Did you know?
The cost of building and infrastructure construction has soared to unprecedented heights.
A global pandemic.
Supply shortages and project delays.
Record- (and budget) breaking price surges in common building materials.
A spike in home renovations due to a shift to working-from-home.
Increased demand on rebuilding/repairing properties that were damaged by severe weather events.
All of these factors are contributing to massive surges in construction costs.
The cost of lumber, for example, increased nearly 400% since 2019 and though it’s recently come down, experts say it will not reach pre-pandemic levels again.
Depending on where you live in Canada, a sheet of Oriented Strand Board that was around $15 two years ago, now costs you up to $56.
From May 2020 to May 2021, reconstruction costs have increased by 6.4% year over year in all provinces across the country.
At the start of COVID-19, the steel industry closed or reduced capacity significantly – from 87% to less than 50% – causing prices to double since November last year.
While as of April, the price of plywood has doubled since a year ago.
With 1 in 2 Canadians renovating their homes during the pandemic, the demand for building projects has placed severe pressure on supply – the North American market is sold out of drywall! – and with 74% of homeowners still planning to make home improvements of up to $10,000 this year, this trend will continue to drive up construction costs.
How does this affect you?
Even if you’re not currently paying a lot more for home renovations or other property construction projects, these recent trends affect your insurance.
You’re open to risk of severe loss if something happens and your home or commercial property is not insured to the current value of replacement construction costs.
What should you do?
Review your property values – Hire a professional replacement cost appraiser/contractor to evaluate your property assets.
Talk to your broker – Your broker will guide you through the appraisal process, explain coverage limits in detail and help identify coverage gaps.
Update your policy – Your broker can help get your policy updated to ensure your personal home or commercial properties are insured to value.
Sources: Opta’s 2021 Q2 Reconstruction Cost Update Canada; CapriCMW: Associated Risks of Rising Construction Costs