San Antonio, July 4, 2022 The construction industry has faced many challenges during the COVID-19 pandemic, from supply chain disruptions and material shortages to social distancing requirements and sick workers . After a turbulent market in 2020, some businesses are experiencing some stabilization. However, 2021 was a banner year for the construction industry, and until today, consumer appetite for new homes and builder optimism about the future remain incredibly strong. For the specialists at BuildersRisk.Net it has been an extraordinary journey with over 2550 policies sold during the year. This milestone represents a significant increase in sales for the company and underscores its commitment to providing quality assurance products to all types of builders.
Underbuilding and resulting supply shortages have led to real estate bidding wars and soaring home prices. Extremely low interest rates, a COVID-inspired movement from cities to suburbs, Gen Xers reaching their peak income years, and Millennials entering the housing market in large numbers have amplified demand for accommodations. The federal government’s mortgage forbearance program and baby boomers choosing to keep their homes longer have also reduced the existing housing stock. All of this means there’s tremendous pressure on builders to innovate new homes, and new home starts are up again this year to levels not seen since before the Great Recession.
- Commercial construction also increased
The business side of the business is also experiencing strong growth. With recent development comes retail, food service, gas stations, medical clinics – the infrastructure needed to support communities. For these basic commercial services, construction is progressing at about the same rate as residential construction. Underutilized commercial spaces are being converted into apartments and condominiums. Entrepreneurs are buying up vacant restaurants and stores and creating new businesses. And employers are reopening offices that were closed during the pandemic.
Renovation and remodeling are still hot. Total renovations exceed renovations as commercial buildings are destroyed and reused. To be clear, some segments remain weak primarily due to the impact of the pandemic. Accommodation, entertainment and recreation, religious institutions, public safety and academic facilities are reduced, even as many prepare for recovery. Plus, they have a large surplus of office space in most major cities. The construction boom had its challenges. Supply chain disruptions have led to huge material cost increases and delayed project completion. There is also a severe shortage of skilled labor and ready-to-dig land is briefly provided in many areas.
In August 2021, the NAHB reported that building material prices were rising at a record pace, up 19.4% over the past 12 months. To put that into perspective, materials prices rose 13% in the first seven months of 2021, compared to just 1.1% in the same period of 2020. While nearly every region of the United States is experiencing double-digit growth in construction, some regions are growing much faster than others. Regional differences are not collapsing as they have in the past, such as the West or Southeast overtaking the Northeast or Midwest. Instead, demand for new construction is driven by outward migration, affordability and a highly mobile workforce. This is creating pockets of strong growth in all regions of the country, even in those that historically have not performed well. Places with lower cost of living and plentiful employment have become popular alternative living locations.
- A national trend in construction insurance
In the builder’s risk insurance market, which covers materials, fixtures and equipment installed during construction or renovation, US Assure saw double-digit increases in residential premiums throughout 2021 in nearly every state, with some exceeding 50% over 2020. Contractor hours have increased significantly. A builder who worked on 10 to 15 houses a year in the past is now building 30, 50, or even 100 houses. It also means more premium dollars for the other coverages contractors need, like general liability, property, and commercial auto.
And it’s not just builders’ risk, general liability has also skyrocketed. Wildfires, hurricanes, tornadoes, ice storms, floods and other catastrophic events contributed to the higher rates. In 2020, there were 30 named storms in the United States, and in 2021, nearly 50 wildfires. Huge losses have squeezed insurers and caused many carriers to back down.
- How Builder’s Risk Works
The builder’s risk insurance policy will protect contractors against delays on projects under construction. Insuring a building is a fundamental element of any insurance policy since when a contractor goes to a broker to obtain this type of coverage, he is not only insuring people, property or risks but also the interest of the contracting party who ensures that the disaster does not occur. This policy is issued for a certain project for a specific period, such as three, six, or twelve months during ongoing construction for a required project.
Insurance for builders can pay for materials, fixtures, equipment and the structure itself, in the event of an incident where these assets are damaged or destroyed due to fire, theft, vandalism or extreme weather conditions such as an earthquake or flood.
It should be mentioned that the cost of the policy will usually be determined with the total value of the project, which will be between 1% and 5%. Four key factors will influence the price: the type of project, the type of material used, the location of construction and the duration of the project.
- The right way to protect a project
Despite shortages, high prices and a tightening insurance market, building permits and construction spending hit new highs in 2021. Construction continues at a blistering pace and shows no signs of slowing down . This does not mean that the ride is completely smooth or that the path is perfectly straight. But all indications are that the road will be wide with plenty of room for entrepreneurs to grow and one of the best decisions would be to choose a genuine, experienced and independent broker like BuildersRisk.Net, as they work with multiple carriers, have a vast expertise on the industry and it is certainly much easier and less expensive to obtain a font that specifically meets the needs and requirements of the project.
BuildersRisk.net offers competitive quotes for a variety of insurance plans suitable for contractors, builders, homeowners, business owners, and more. They represent the 3 main Builders Risk insurers, plus 7 other companies. Their professional agents have been providing the construction industry with same day certificates as well as instant quotes to ensure fast and convenient service. They have internal binding authority and can have a policy bound multiple times in less than an hour.