The Insurance Bureau of Canada (IBC) has advised homeowners worried about the rising cost of lumber to check with their insurance representative to see if the trend will actually impact them.
The advisory comes after the cost of softwood lumber rose nearly 120% in the past year, which made some homeowners worry about the potential repair or rebuilding expenses they will have to go through following a disaster, and whether they will have enough insurance coverage for it all.
According to IBC director of consumer and industry relations Rob de Pruis, customers might want to ask their insurance representative about how lumber prices impact their insurance. He clarified that whenever an individual first takes out a home insurance policy, the insurer will calculate the replacement value of the property. Once the value has been determined, there are mechanisms in place that protect the consumer from things like inflation, and adjustments are made each year for accuracy.
The director also told CHAT News Today that there is something called Guaranteed Replacement Cost, a type of endorsement that could help consumers worried about the spiking costs of lumber.
“What it does is, if you do have a total loss on your home, as long as you’re insured to a value that your insurance company initially came up with, even if there are increases in price fluctuations, you’re not bound by the limit you have in your policy,” de Pruis explained.
“Ultimately your company will be paying the guaranteed replacement cost for similar kind and quality of materials.”
De Pruis also said that to ensure accuracy, it would be a good idea for consumers to inform their insurers about any additions or renovations they have made to their property before a loss happens. He also noted that while the cost of claims is a factor that can affect premiums, not all claims include lumber as a cost, such as a flood claim – which would involve the replacement of non-lumber items such as drywall, carpeting, shingles, and siding.
