With rising inflation, supply constraints, and surging costs in the wake of the Consumer Price Index reaching a 30-year high, you may be wondering how these factors will impact your business’ insurance. In this blog, we explore why it’s crucial to ensure the Insurance to Value (ITV) of your property is up to date.
Global Need for Construction Materials is Increasing
Long-term global demand continues to have a negative influence on the pricing and availability of construction materials around the world. Building materials that were once made in Canada or the United States are now commonly made overseas and shipped all over the world. Commodities demand has become a global marketplace, with your local lumberyard competing for the same materials with global forces. Before the epidemic, a pre-cut 2×4 cost $3.39, but today it costs around $13, said Art Hicks, owner of Home Hardware Building Centre in Witless Bay.
Residential construction prices surged by 18.1% last year, while non-residential costs increased by 6.9%. With a 31.2% year-over-year increase in softwood lumber pricing, it was one of the most dramatic increases.
Aside from timber, the Industrial Product Price Index, which analyses the price of all goods sold by Canadian manufacturers, reveals that prices increased by 16.4% in 2021.
Rebuilding Yesterday’s Buildings at Today’s Prices
A few commercial property clients have faced difficulties in having their damaged properties reconstructed for the values specified on their insurance policies, which may not have been updated to meet replacement costs at today’s prices in the event of a loss or property loss. Some business owners may discover that their insurance limits are overstated by as much as 50% to 75%, resulting in major unanticipated out-of-pocket payments, business disruption, or shutdown.
Up to 1/4 of Businesses Close their Doors Following a Major Loss
Hundreds of businesses in Canada are affected each year by disasters such as floods, windstorms, and wildfires. Even more regular occurrences, such as building fires, can have disastrous consequences. Unfortunately, according to the Insurance Institute for Business and Home Safety, up to 25% of businesses close their doors after a major loss.
How We Can Help Determine your Insurance Value
We know it took a lot of time and effort, and your hard-earned investments to sustain and grow your business. We want to help ensure your continued success, even if the unexpected happens. Insurance to Value (ITV) is an assessment of the complete cost to replace insured property – a critical element of a comprehensive property insurance program.
One way to ensure you are adequately insured to value is to regularly review the current value of your buildings. It is always a good risk management practice to have your buildings appraised every 3 years, however, since we are presently seeing a spike in inflation and the cost of materials and labour, it would be a good time to review your limits right now. Please contact your Account Manager, to discuss any changes to your Insurance to Value assessment.
There’s more to insurance than the price of the policy and Wedgwood goes above and beyond for our clients with expert advice you can trust, but don’t take our word for it. There’s a reason we’re Newfoundland & Labrador’s most trusted insurance broker.
With over 200 Google My Business reviews, come experience the Wedgwood difference with expert advice from our dedicated team. We work to ensure that every client has the coverage that best suits their needs through upfront complimentary consultations and midterm reviews.
With thanks to Travelers Canada