rising lumber costs

Rising Lumber Costs Affecting your Business Insurance?

As the economy continues to recover from the impact of the pandemic, businesses across various industries are facing unexpected challenges. One such challenge is the rising costs of lumber, which can significantly impact business insurance policies.

When the pandemic hit, many anticipated a slowdown in the construction and renovation industry, leading to a decrease in demand for lumber and, subsequently, lower prices. However, the reality turned out to be quite different. According to StatsCan, lumber costs have been soaring, with prices increasing by 118.9% between March 31, 2020, and March 31, 2021. Although prices have decreased slightly since early May, they remain significantly higher than pre-pandemic levels.

The impact of rising lumber costs extends beyond the construction industry. For business owners, it is essential to understand how these increased costs can affect their property insurance policies. The cost to rebuild or replace insured properties rises with lumber costs.


Increased Lumber Costs Affect:

The impact of rising lumber costs on business insurance can be significant. Here are some key factors to consider:

1. Increased Rebuilding Costs

The surge in lumber prices has added significant costs to construction projects. According to the National Association of Home Builders, the increased lumber prices have added nearly $36,000 to the price of a new home. If you have a home insurance policy, the amount it would pay out in case of a claim may not cover the increased costs due to higher lumber prices. As a result, you may have to bear these additional costs out of pocket.

3. Blanket Coverage or Specific Location Coverage

Business insurance policies often offer blanket coverage or specific location coverage. Blanket coverage allows for flexible coverage for multiple or both buildings and equipment. Specific location coverage is limited to individual properties. Evaluating the specific needs of your business can help determine the most appropriate coverage option.

4. Co-Insurance Clause

Many policies include a co-insurance clause. This clause requires policyholders to insure their property/equipment/buildings to a minimum percentage of the total replacement cost value. If the building value is below the co-insurance requirement, it could mean underinsuring your property. Our advisors strongly urge a review of the limit at least every five years, but it’s best to review it sooner rather than later when a sharp price increase happens.

5. Debris Removal

It is also important to remember that your policy may include debris removal expenses in the insurance limit. Debris removal is the cost of safely disposing of the rubble left over after a loss. Don’t be left paying for this cost out of pocket. Ask your advisor when was the last time there was a discussion on the limit of insurance on your property.


Mitigating Exposure and Ensuring Adequate Coverage

To mitigate potential risks and ensure adequate insurance coverage, business owners can take several steps:

  • Conduct an annual review with an insurance advisor to determine the replacement costs for buildings, stock, equipment, and other necessary items.
  • Provide your advisor with yearly sales revenue and gross profit information to accurately calculate the loss of income coverage.
  • Inform your advisor about any significant acquisitions of assets to ensure proper coverage.
  • Keep receipts for major purchases in an online server for easy access during claims.
  • Conduct regular physical inventories to keep track of your business assets and update coverage accordingly.
  • Take photos of your property yearly to document its condition and aid in the claims process.


Business owners must understand and account for these increased lumber costs when evaluating their insurance coverage. By staying informed, regularly reviewing policies, and working closely with insurance advisors, businesses can mitigate potential risks and ensure they have the right coverage. Protecting your business against financial losses is essential for long-term success and resilience in the face of unexpected challenges.

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