Written By: Brad Hoegler
If anyone has been to a hardware store lately, you probably have noticed some very high prices, but none higher than lumber. Since the beginning of the COVID-19 pandemic, lumber prices have gone from $350/ thousand board feet to over $1300 due to several factors.
It seems we are in the middle of a perfect storm of surging home building and renovations as well as a once-in-a-lifetime lumber shortage. In addition to this elevated cost of materials, the cost of labor has also increased sharply. Many experts believe these conditions could last for almost two years if the demand remains steady. As a result of this price inflation, it is now more important than ever to make sure you have adequate homeowners insurance coverage.
In 2005, Hurricane Katrina destroyed more than 850,000 homes. In the years that followed, many articles, news segments, and movies made a point about how families had a nasty surprise when they found out the homes they had purchased 10, 20, or 30 years ago were underinsured for replacement. Some of these residents could not afford the difference between the cost of rebuilding their homes and what their insurance policy paid. This was a painful reminder of how important it is to keep your homeowners coverage up to date.
To help protect yourself in the event of a fire or natural disaster, this could be a good time to contact your insurance provider. Most underwriters will ask you a few questions to confirm features about your home. How many bathrooms do you have? What kind of flooring is in your home? Where is your garage?
After these questions, they will then give you an updated replacement cost of your home. Several of our clients were shocked to find they were underinsured by 50 to 100 thousand dollars or more. Surprisingly, the increase in coverage may only cost a little more per month but give you the peace of mind needed if disaster strikes tomorrow.
While this call may seem like a hassle, you should feel more confident than ever about your family’s safety after you hang up the phone. As previously mentioned, you may only experience a small monthly increase on your policy, but you will be covered for a much greater amount. The best part is, when lumber prices and labor go back to normal, you can always adjust your policy downward when the time is right.
At TCG Advisors, we believe financial planning is an ever-evolving process that includes understanding and assessing your insurance risks. While we do not sell insurance, helping our clients become more aware of their risks is a big part of what we do. Please contact us or schedule an appointment with any questions about this article or with any other concerns you have.
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