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Texas Department of Insurance
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May 18, 2021

How rising lumber costs affect your insurance

racks of lumber at a home improvement store

Lumber prices are through the roof. Even if you aren’t buying or building a house, you might feel the sting of inflation. Higher rebuilding costs may mean higher insurance costs.

Will my premium go up?

Probably. The price of lumber tripled over the last year, adding about $36,000 to the average cost of building a house, according to the National Association of Home Builders. The prices of other building materials are also up.

When renewing your policy, your insurance company will calculate what it would cost to rebuild your home at today’s prices to determine how much insurance you need. If the costs are higher, your company will increase your policy limits.

Why is my insured value different than my appraisal?

Your property’s appraised value includes the cost of your land and factors in how much homes are selling for in your neighborhood. The insured value is the cost to rebuild or replace your home.

Do I have to increase my policy limits?

Some insurance companies require you to insure at least 80% of the cost to rebuild your home. If you have a home loan, your mortgage company will probably require you to have enough insurance to pay off your loan in case of a disaster.

If you do have the option of insuring your property for a lower value, think about how you’d make up the difference if your home was destroyed or damaged. Most insurers will prorate claim payments based on the amount of coverage you have. For example, let’s say the cost to rebuild your home is $200,000, but you only insured it up to $120,000 – or 60% of the replacement cost. Your insurance company may only pay up to 60% of the repair cost for any damage to your home, minus your deductible.

How can I lower my costs?

You could consider increasing your deductible. This will lower your premium payment. When deciding what deductible is right for you, think about how much you can afford to pay if your property is damaged.

You can also use to compare sample rates for different companies.