Many business owners are not aware of how inflation can play a role in the value of their property insurance. As the cost of construction and materials increase, so does the amount you need to insure your property for. If you don’t keep up with these changes, you could find yourself underinsured and at risk of having to pay out of pocket for damages.
What is Inflation?
Inflation is the rate at which the prices of goods and services rise over time. The main cause of inflation is an increase in the money supply, which leads to more money chasing the same number of goods and services. This results in a higher demand for goods and services, which drives up prices.
How Does Inflation Affect Insurance Property Values?
As mentioned above, inflation can cause the cost of construction and materials to increase over time. This means that if you insure your property for its current value, it may not be enough to cover the cost of rebuilding it if it’s damaged or destroyed. That’s why it’s important to keep up with changes in construction costs so that you can ensure your property is properly insured.
There are a few ways to do this:
-Check with your insurance broker and work together to determine if your current carrier has the adequate Inflation Guard (which is the automatic annual increase in property values on an insurance policy to help keep up with rising costs of construction) for your policy.
– Check with your local building department for their estimated cost per square foot to rebuild.
-Consult with a local contractor or builder for their estimate on what it would cost to rebuild your property.
-Look up the Marshall & Swift/Boeckh Cost Index, which is a leading indicator of building costs in the United States.
Something else to consider for grocery retailers is the stock that you carry and the way inflation has increased those items as well. Having a trusted agent is imperative to minimizing risks and here at HIG we have dedicated agents that can help you review your limits to best protect yourself and your business.
