Skyrocketing Building Material Costs: Check Your Home Insurance Policy Now

The cost of building materials has jumped in recent months. For homeowners, it’s more important than ever to check your insurance policy to make sure you’re covered.

Prices are rising whether you’re gassing up the car or picking up weekly groceries, while the cost of gas and electricity also hit an all-time high in April.

While these hit Brits directly in the pocket, there is a hidden price rise that could indirectly impact homeowners – rising building material prices.

When buying home insurance, it’s important to include a ‘sum insured’, which is the cost of rebuilding your property should the worst happen.

This covers the building structure, such as the roof, floor, walls and windows, as well as permanent fixtures and fittings, including kitchen units and bathrooms.

It is up to the policyholder to get the exact figure of the sum insured for the buildings – it is not the purchase price or the market value – and there is a range of rebuild calculators you can use to help you.

But as building material costs have skyrocketed in recent months, it’s important for homeowners to check insurance policies to ensure the figure is up to date so your insurer pays the maximum amount for any potential claim. .

The Royal Institution of Chartered Surveyors (RICS) Building Cost Information Service publishes an index which can be used to help update the sum insured of buildings between renewals.

It shows annual percentage increases in the index, and in April 2022 the index increased by 11.4%, after an increase of 10.3% in March, 10.9% in February and 10, 1% in January. These are all double-digit numbers, compared to single-digit figures dating back to 2016.

And according to its index showing the recorded evolution of the prices of the main building materials between May 2021 and January 2022, these have all increased:

  • Wood price – 25%
  • Plaster and plasterboard – 23%
  • Bricks and blocks – 22%
  • Hardware – 20%
  • Fabricated structural steel – nearly 20%
  • Cement – ​​19%.

Richard Groom, Head of Data Products at BCIS, said: “With so many factors currently contributing to higher prices, we appear to be in the midst of a perfect storm for material costs, with the latest BCIS index showing growth levels above 20% – a level not seen since the late 1970s.”

Indeed, according to craftsman research platform Rated People, material shortages, increased demand, Covid challenges and rising production costs are driving up material costs. This also leads to increased labor costs.

Its data reveals that in the year to February 2022, these are the top 15 materials with the largest price increases:

  1. Particle board +45%
  2. Rebars (steel) +44%
  3. Metal frame fabricated +36%
  4. Imported plywood +29%
  5. Precast concrete products +26%
  6. Imported sawn or planed wood +23%
  7. Paint (non-aqueous) +21%
  8. Blocks, bricks, tiles & concrete slabs +19%
  9. Plastic doors & windows +19%
  10. Carpentry builders +17%
  11. Machine screws +17%
  12. Plastic pipes and fittings (rigid) +15%
  13. Paint (water) +14%
  14. Ready-mixed concrete +13%
  15. Bituminous mixtures based on natural & artificial stone +13%

Building amount insured

Groom says that since most owners only have a full estimate of rebuilding costs when they buy their property, “recent price movements will make it essential that everyone checks they have levels of appropriate cover in place to fully rebuild should the worst happen.”

This is echoed by the British Insurance Brokers’ Association (BIBA) who say they are concerned that some people have not reviewed their sums insured for some time.

He says: “With significant inflation in construction costs and materials, there is a potential risk that they do not have sufficient insurance. We recommend that they speak to their broker who can help them obtain insurance for the correct sums.

“Buildings insurance is based on rebuilding value and if the cost of labor and materials increases this should be reflected in the sums insured. Many policies will give a comfortable level of sums insured depending on number of bedrooms, but consumers still need to check that this meets their specific needs.

The Association of British Insurers (ABI) adds that if a property is of non-standard construction, for example timber framing, you may need to hire a surveyor to help you get the cost of rebuilding.

According to the financial information and rating company Defaqto, the sum insured can be presented as a range or as a fixed amount.

34% have been found to provide a sum insured of £1million as a fixed level, so for most homes ‘this removes the need to estimate how much you want to insure’, says Anna-Marie Duthie , consultant in analysis (general insurance) at the firm.

Currently, 12% of standard home building policies offer an unlimited sum insured, which means costs will be covered without limit, but these policies can be more expensive.

Duthie adds: “It is important to regularly review your sum insured to ensure that it remains appropriate for your situation. Many policies, 42%, now include ‘indexing’, ie the insurer automatically increases the sum insured based on the RICS home reconstruction cost index.

“Keep in mind that this is to ensure that the sum assured is adequate in light of rising costs, but will be based on the initial sum assured selected at the start of the policy, you You must therefore ensure that you have an adequate sum insured when purchasing a new policy and at each renewal thereafter.

Duthie warns:However, it is still important to ensure that these amounts are sufficient for your needs. If you insure your home for less than its value and you have a large loss, the insurer may reduce the amount they pay you in proportion to the amount you are underinsured. This is called the “average” of your claim.

The Financial Ombudsman Service regularly publishes data on complaints, including in the insurance sector. Although he was unable to provide statistics on the number of complaints he has handled specifically relating to owners who had underinsured themselves in this way, he said he was seeing a number Many complaints arise when the insurer claims that the consumer has undervalued his property when taking out a policy.

In one case handled by the Ombudsman, a landlord complained that she had received incorrect advice from an insurance broker as to the amount for which she should insure her buildings (sum insured). In 2016, a fire broke out in his property which affected one of the outbuildings.

She submitted a claim for the damage caused by the fire to her insurer and received compensation of around £7,000, around half of the total amount of the claim.

She claimed she had sold the policy incorrectly as she did not have an adequate level of cover for the property and at renewal (she had been a client since 2005) she was not told to check what the amount was. insured or whether it would be sufficient to cover reconstruction costs.

The insurer said it was up to the owner to check and read the paperwork to make sure everything was adequate, but she believed the insurer should pay the shortfall.

The ombudsman agreed with the owner, stating that during the renewal process, the broker did not inquire or properly verify with the owner that the sum insured was adequate.

However, owners should carefully check the police documents to avoid such a scenario.

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Justin D. O'Neill