Everywhere you look today, prices are skyrocketing with no signs of stopping. From groceries to gas prices, lumber to steel, inflation is increasing across the economy. Combined with supply chain disruptions and labor shortages, these are warning signs for every business owner to conduct a policy review with their insurance advisor and ensure they are not under-insured. Here’s what you need to know about inflation in the insurance industry and why you should review your insurance policy to avoid any surprises should you need to file a claim during these uncertain financial times.
How Bad Is Inflation?
As a business owner, it’s part of the job to stay up to date on economic trends that can affect your business operations. According to the most recent Consumer Price Index (CPI) report, prices for goods and services rose 7.9% in February compared to last year. This is the fastest inflation has increased since the early 1980s. Take a look at these items that have seen some of the largest surges over the past 12 months:
- Home sale prices: 18%
- New cars: 12.2%
- Used cars: 40.5%
- Meats, poultry, fish, and eggs: 13%
- Clothing: 13.5%
- Furniture: 17.1%
For many business owners, raising prices for goods and services is a way to help keep business operations afloat. But that also means many of your insured items are more valuable and expensive to replace if damaged or destroyed.
How Does Inflation Affect Your Business Insurance Coverage?
Because inflation and supply chain issues have placed more value on everything we own, the cost to replace or rebuild your property may exceed your policy limits. Here’s a closer look at specific lines of coverage where inflation plays a factor and how you might be at a shortfall:
Commercial Auto. Vehicle repair expenses and prices for new and used cars have surged. The cargo van you purchased a few years ago for $40,000 may be worth more in today’s current market value. For stated value policies, it’s crucial to regularly review your stated value because it affects how insurance companies pay out claims. After a total loss occurs, your insurance company will look at your commercial vehicle’s stated amount and market value and pay whichever is less. By reviewing and correctly assessing your commercial auto’s value now, you can minimize surprises later. Business owners of auto dealerships, body shops, and repair shops should consider purchasing or increasing their garage keeper’s insurance coverage for extra protection.
Commercial Property. Construction material costs shot up dramatically in 2020. In addition, labor costs have grown due to construction worker shortages. In the event of a covered loss, it’s possible your business may experience delays or added rebuild costs, putting you at risk of exceeding policy limits. The longer it takes to rebuild your business, the more likely your business income loss will exceed your limits. Be sure to reevaluate your policies by accurately valuing your business needs and safeguarding yourself against underinsurance.
5 Steps to Minimize Your Exposure
A lot can happen in a year, especially when you own a business. You should always review your commercial insurance, whether you’ve made some changes to your operations, such as hiring additional workers, buying new equipment, or even downsizing your business. To protect yourself against underinsurance and ensure you have the proper protection, follow these steps:
- Get in touch with a trusted business insurance professional.
- Discuss your policy limits and coverage terms and conditions.
- Conduct a replacement valuation on your business equipment and machinery.
- Reassess your commercial property valuations.
- Consider business interruption insurance to replace lost income in the event your business halts from a covered loss.
Figuring out your small business insurance needs and finding the best protection for your company is our specialty. Speak with one of our Commercial Insurance Specialists today at (855) 919-4247 for a quick and easy quote and an analysis of your policy coverages.
The information in this article is obtained from various sources and offered for educational purposes only. Furthermore, it should not replace the advice of a qualified professional. The definitions, terms, and coverage in a given policy may be different than those suggested here. No warranty or appropriateness for a specific purpose is expressed or implied.