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!