cover the full cost of your residence’s rebuild, even if said cost exceeds the replacement cost limit designated by your policy.
For commercial policyholders, it’s a different story, as the Guaranteed Replacement Costs safeguard does not apply to them. “If that’s you, your insurance company will only pay up to the limit designated in your policy,” Ericksen qualifies, “without consideration of the excess.”
Call Your Broker
In all cases, Ericksen recommends first getting your home or rental property appraised. Then, he encourages a constructive, extended dialogue between property owner and broker, including a thorough review of the exact nature of your Guaranteed Replacement Costs or replacement cost policy.
“It’s the best way to determine if you are properly insured.”