The last two years have seen a rise in home renovations. The increased demand for building and renovation materials, coupled with supply chain constraints and delays due to the pandemic, has resulted in rising prices for many raw inputs and building materials.
When building or renovating, homeowners try to find cost efficiencies where possible to reduce the project’s overall cost. But one place not to cut corners is on your contractor’s insurance. Are you covered in the event of a disaster? Read on to learn more about contractors’ insurance.
What Is Contractors Insurance
When building or remodeling a home, it is wise to take out an insurance policy. This gives you coverage for any damages or disasters during the project and protects you from a potential loss.
Homeowner’s insurance policy outlines the dollar amount the insurance company must pay if your home is damaged or destroyed.
However, with rising lumber costs, the higher price of processed goods, and labor costs, the estimate that you take out at the beginning of the project may not be sufficient to rebuild the home by the time it is completed.
How This Impacts You
Your initial estimate may be understated against the true value of your home and, therefore, the cost to rebuild it.
Coinsurance policies state that you must ensure your property for typically at least 80% of its value. However, the valuation of the property is ever-changing as you continue to build, which has a unique impact on your insurance coverage.
If you fail to update your insurance policy to reflect the true value, you will be left to pay the difference between the coinsurance amount and the actual amount in your pocket. This can lead to unexpected costs and financial strain, especially if there is a large delta.
For example, your insurance estimate is for $400,000 at the start of the project. But rising costs of lumber, labor, and inputs means that one year later, it would cost $500,000 to rebuild your home, you would be left to pay the $100,000 difference yourself.
What to Ask About Contractors Insurance
Here are some questions to have in your back pocket to discuss when you are evaluating contractor insurance:
- Does it rebuild or replace the home in the event of a disaster?
- Do you need additional coverage if you are operating a business out of your home?
- If building codes change during the process, are you covered?
Find the Right Contractors Insurance
While home builders like you have little control over the rising costs of materials, you can take control of how you protect your investment. Taking proactive steps to secure contractor insurance for the right amount can make sure you are adequately protected.
Looking to learn more about contractor’s insurance and find a plan that works for you? Reach out to our qualified team as soon as possible.
Top Contractors Insurance Services is a full-service contractor insurance agency handling workers compensation, general liability, construction bonds, and auto quotes.