March 01, 2017

Insurance Costs - Another Negative of Wood-frame Construction

The results of a study released in 2016 point to the need for architects, contractors and owners to seriously consider another negative of wood-frame construction: disparities in insurance costs compared to insuring masonry construction.

Research Methodology

The comparative study of insurance rates was conducted by Globe Advisors for the Concrete Council of Canada. Researchers accumulated data from a wide variety of sources:

  • Interviews with underwriters
  • Consultations with property managers, insurance brokers and underwriters
  • Relevant published materials
  • Data from the Canadian Wood Council

Study Highlights Huge Gap in Rates

Using data provided by underwriters and the Canadian Wood Council, the study calculated that a builder’s average monthly risk insurance costs for wood-frame construction were $0.053 per $100. Rates for concrete building were approximately six times lower, at $0.008 per $100. When the CWC figures were excluded and only data from the underwriters was used, the average monthly insurance cost for wood structures rose to $0.06 per $100. This was 7.5 times higher than the average rate for masonry construction.

As the study suggests, insuring wood structures is not only more expensive, it can be more difficult to do. Underwriters are sometimes hesitant to insure wood-frame buildings without finding ways to decrease risk exposures.

Reasons for Insurance Differences

The far higher property insurance rates for wood-frame structures are attributed to the following:

Moisture risks - In general, wood-frame buildings are more susceptible to water damage. Water often spreads more rapidly in these buildings and it often spreads without detection until significant damage has already occurred. In extreme cases, entire structures have been lost due to extensive mold or rotting wood. The study underscores the importance of moisture control in wood-frame structures during construction and throughout their entire life cycles. By inference, concrete construction enjoys significant advantages in terms of moisture intrusion and control.

Fire risks - When we compare only the fire insurance portion of property insurance, the gulf between wood-frame and concrete construction grows even wider. Due in large part to the combustibility of wood, rates are as much as 11 times higher. According to the Council’s post, approximately one percent of concrete buildings are demolished following a fire. The figure for wood-frame structures is eight times that.

Growing weather extremes - The article asserts that claims related to extreme weather have doubled every 5-10 years for the last three decades. Although some may debate the reasons for these extreme weather trends, it is undeniable that more destructive and more frequent storms have generated flooding rains, high winds and other forces that increasingly threaten building integrity.

Wood-frame Vulnerabilities

According to Chris Conway, the Chair of the Concrete Council of Canada, the study highlights issues with mid-rise wood-frame construction in a variety of areas:

  • Public safety
  • Risk exposure
  • Contractor liability
  • Municipal budgets

The study also highlights the need for continued comparative analyses of factors influencing the life-cycle costs of various structures. This process is fluid, given the ever-changing technologies that influence costs in the construction industry. Long-term maintenance costs are certainly part of the equation, as are operations expenses. The eventual cost of decommissioning the building must be also factored into any analysis. 

The Globe Advisors study demonstrates the importance of considering insurance costs when calculating complete life-cycle costs of different types of buildings. In response to the study, the Concrete Council of Canada suggests that “a concerted effort must be made to build better awareness of the factors that influence insurance rates.”

Insurance Savings with the Bautex Wall System

Structures built with the innovative Bautex wall system qualify for the lower property insurance premiums associated with concrete construction. Underwriters take note of important Bautex features that are likely to reduce the frequency and size of claims, like extreme wind-storm resistance and the four-hour fire rating. To learn more about how this innovative building system can benefit your next project, click here!