If you have been faced with a property claim in the past year or two, you most likely have noticed the increasing cost of construction prices. As we see construction materials and equipment costs increase, please take time to review and consider the impact of these current market conditions on your insurance protection and risk. Some affected items include:
- Your Home – You may not be living in a new home and may not plan to build a new one, but the cost to replace your house might be higher than you think! Insurance takes into account both the square footage and unique features of your home in calculating replacement cost using today’s building prices. We want your home replaced with the same level of comfort that you currently have so it’s important to have your replacement cost right! In 2021 the average cost to build a house can range anywhere from $100 – $200 per square foot. Replacement cost that we use to insure a home on an insurance policy is not the same thing as the market value of a home that a Realtor uses when selling a home, which is based off of recent area sales, not construction costs. The following link provides valuable information to consider when deciding whether to buy a home or build a new one: www.realtor.com/advice/buy/is-it-cheaper-to-buy-or-build-a-house
- Structures – Are the limits of coverage on your detached garage, pole barn, livestock facility, grain bins and other commercial property adequate if a loss happens? Would you be able to rebuild the same structure with your current coverage limits? Trust us, having your property underinsured at claim time is no fun! Structures that we see have been particularly impacted by the increased material cost of steel and lumber include machine sheds, shops, and steel grain bins. Machine sheds vary with the number of doors, whether there is concrete, insulation and heat, but for a basic unheated pole shed we like to see replacement cost coverage at $20 per square foot minimum. For confinement swine facilities we like to see replacement cost from $350 – $375 per pig space. For grain bins, we normally use a $ per bushel value depending on the type of bin, and also confirm with each bin contractor to make sure grain bins are covered appropriately. Following are links for two popular grain bin companies for more information: www.sukup.com, www.grainsystems.com
- Equipment – Although we just went through a period of lower prices for farm and commercial equipment, we are now in a period where these prices are once again skyrocketing. If you lowered your equipment values in the past, you may want to rethink this and let us know if you’d like to increase coverage again. With the high demand for new and used equipment and the current supply being limited, market values keep trending higher on these items. Farm and commercial equipment is usually covered using “actual cash value” which is what the market value is for each item and not replacement cost for the same item only new. We find that most farmers and equipment owners have a better handle than anyone regarding what the ACV is for owned equipment. Make sure to review the values you have your equipment listed at on your policy to make sure that your current machinery and equipment is valued at the current market value which will help you to experience a more enjoyable claims experience. Current market values can best be found at any local equipment auction or on www.craigslist.com to name a few.
- Tools – It seems like tools never decrease in value, but steadily increase. We understand that it’s not always easy to come up with a value for tools, but keeping an inventory list of all your tools and their approximate value is helpful. Having this list on a computer spreadsheet or included with your insurance policy makes things so much easier come claim time and you will appreciate this should you have the unfortunate event of a tornado scattering your tools amongst debris over several miles. Tools can be insured using either replacement cost or actual cash value coverage. On your insurance policy the value of Tools can be lumped into one total amount instead of listing tools separately. If the individual value of a tool is over $1,000 we recommend that you list these higher valued tools out separately on your policy. Resources to find current values for your tools includewww.truevalue.com and www.menards.com or any other vendor where you choose to purchase your tools.
Over the past year we have been consistently seeing values increase on all types of property that our customers insure. If any of these items are concerning to you and you want to make sure that you have sufficient coverage, please give us a call. Value changes can be made at any time and we do not need to wait until your policy renews to make changes!