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!