For Immediate Release:
July 29, 2021

How Rising Construction Costs Could Impact Your Homeowners Insurance

By Oklahoma Insurance Commissioner Glen Mulready  


If you recently started a home improvement project, you probably have noticed the rise in construction costs. According to Verisk’s (ISO) most recent 360Value Quarterly Cost Update, total reconstruction costs increased 8.1% countrywide, on average, between January 2020 and January 2021. Lumber, iron, steel and labor costs all have increased in just a year. These drastic increases are not exclusive to building materials. These rising construction costs may have a significant impact on your homeowners insurance as well.

Homeowners insurance covers the cost to rebuild or repair your home after a loss or claim and construction costs directly correspond with the cost of home insurance. As construction costs increase, it’s important to review your policy with your insurance agent or company to ensure your existing policy limits and coverages offer adequate protection. Here are three things you should consider when you talk to your agent.


  • Replacement Cost Coverage or Actual Cash Value Coverage
    Take note of whether you have replacement cost coverage or actual cash value coverage. Replacement cost coverage would pay the cost of replacing something with a brand-new version. If your home is destroyed, replacement cost coverage will pay the cost of materials and labor needed to rebuild the structure. On the other hand, actual cash value coverage (often referenced as replacement cost minus depreciation) will pay the actual reduced value of an item. If your home was destroyed, the actual cash value would take into account the age of your home’s walls, roof, floors, lighting, etc. You would only be paid for their depreciated value, not the cost of actually replacing them.
  • Coverage Adjustments
    Ask questions to your insurer to determine whether you need to adjust your policy to have sufficient coverage in the event of a loss. Based on the spike in construction costs, your replacement cost may be underestimated, which may result in your home being underinsured. Your insurance agent can help reevaluate replacement cost estimates for your home and contents inside to ensure the appropriate coverage levels are in place.
  • Savings and Other Options
    Ask your insurance agent or company about discounts. Many insurers offer multi-policy discounts to help consumers lower their insurance bills. Some insurers may offer discounts on smart home technology you’ve installed in your home. Also, don’t forget you can always shop around. Please take advantage of our fair, competitive insurance market. There are over 900 homeowners insurance companies doing business in Oklahoma.

Lastly, I would caution against insuring for less or keeping your current coverage to avoid paying more on your premiumsThe purpose of insurance is to cover you for risks so you do not have a high out-of-pocket cost in the event of a lossIf you need help selecting homeowners insurance, visit to compare local rates and find other helpful information.

For more insurance information, please contact the Oklahoma Insurance Department at 1-800-522-0071 or visit our website at


Questions or comments should be directed to
Communications Director, Liz Heigle | (405) 819-2221