Going into a new year, inflation continues to be a key topic for individuals. But are your business customers keeping pace? Insurance to Value is not a new concept. Each year leading up to renewal, it’s one of the many items on an underwriter’s checklist — to update values for a business. Often, insurance customers suggest that values are fine as they are. However, in this current environment, that approach will likely result in underinsured property values and it’s more important than ever to have those values updated at renewal. Insurance to Value (or often referred to as ITV) isn’t the property value itself, but the cost to replace or repair if loss or damage occurs. Over the course of two years, costs have increased with prolonged timelines to repair or replace property. This is driven by several factors, including supply chain disruptions and labor shortages contributing to delays, as well as inflation driving up the cost of materials and services. The combined impact of these factors should encourage your clients to re-evaluate not only the replacement costs of physical property, but the turnaround time for repairs or replacement so they can appropriately gauge their business income and extra expense exposure. Having adequate INSURANCE TO VALUE (ITV): insurance protection as external factors change will help your client’s business be better prepared in good times and bad. When assessing a property’s value today, several factors play a role: • Increased costs for construction and building materials • Increased costs and availability of specialized equipment, machinery, electronics, furnishings, etc. • Slower turnaround times for re-builds, delivery of materials, replacement of business personal property, etc. Avoiding the Impacts of Being Underinsured When property exposures are underinsured, clients may face a number of tough scenarios: 1. Not enough insurance: When a property is completely damaged and the limit of insurance is less than the replacement cost, the customer will simply not have enough insurance to cover the entire loss. 2. Coinsurance penalty: When underinsured, if a coinsurance clause applies, a customer may be impacted by a coinsurance penalty. This means that even without a total By Betsy Good, Vice President of Collateral Lines, Intact Financial Services What You Need to Know in This Inflationary Climate 18
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