Insurance coverage Implications of Rising Constructing Prices

0
107

This post is part of a series sponsored by the Hannover Insurance Group.

Rising building material costs are quickly outpacing inflation rates, and the high demand for skilled labor and widespread global pressures on the supply chain only add to rising costs and create new risks for business customers who may need to rebuild after a property loss. Fortunately, independent brokers are well placed to educate their clients about important insurance requirements and considerations.

Rising costs

According to the latest 360Value Quarterly Cost Update from Verisk (ISO), the total cost of rebuilding rose by an average of 8.1% nationwide between January 2020 and January 2021, rising from lows of around 6% to almost 12%, depending on the state. The material costs rose by 15.2%, the wood costs alone increased by 85%.

At the same time, labor costs rose 3.8%, up from nearly 8% in January, partly due to a labor shortage. This applies in particular to areas that were badly affected by winter and spring storms, where there was even greater demand for materials and suitably qualified workers. The shortage of materials has been exacerbated by pressure on the global supply chain. A current example was the blockade of the Suez Canal, in which many materials reached their destination late. This and other pressures on the international supply chain could affect the transportation of equipment and materials in the coming months.

Insurance considerations

Delays. Given the lack of manpower and more expensive materials, many companies experience delays in recovery from a loss, putting their companies at risk of exceeding policy restrictions.

Unexpected costs. Given the rise in costs, the total cost of replacing buildings, equipment and contents can be underestimated, which can result in a company being underinsured or subject to undesirable co-insurance penalties.

Income limits for companies: In the case of material and work delays, it is conceivable that the recovery times will be extended, possibly beyond the period of leave and / or the extension of the leave. In some cases, this can result in the Real Estate Policy time element restrictions being exceeded.

recommendations

The right insurance solution can help protect customers from unexpected financial burdens in the event of damage. Independent agents can guide their customers to coverage that is appropriate to their individual needs by taking the following steps:

  1. Initiate proactive conversations: Mid-term meetings with customers can help prepare these important discussions well in advance of contract renewals.
  2. Reevaluate cost estimates: Agents can assist customers in re-evaluating replacement cost estimates for buildings, contents, equipment, and business interruptions to ensure the appropriate levels of coverage are in place.
  3. Read the policy’s terms and conditions: Agents can confirm that the correct policy limits or sub-limits are in place so that customers are not underinsured and unnecessarily penalized by co-insurance requirements.
  4. Highlighting procurement alternatives: Faced with material shortages, agents can remind customers to create backup plans for the procurement and procurement of resources, materials and equipment to meet their commitments.

As current trends are set to continue for the foreseeable future, independent brokers can provide valuable advice and advice to their clients and put in place an insurance program that will provide proper protection in the event of harmful property damage.

subjects
Trends

Are you interested in trends?

Receive automatic notifications on this matter.