Tariff Talk: Should You Revisit Your Homeowners Insurance Coverage Limits?

Reading time • 5 minutes

By Matic

New home construction with labor materials from tariffed sources.

Inflation contributed to a surge in the cost of building materials during the pandemic, with a 20% jump in lumber prices and a 44% jump in drywall prices. While the prices of many items have since normalized, recent tariffs against imports from Canada and Mexico in 2025 could fuel another surge in raw material costs.

What does this mean for homeowners? When the price of building materials increases, so does the cost to repair or restore your home after a covered event takes place. And given the amount of severe weather damaging property across the country, from wildfires in California to hurricanes in the Southeast, it’s a smart time to reassess your homeowners insurance policy coverage while tracking the impact of geopolitical events on pricing.

Why homeowners insurance coverage limits matter

Every homeowners insurance policy comes with coverage limits, meaning the maximum amount of cash you can receive to repair or rebuild your home after a covered loss. If your coverage limit isn’t enough for the cost of rebuilding your home in today’s market, you’ll likely be responsible for paying the difference.

In addition to rechecking your coverage limit, also look at the type of coverage. Your policy will typically insure your structure based on either replacement cost or actual cash value. With most replacement cost coverage, you will receive reimbursement (up to your limit) based on current values to replace your home. Depreciation (as in, the wear and tear that has occurred over the years) isn’t taken into account.

With actual cash value coverage, on the other hand, depreciation is factored in. That means the amount of money you receive for a claim, despite your coverage limit, could be substantially less than what it would cost to rebuild today. The insurer typically calculates the value of your home based on things like its age and condition.

When the cost of building materials spikes, homeowners may find that their insurance coverage falls short of the full cost of rebuilding. That gap can widen even more dramatically when the cost of building materials increases. In order to try and reduce your financial risk, it’s important to understand your coverage and reevaluate your home insurance needs, especially during times of price volatility.

The impact of 2025 tariffs on building costs

The start of 2025 has been full of news headlines, including the U.S. rolling out new tariffs. For homeowners, the most impactful tariffs may be those placed on Canadian and Mexican imports. The U.S. imports a large percentage of building materials from these two countries. According to the National Association of Home Builders, Canada provides 72% of sawmill and wood products in the U.S., while Mexico provides 74% of lime and gypsum products.

So what’s happening with the tariffs on these imports? In early February, the Trump administration initially imposed a 25% tariff on imports from Canada, Mexico, and China as a leveraging tool to forward its immigration and illegal drug initiatives. Just days later, the tariffs on Canada and Mexico were paused in the midst of negotiations. However, those tariffs were reinstated in early March, with just a few alterations and exemptions.

But as of time of writing, most imported materials from both of our neighbors stand at 25% — a price likely to affect consumers with its direct impact on construction prices. While most people associate raw materials with new-build homes, homeowners are also at risk of feeling those price increases if damage occurs.

Reevaluate your coverage limits

It’s important to fully understand your homeowners insurance policy. Once you know what kind of coverage you have, the following steps may help you assess whether or not it’s sufficient in today’s environment.

Check if you have replacement cost or actual cash value coverage and consider whether you need replacement cost coverage.
Assess your dwelling coverage limit in light of rising construction costs. Start by finding out the average cost per square foot for a new build in your area, then multiply that by your home’s square footage. You may need higher coverage if you have higher end finishes.
Also review additional structures on your property, such as a detached garage or shed. Make sure the updated cost to rebuild those are included in your dwelling coverage.

Talking to an insurance agent can also give you insights on how replacement costs are changing in your area.

Staying ahead with Matic

These potential policy changes could strongly impact how much imported materials cost in the near term. While you can’t control such high-level factors, you can build a bigger financial safety net in the event your home suffers damage during a covered peril.

Take the time to review your homeowners insurance policy and assess whether your dwelling coverage limit is enough to rebuild using materials in today’s market. When you’re ready to make a change, explore your options through Matic. We partner with multiple insurance carriers to help you compare multiple quotes and find the right coverage for your home.