How Inflation is Affecting your Insurance

Sponsored by 3000 Insurance Group

We're seeing inflation impact the price of various things across the board, and insurance is no exception. While the rising cost of insurance is a concern for many, another concern is the increased cost of repairing or replacing assets such as homes, buildings, or personal property. You might think it's enough to insure your property for market value (the cost people are willing to pay for your property), but the replacement value may exceed its market value. Your property's market value today could be quite different next year. And the price of materials to rebuild is likely to increase year over year.

Are your limits adequate in the event of a covered loss? Insurance policies are commonly written on a replacement cost basis, which means the policy will pay to replace your building, home, or personal property should a covered loss occur. As the current costs of materials and labor continue to rise, your policy may need to be adjusted. With many policies, an adjustment happens automatically, but it’s often nominal. Check your policy to ensure you have adequate funds to rebuild or replace your house, business, or personal property.

Keep in mind that many insurance policies have a coinsurance provision that states that, you, the insured agrees to keep the asset insured within a certain percentage of the asset's replacement cost to avoid penalties. We recommend you review your property and any assets annually to ensure you carry limits adequate to satisfy the coinsurance requirements and avoid penalties or partial payments at the time of a covered loss.

If you lease your property, always read your lease agreement to understand exactly what you are responsible for insuring. If your landlord built out the space, they could likely give you an appropriate figure to do so again. Or seek out help from a trusted Real Estate broker to help you determine the proper reconstruction amount. Many leases make you responsible for the Leasehold Improvements in your space, especially if they were placed in your space by you or on your behalf; making it your responsibility to insure.

It is critical to remember when evaluating the replacement cost, it is not always equal to the market value. Market value often includes the cost of the lot or acreage a building sits on, which is not insurable. You can speak with our office to help get an idea of replacement costs, or you can talk with a contractor, real estate agent or home builder to get an idea of the current costs.  

Please let us know how we can help! Give us a call at 405-521-1600 or visit www.3000ig.com for more information.