A Few Ways Inflation Could Be "Messing With" Your Commercial Insurance Policies

Most business owners, CEO's, and CFO's,  look at their commercial insurance polices once a year and then put them in a file to not be thought about again until next renewal cycle. They may have to review them if there is a claim or if there was a need for major changes, but most of the time no one is thinking about their insurance policies. 

With rising inflation, it may be time to look again. Inflation is silently messing with your commercial insurance policies. I have listed a few ways below. There are many more but this will at least get you to think, "Um... I should pull those policies out of the file and take another look".

1) Your Property Insurance values may be inadequate - Rising building material costs due to inflation and supply chain disruptions could mean your buildings and or property will cost a lot more to rebuild or repair after a loss. Most property insurance policies are set up with a potential penalty for under insurance at the time of a claim. This is called Co-Insurance.  It may be a good idea to check your insurance limits compared to the current price of materials. You may find that due to inflation you need to raise your building and or property coverage amounts so that you are not hit with the dreaded coinsurance penalty after a claim.

2) Your Business Income Coverage needs to be adjusted more frequently- Figuring out what business income coverage limit is needed for your business can be a complicated process. Most starting points for a coverage limit is to take total sales minus cost of goods sold. This is what I like to call the gross income number. With today's inflation the cost of goods sold is increasing, month to month. This means business income coverage limits have to be adjusted frequently to keep up. Because of inflation,  you may find that the business income coverage that was accurate last quarter, is insufficient. 

3) Your General Liability Policy has a rating base that is to low- The inflationary pressures today are making businesses raise prices to keep up. This increases the sales number. Most General Liability policies have a rating base on sales. If the sales go up the premium goes up. With rising prices due to inflation, a lot of businesses will see their liability insurance costs go up just because they raised  prices. 

These are just a few ways that inflation is messing with your insurance policies. Reach out to your insurance professional and pull the policies out of the file. The circumstances of the COVID economy and the resulting inflation, make it very risky to not look at your insurance more frequently. Dust off those files !

Until next time be careful out there and know your risks.

Posted by: G. Kevin Nemith CIC. CRM  Agency Leader for Hilb Group of Delaware, a division of  Hilb Mid-Atlantic Group and Hilb Group

knemith@hilbgroup.com

Top 20 insurance brokers and risk managers in the USA. 

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