As Tropical Storm Henri approached Rhode Island on Aug. 22, homeowners cleared their porches of furniture and battened down the hatches, fearing the havoc that high winds and torrential rain could bring.
While the storm inflicted less damage than expected, trees and branches fell on homes, sheds and power lines, making for a messy situation.
Now some homeowners who need to make repairs might not have an insurance policy that covers the full costs, forcing them to reach into their wallets to pay for fixes. And some homeowners may find themselves reaching deeper because the cost of labor and building materials is on the rise amid the COVID-19 pandemic.
Making matters worse is that Rhode Island is among nine states that saw reconstruction costs skyrocket by at least 10% from January 2020 to January 2021. The average increase nationally was 9.1%. Indeed, the National Association of Home Builders noted that lumber prices are up 180% since April 2020, and the average price of a single-family new home has increased by nearly $30,000 in the same period.
Mary Caruso, director of business development at Middletown-based Carey, Richmond & Viking Insurance Agency, said while most insurers offer “inflation guard protection,” some insurance agents might strip a policy of the protection to satisfy their clients’ requests for lower premiums.
An inflation guard is a provision that gradually increases the limit of insurance by a specified percentage, usually annually, to keep up with the cost of inflation.
“Most inflation guards are 3% to 4% every year, but some carriers have taken the initiative to bump that up to 6% during these crazy times,” said Caruso, referring to the impact of the pandemic. “If you’re using a good insurance agent, most carriers have a built-in inflation guard in their standard policy form.”
‘Most carriers have a built-in inflation guard in their standard policy form.’
MARY CARUSO, Carey, Richmond & Viking Insurance Agency director of business development
Caruso said most homeowner’s insurance policies should have replacement cost coverage on their property. Some policies, she said, are guaranteed replacement, meaning if a $500,000 home costs $800,000 to rebuild, the insurer will cover the complete cost.
However, Caruso said buyers should beware that not all policies are the same and might not include this type of coverage. She said most homeowners are unaware of what coverage they have, as well as what their policy includes.
“For example,” she said, “most clients don’t realize that flood insurance is never included in their homeowner’s policy. And, in addition, they don’t know that they may have a major hurricane deductible or that there is no inflation guard built into their policy.”
Caruso said with the rising costs of building materials, homeowners should speak with their agent about including replacement cost coverage on their policy.
David Brush, president of Apple Valley Insurance in Smithfield, agrees. He said it is imperative for homeowners to have guaranteed replacement-cost coverage included in their policies.
“Guaranteed replacement cost is not included in all policies,” he said, noting that this type of coverage is used for loss or partial loss of a property and can cover the entire cost of replacing a dwelling.
Brush said he is concerned about the impact the rising costs of building materials and labor might have on the consumer. To illustrate his point, Brush said he endeavored to build a shed on a budget of about $1,200 but learned that the estimated cost would be more than $3,000.
“I worry about this,” he said.
Shannon Buss, a broker associate at the North Kingstown office of Randall Realtors, has seen the issue firsthand. Buss said delays and the cost to purchase building materials is an issue for builders and homeowners. Some of her clients who bought vacant land with plans to build new homes had trouble hiring builders.
Buss said clients in Georgia who had contracts with builders were being asked to renegotiate because the price of materials was so high that builders were going to lose money.
“So, they were basically saying that the contract needed to be renegotiated or we can’t build your house,” she said. “The price is an issue, but also the timing of getting the materials is an issue because a lot of the factories were shut down because of COVID.”
One of her clients, who had closed on vacant land before Christmas, canceled their modular home contract due to delivery problems, and is having it built from scratch. “That’s a much higher price point than they originally planned,” she said.
Another client, Brian Baker,, purchased land in March in North Kingstown, partly to enroll his two daughters in the town’s school system. Now he is having to navigate delays and price increases while building a new home.
“It’s been stressful,” said Baker, a captain with the Portsmouth Fire Department, who said he has insurance protection for inflation guard and replacement costs on his property.
Baker said his family is in a quandary. They moved in with friends after selling their house in Newport in February and are now facing delays in the construction of their home.
“Right now, I just see a vacant lot, so it’s demoralizing,” he said. “To have your own place, your own castle, means everything.”
Cassius Shuman is a PBN staff writer. Email him at Shuman@PBN.com.