With soaring home prices and shrinking inventory across the country, many Americans have opted to invest in remodeling their current homes rather than selling and buying new. A new survey from Nationwide revealed multiline agents have opportunities to provide needed counsel to both homeowners planning or undergoing renovations and the residential contractors helping them with the work.
Nationwide’s latest Agency Forward survey revealed that 77% of homeowners currently updating their homes have future remodeling plans this year and 71% expect to proceed with those plans despite higher costs, delayed timelines and limited material availability brought on by today’s inflation and supply chain obstacles.
Meanwhile, half of the residential contractors serving homeowners’ renovation needs say it has been difficult to keep up. Most are making changes to their businesses to compete in today’s market, including expanding their services for customers and taking steps to hire and retain workers.
Most homeowners don’t weigh insurance needs when updating their homes
Homeowners are largely focused on voluntary interior remodels aimed at repairing wear and tear, making their homes more enjoyable or refreshing something outdated. They’re also investing significantly in their remodels, but not to increase resale value down the line. In fact, four in 10 say they would not consider selling their homes at all after their projects are complete.
What is alarming to us is that the survey found few consumers consider whether their homeowners’ insurance policies include adequate limits to cover the upgrades should an accident occur. This is a significant gap agents can help them address.
With inflation and supply chain disruptions driving up claims costs across the country, it’s important for agents to check in with homeowner clients to ensure their exciting remodel doesn’t turn into a future headache.
A few topics to emphasize during check-ins with homeowners:
» Insurance needs and policy limits may change when undergoing major home renovations. It’s important to have adequate coverage to account for upgrades.
» Potential insurance savings could be available for renovating the home’s roof, plumbing, heating, cooling or electrical systems.
» As projects are completed, consider leveraging smart home technologies, such as smoke and water leak sensors, to save on premiums and further protect from common and costly claims.
» When planning for future projects, be sure to screen contractors carefully to ensure they have insurance and the skills needed to do the work.
Insurance must keep pace with residential contractors
Since the pandemic began in 2020, 62% of residential contractors have seen increased demand for home renovation work and most have been hiring to keep up.
Many are already booked up well into the next year and the demand crunch has further strained an already reeling construction labor market. To help with attracting and retaining skilled workers, half of contractors say they’ve raised wages while a quarter would like to but can’t afford it.
Another 54% have also expanded the offerings their business provides to clients to meet demand where it’s headed. Of those who expanded their offerings, 42% hired new workers who specialize in those trades, and 35% trained current employees to do the work.
Most residential contractors also faced substantial stresses in 2021 like higher material costs, difficulty finding materials in stock, and delays in receiving materials needed to complete projects. And they expect even greater challenges this year.
As contractors fight to keep up with demand and remain competitive in today’s market, insurance agents can serve a critical role in making sure their insurance protection stays in lockstep with their business needs. Contractor clients could use your guidance on:
» Ensuring they have appropriate limits across all coverage lines as inflation drives up the replacement cost of equipment and materials. Additional layers of coverage, such as that offered by an umbrella policy, can also help insured clients protect themselves against the impact of social inflation in claims situations.
» Keeping payroll information up to date as they add more employees and grow. If clients experience substantial increases in payroll or employees, you can make a midterm adjustment to general liability and workers’ compensation lines to reduce the potential for a premium audit payment due.
» Considering inland marine coverage to protect against costly losses that could occur when transporting or storing tools and equipment for projects. They may also benefit from an installation floater to cover project materials being stored while jobs are underway or being scheduled.
» Thoroughly vetting subcontractors to make sure they have the proper insurance, proper licensing if it’s needed, and the experience to do the work appropriately. Residential contractors also should have adequate risk transfer in place, especially if they don’t have a long-standing relationship with the subcontractors.
» Regularly checking in to help understand and account for any new or evolving exposures their business and employees may be facing and risk mitigation measures to protect against them.
Optimism on the horizon
Despite economic obstacles in 2022, both homeowners and residential contractors are optimistic about their future projects.
Both homeowners and contractors expect to see continued supply chain and inflation troubles as they tackle renovation projects, but only 5% of homeowners say they’ll halt their projects as a result. Seven in 10 residential contractors are also optimistic about the 2022 season.
As home remodeling demand continues to create opportunities and challenges for customers, multiline agents can reinforce their value to personal lines and commercial lines insureds alike with proactive outreach and guidance to help them smoothly navigate their projects ahead.