Skip to main content

Inflation and Rise in Construction Material Costs

Blog - Measuring Tools Sitting along with a Pencil Sitting on a Piece of Wood

In the past year and a half, there has been a major increase in the prices of construction materials and labor. As everything is reaching its new normal and everyone is able to do things they couldn’t before, the demand for construction materials has drastically impacted the prices. While keeping a close eye on inflation we see how it has affected the reconstruction cost as well as the insurance coverage for it.

Halfway through the year, we have already seen a significant increase in the annual prices of construction materials. Lumber and plywood have increased at an alarming rate. Labor for plumbers and electricians is increasing by almost 5% and roofers’ prices have increased by 6%. The National Association of Home Builders¹ conducted a survey asking builders how much prices have changed in the past year. The average response to this survey was that the material prices have risen around 26%. The highest percentage that was given to the survey was that material prices have risen 50%.

How insurance agencies handle this situation

Insurance agencies look at an inflation factor that affects both Homeowners’ and Dwelling Fire policies. This is because the reconstruction cost, which is included in these policies, is affected by the materials and labor prices. Reconstruction cost is how much it would take to rebuild the house. This is done so that the policy has an adequate amount of coverage. The price changes that occur in the policies will be reflecting the most recent reconstruction costs with the construction material prices.

What you can do

There are few things that you as an insured can do to make sure you are properly covered during these crazy times. The first is to understand the policies that you have. By knowing what policies you have and what it all entails, you can see if you need to ask about certain things like reconstruction costs. The second thing you can do is to know the amount of money that it would take to rebuild your home. This number may change through the years, so it is important to check to see how much it would take to fix your home in the event of a disaster. Lastly, make sure you have the amount of insurance that works for you. This is done by meeting with your insurance agent. In the meeting, you can see if changes need to be made to the policy to get the best coverage for you. Also, make sure that your agent is aware of any improvements made to the house as it will affect the replacement cost.

For any questions about the information in this article, give Myers and Hayden Insurance a call at (260) 486-5255 or email us at

¹Emrath, P. (2021, June 1). Builders Report 26 Percent Increase in Material Prices: Eye On Housing. Eye On Housing | National Association of Home Builders Discusses Economics and Housing Policy.