Effective October 1, 2023, Rooney Insurance will be located at 5100 E Skelly Dr, Suite 1010 in Tulsa, Oklahoma
Effective October 1, 2023, Rooney Insurance will be located at 5100 E Skelly Dr, Suite 1010 in Tulsa, Oklahoma
Inflation affects most all sectors and industries, and everyone has felt the impact over the last couple of years. Commercial construction costs continue to rise in large part due to inflation. This is a concern for insurance claimants who have to re-construction following a loss. The rapidly rising costs of building materials, supply chain issues, and labor shortages have all put commercial property owners at risk of being underinsured. What if you need to rebuild a significant portion of your commercial building following a covered loss? After paying insurance premiums for years and years, you certainly don’t want to be caught not having enough coverage when you need it the most.
Your property’s square footage, construction materials, year built, and type of construction all go into determining what it would take to replace your building(s). One way to find out this number is to ask a contractor to provide an estimate. Another is to work with your insurance agent, who may be able to use industry-trusted cost estimators that underwriters use and help determine a replacement valuation that way. If property values are large or the structures are complex, many insurers will require sending an inspector to do a loss control inspection ahead of time. This information gathered at the time of inspection is also helpful to underwriters in verifying a structure’s value.
Not all replacement cost commercial property insurance policies are written the same way. Many include a co-insurance clause. Coinsurance clauses in commercial property policies say that you, the policyholder agree to maintain limits of coverage of at least a certain percentage of the replacement value of the property at the time of the loss. If you did not buy (or maintain) at least that amount indicated as required in the policy (usually 80% or 90% of the replacement value coverage) and a loss occurs, then your claim settlement will be penalized for not having purchased enough insurance. The best way to avoid this penalty is to regularly review your coverage with your agent each year and adjust the value according to what it would take to replace the building in the current construction cost environment. Skimping on the valuation of your commercial property to try and save some premium is not wise.
Some commercial property insurance policies may include an inflation guard feature designed to help offset the risk of being underinsured due to expected inflation increases. Such policies will automatically increase the building value each year by a preset percentage. This is helpful but isn’t the cure for all change in value that may need to be made on your policy. It is wise and recommended to inform your insurance agent of any changes or investments you make to the property, such as upgrades or renovations, so that you can adjust the coverage limits accordingly.
Rooney Insurance Agency, Inc., headquartered in Tulsa, OK, has provided insurance solutions to businesses both locally and in several states across the USA since 1960. For more information about the firm and its capabilities, please visit www.rooneyinsurance.com.
