Update on construction material price rises
A 2024 update on construction material price increases and their impact on charities’ insurance.
Material costs are stabilising
Construction material costs have stabilised since 2023, with overall inflation rates easing. The latest forecasts predict building costs will rise by approximately 3% in 2024, a significant decrease from the double-digit inflation rates seen in previous years.
However, it’s important to note that while overall inflation has slowed, certain materials continue to experience higher price increases. “For example, insulating materials, metal doors and windows, and ready-mixed concrete have seen cost increases of around 20% in the past year”, states Liz James MRICS, Surveyor at RebuildCostASSESSMENT.com.
The stabilisation of material prices is generally positive news for the construction industry and property owners, including charities. However, the risk of underinsurance remains high. According to data from our partners RebuildCostASSESSMENT.com, approximately 4 out of 5 properties in the UK are still underinsured. The gap between insured values and actual rebuild costs has widened in recent years. In 2021, buildings were on average covered for 68% of the amount they should have been, but this figure dropped to 63% in 2023. This widening gap exposes property owners, including charities, to significant financial risks in the event of a claim.
What is the danger of underinsurance?
Insurers use index linking, applying the indexation to the sums insured, to increase the premium to protect your interests . The danger is that not increasing the sums insured will cause you to be underinsured and, therefore, will be subject to the average clause, which means any claims settlement would be reduced by a percentage based on the underinsured amount, which may not be enough to pay the true cost of rebuild/repair/reinstatement. See our guide on the average clause and underinsurance, which goes into more detail.
What can I do?
- Ensure the amount you put as the declared value (rebuild cost) at the start of your policy reflects the true value it will cost to rebuild it.
- Ensure other declared values on specified contents, computer equipment, plants and machinery are as accurate as they can be.
- Check the indemnity period for business interruption cover to account for supply chain issues and delays.
- Consider using a valuations expert for specified items and a rebuild cost assessment which Access clients can obtain through us at a preferential rate using our partner RebuildCostAssessment.
If you don’t have an independent broker like Access looking after your insurance, then now may be a good time to review your insurance with one of our experts. We can help you make your insurance cost-effective, so you only pay for the cover you need.