Friday, December 7, 2007

Building Material Costs Escalate - Is your Building Underinsured?

Industry studies have indicated that more than 70 percent of commercial properties are at least 40 percent underinsured. Many property policies are renewed on an "as is" basis. Proper valuation is critical in protecting a firm’s financial health in the event of loss.

A report from The Associated General Contractors of America (AGC) predicts that by the end of the year there will be a 6-8% increase in cost of construction materials. A main cause for this rise is the increase in costs to transport the material, considering that construction companies largely haul their material by road. Higher gasoline prices yield higher costs of materials and products, because companies affected have to make up for higher costs of transporting and producing.

Turner Construction's Building Cost Index registered 863 in the third quarter, a 1.9 percent increase from the second quarter and 8.8 percent increase from a year ago. Turner’s Building Cost Index is determined by the following factors considered on a nationwide basis: labor rates and productivity, material prices and the competitive competition of the marketplace.

Given the dramatic inflation in construction materials and labor, it is recommended that you consult your Sabal Insurance Representative to discuss the proper limit of insurance necessary to cover reconstruction expenses in the event of a loss.