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Increasing Construction Costs
Hey there! Just a heads up on why it’s super important to keep your insurance coverage limits in check, especially with all the construction cost changes happening lately!
We’ve all felt the ripple effects of the COVID-19 pandemic, and it’s shaken up a lot of industries, construction included. There’s been a real pinch in building materials availability, and with more folks wanting to build and renovate, plus the labor costs climbing, construction expenses have really jumped up.
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Here's the scoop for you
Most of our Farm and Commercial Insurance Policies have this thing called a Co-Insurance Clause. In plain speak, it means if you’re not insured for the full, current rebuild cost of whatever’s insured, you could face penalties if you need to make a claim. The idea is that your building or gear is covered for its replacement cost, as long as you’ve insured it for its full current value.
As the policy owner, it’s on you to make sure these coverage limits are spot on, keeping up with the latest in construction costs and trends.
When you insure a building, insurers expect you to cover it for its real replacement value. They figure out your premiums based on the risk, not really expecting a total loss. But they’re banking on you to insure the whole value of your building. The co-insurance clause is their way of making sure you don’t underinsure on purpose, thinking a total loss won’t happen to you.
Here’s how it plays out if something happens
Say your building’s replacement value is $100,000. You insure it for $60,000, but your policy has an 80% co-insurance clause. If a fire damages your roof and upper floor, causing $10,000 in damages, here’s what the claim settlement could look like: $60,000 (what you insured) / $80,000 (what you should’ve insured – 80% co-insurance) X $10,000 (damage cost) = $7,500.
Because you were insured for 25% less than you should have been, you end up covering 25% of the losses yourself. This co-insurance principle applies whether you’re covered for Replacement Cost or Actual Cash Value.
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Thinking it's time to check your coverage?
Our team is here and ready to dive in with you to make sure your coverage is up to snuff. Let’s make sure you’re fully covered, given all these changes.
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This provides coverage in the event of a financial loss initiated by an injury on the job (at the hands of yourself or an employee.) Note: this does not protect your employees.
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