Keeping Insurance Values Up to Date- Building Costs
With businesses facing rising inflation, continued supply shortages and soaring prices amid a Consumer Price Index hitting a 30-year high- it is important for you to understand how this impacts your insurance rates.
Global demand for building materials escalates
Prolonged global demand continues to adversely impact the cost and availability of building materials worldwide. Building materials that were once manufactured domestically are now frequently made overseas – and they’re shipped everywhere. Demand for materials has become a global marketplace, with your neighborhood lumberyard competing with global forces for the same materials.
Last year, residential building construction costs increased 18.1% while non-residential costs grew by 6.9%. Softwood lumber pricing showed one of the most dramatic increases with a year over year increase of 31.2%.
Beyond lumber, the Industrial Product Price Index, which tracks the price of all commodities sold by manufacturers in Canada, shows that prices rose a staggering 16.4% in 2021.
Rebuilding yesterday’s buildings at today’s prices
Because the cost of building materials and labor has escalated so steeply in the past year, many commercial properties may be difficult to reconstruct for the values stated on their insurance policies.
Up to 1 in 4 businesses close their doors following a major loss
Some business owners find their limit of insurance to be understated by 50% to 75%, resulting in significant, unexpected out-of-pocket costs, business disruption or termination of operations, as insurance limits are exhausted. Each year, disasters such as floods, hurricanes, tornadoes and wildfires force thousands of businesses to close. But even more common events, such as building fires, cause the same result. Research shows that at least 25% of those businesses that close following events such as these do not reopen.
Update building values regularly
It took time, effort and hard-earned investment dollars to create and sustain your business. Help your business thrive by regularly assessing the current value of your buildings. The values stated in your insurance policy may not be enough to cover replacement costs at today’s prices if a major loss occurs. Insurance to value (ITV) is an assessment of the complete cost to replace insured property – a critical element of a comprehensive property insurance program.
What’s the best insurance policy for you?
Talk to an expert LIG Broker today about coverage solutions offered that best suit your business’ unique needs.