The Coronavirus pandemic changed our world in many ways, from remote work to a more widespread adoption of e-commerce. One consequence, however, has garnered little attention, although it’s equally important: the rising cost of building homes and commercial properties. Keep reading to learn how this trend came to be.
The Pandemic and Inflation
As you have probably noticed, inflation is all over the news. Both government officials and regular people watch inflation closely these days, mainly because if inflation keeps rising, then it’s likely that interest rates (the amount you pay banks to borrow money) will increase too.
Now, as you know, inflation refers to a generalized increase in prices. But what does all this have to do with the pandemic?
Although the current high levels of inflation are the result of a complex phenomenon, the pandemic played a role in it.
Inflation and the Construction Industry
With supply chains disrupted at the height of the pandemic, extracting, storing, and moving goods became more expensive. As a result, prices rose, and building materials were no exception.
This is important because the U.S. construction industry relies on imported materials (such as steel or stone), which were among those that saw the steepest price increases.
In fact, according to the U.S. Bureau of Labor Statistics, construction and good-producing industries were the two sectors that experienced the largest fluctuations in prices of raw materials.
Additionally, data from the U.S. Census Bureau showed that the costs of construction reached a 50-year peak between 2020 and 2021. To put it simply, construction became really expensive during the pandemic due to a combination of inflation and labor shortages.
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The Impact on Insurance
If you are like most people, you probably think that the pandemic is already behind us. And while that’s true in general, some of the effects of the pandemic still linger.
For example, as late as November 2022, construction industry experts were warning that the challenges that stemmed from the pandemic were far from over, and high prices were still a concern.
All these factors have an impact on insurance. For example, here are a few things builders, property owners, and business owners should consider:
- To begin with, insurance premiums are set to rise as a reflection of the generalized increase in prices
- Project delays pose the question of extending existing insurance policies, which isn’t always easy
- High costs of labor and materials can translate into gaps in coverage because it becomes impossible to rebuild a property at pre-pandemic costs
Amid all this uncertainty, the best way to enjoy peace of mind is by talking to an insurance expert to ensure you have the right protection in place. Contact us today: our team stands ready to offer the high-quality assistance you deserve.
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