Is inflation leaving your business underinsured?

“Material prices are at an all-time high, which impacts the cost to rebuild following a catastrophic event.  Property values need to be updated to ensure you are properly insured,” said Denise Perlman, EVP, of Business Insurance and National Partnerships, Marsh McLennan Agency.

Focusing on the accuracy of your data

With heightened underwriter scrutiny, insureds are under pressure to report replacement values that reflect the current construction environment more reliably. If insurers are still questioning if the reported values are accurate, they may introduce coverage limiting clauses, endorsements, and provisions during your renewal to avoid bearing risk relating to undervaluation.  

Some insurers may try to impose a coinsurance provision, a charge to the insured when there is a loss, resulting in a lower insurance payout. Insurers may also limit coverage for one or more locations to the values reported. In some instances, insurers may agree to a margin clause. Insurers may also opt not to renew policies where they view the reported values as being well below market averages or where an insured has sustained prior losses that exceeded the values previously reported. Aside from complicating the loss recovery process, policy wording that limits coverage to the values reported can potentially put insureds at risk of violating lender requirements, lease obligations, or other agreements to maintain a specified level of insurance.   

If you think your business is at risk of being underinsured, reach out to a Marsh McLennan Agency representative today to help prepare for an unknown future.

Read parts two and three of this series to learn more about how inflation could effect your business.