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How Does the Cost of Building Supplies in Ontario Affect My Business?

How Does the Cost of Building Supplies in Ontario Affect My Business?

January 14th, 2023

As a business owner with a commercial building, it is essential to understand the various factors that can impact the cost of your insurance premiums. One such factor is the cost of building supplies, which can significantly influence your coverage price. 

In this blog post, you will learn about the relationship between building supply costs and commercial building insurance premiums, including the current state of affairs and predictions for the future. 

Additionally, you will discover steps business owners in Ontario can take to mitigate the effects of rising building supply costs on their insurance premiums. You will also better understand how to navigate the sometimes-turbulent waters of commercial building insurance in Ontario.

Current State of Building Supply Costs in Ontario

Building supply costs in Ontario have been rising since the middle of 2020, showing no signs of slowing down. Lumber prices, in particular, have been steadily increasing and are expected to continue climbing. The high demand for new home construction contributes to the increase in lumber costs, adding thousands to the purchase price of a new home.

In addition, the pandemic has disrupted supply chains for many building materials, including lumber. Sawmills have had to shut down, leading to shortages and higher prices. The Ontario Forest Industries Association (OFIA) reports mills are working to catch up, but it is unclear when costs will return to pre-pandemic levels.

The Federal Reserve in the US and the Bank of Canada have been gradually increasing interest rates throughout 2022, with more increases expected by the end of the year. While both countries may be affected by these rate hikes, Canada expects to fare better in construction growth than the United States. According to GlobalData, the US has experienced more negative impacts from economic challenges than Canada, which projects a 4% increase in overall construction growth in 2023.

The high cost of building supplies is not limited to lumber, however. Many other materials, including drywall, plumbing, and electrical, are also in high demand and experiencing shortages. This demand is causing delays and higher prices for these materials as well.

2023 Predictions for Building Supply Costs in Ontario

If lumber prices become too high, some Canadian builders and contractors may decide to scale back or delay their projects, decreasing demand for building materials and potentially causing prices to drop.

The cost of lumber can have a ripple effect on building costs in Ontario, affecting everything from the cost of individual construction projects to the overall demand for new construction. 

Other factors that could influence the cost of building supplies in the coming years include:

  • Recovery from the pandemic – As the world continues to recover from the COVID-19 pandemic, supply chains for building materials are expected to improve. Eventually, there could be a decrease in the cost of building supplies, especially if the demand for construction materials decreases.
  • Natural disasters – The frequency and severity of natural disasters, such as hurricanes and wildfires, could continue to affect the availability and cost of building materials.
  • Trade policies – International trade policies, such as tariffs, can significantly impact the cost of building supplies. 
  • Economic factors – The overall state of the economy can also influence the cost of building supplies. A strong economy might increase demand for construction materials, which could drive up prices. 

Builders, contractors, and small business owners need to stay informed about changes in lumber prices and how they might impact building costs in the province. 

Impact on Commercial Building Insurance Premiums in Ontario

As the cost of building supplies, particularly lumber, increases in Ontario, it is likely commercial building insurance premiums will also increase. Business owners with commercial buildings in Ontario should prepare for potential increases in their insurance premiums due to rising building supply costs. 

Insurance companies base their premiums on various factors, including the cost of materials and labor needed to repair or rebuild a structure. If the cost of these materials increases, insurance companies may need to charge higher premiums to cover their costs. 

Commercial building insurance premiums can rise with building material costs for several reasons. First, insurance companies base their premiums on the cost of materials and labor needed to repair or rebuild a structure in the event of a loss. Similarly, if the price of other building materials such as drywall or plumbing supplies increases, insurance premiums may also rise.

In addition to the direct impact of rising building material costs on insurance premiums, there may also be indirect effects. It may become more expensive for businesses to undertake construction or renovation projects, which could reduce the demand for insurance coverage. The result could lead to a decrease in premiums, as insurance companies compete for business.

Overall, the relationship between commercial building insurance premiums and building material costs is complex and can vary depending on many factors. Business owners should be prepared for rising premiums as building material costs increase, and take steps to mitigate the impact on their insurance costs.

What Other Factors Influence Commercial Building Insurance Premiums?

Commercial building insurance premiums are based on a variety of factors, including:

  • Location – The location of the building can affect the risk of certain types of damage, such as flooding or earthquakes, which can impact the cost of insurance.
  • Age and condition of the building – Older buildings may be more prone to certain types of damage and may require more frequent repairs, which could lead to higher insurance premiums.
  • Use of the building – The type of business conducted in the building and the activities there can also influence insurance premiums. For example, a restaurant may have higher premiums due to the risk of fires or food-borne illnesses.
  • Building materials and construction – The materials used in building construction and the structure’s quality can affect the risk of damage and the cost of repairs, which can impact insurance premiums.
  • Coverage limits and deductibles – A business owner’s coverage can also affect premiums. Higher coverage limits can result in higher premiums, but they can also provide more protection in the event of a loss.

In addition to these factors, insurance companies may also consider the financial stability of a business when determining premiums. For instance, a company with a solid financial track record and good credit score may be considered lower risk and receive more favorable insurance rates. By understanding these factors, business owners can make informed decisions about their insurance coverage and find the best policy at a reasonable price.

Steps Ontario Business Owners Can Take To Mitigate Rising Building Supply Costs

As the cost of building supplies continues to rise in Ontario, business owners must be proactive in mitigating the impact on their commercial building insurance premiums. Here are a few strategies to consider:

  1. Shop around – Do not just accept the first insurance quote you receive. Shop around and compare multiple quotes to find the best coverage at a reasonable price.
  2. Consider alternative materials – In some cases, it may be possible to use alternative materials in construction or renovation projects that are less expensive than traditional building supplies. 
  3. Negotiate with suppliers – If you have a good working relationship with your building supply suppliers, it may be worth negotiating for better material prices. 
  4. Reduce waste – Building projects can generate a lot of waste, which can increase costs. By finding ways to reduce waste, such as by using materials more efficiently or recycling materials, you can help to keep costs down.


In conclusion, the increased cost of building supplies, particularly lumber, can significantly impact commercial building insurance premiums in Ontario. As prices rise, insurance companies may need to charge higher premiums to cover the cost of repairs and rebuilds. 

Business owners with commercial buildings should be prepared for potential increases in insurance premiums and consider strategies for controlling building supply costs. By shopping around and comparing quotes, negotiating with suppliers, and finding ways to reduce waste, it may be possible to mitigate the effects of rising building supply costs on insurance premiums. 

At Duliban Insurance, you can feel confident you are getting the best insurance coverage for your business at a competitive price. Whether you are a small business owner or a large corporation, Duliban Insurance has the expertise to help you protect your investment and keep your business running smoothly.

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