Construction Costs

Construction Costs have gone down, therefore replacement costs have gone down. Has your homeowners insurance gone down?

Following the California wildfires, there have been many reports of people being under-insured.  In fact, for as long as anyone can remember, one of the greatest challenges facing the insurance industry was convincing policyholders to buy enough coverage to fully replace the damaged or destroyed home.  It still is today.

However, some of the specialists in insuring high value homes have made tremendous investments in appraisal services to estimate expected costs and have maintained the discipline to increase insurance amounts annually to keep pace with the rising costs of the past decade.  For some policyholders, these companies may have gone too far.   

Marshall & Swift/Boeckh, LLC (MSB) is a leader in the compilation and distribution of building cost data.  According to the RCT Product Update Bulletin by MSB, the average material cost decreased 3.8% for the 2nd quarter 2009. Specifically, the price of materials, such as steel, copper and lumber has decreased influencing residential construction costs.

Getting consumers to fully understand the distinctions between “market value” and “replacement cost” can be a challenge.  Convincing consumers to buy enough coverage will remain one of the great challenges of the industry.  However, when the industry fails to recognize the leveling or decreasing building costs in their inflation factors, we all run the risk of losing credibility on this all-important matter.

For information and answers to many common questions regarding PURE homeowners insurance, visit the Home Coverage section of our website.

Download: Marshall & Swift/Boeckh, LLC (MSB) 2nd Quarter 2009 Update (PDF, 295.66 K)