News
Clients' Insurance To Value
Bulletin – Thursday, July 8, 2021

When was the last time you checked your clients' insurance to value? 

Often times when a property is insured for the first year with a new agent or carrier, the value may not be looked at for another 3 years or more. It’s important to remember that not all policies have an inflation guard- especially surplus lines. This is the year to look at all your clients’ building values due to the increased cost of construction. Adequate Insurance to Value is critical in making our insureds whole again after a loss.

We have seen the perfect storm of factors that have driven the cost of construction up significantly. The initial COVID-19 shutdowns, labor shortages, increased renovation and building demand, and tariffs have all contributed to the dramatic price increase on materials. 

The price of softwood lumber has increased 83% from March 2020 – March 2021, plywood has increased 53% and steel mill products have increased by 40%, according to the Producer Price Index.1 These trends are all impacting the replacement cost values of buildings, business personal property, along with builders risk projects.

All structures, whether a personal or commercial structure, are a combination of materials and labor hours. If a structure has a total loss today, it will be at least 6 to 18 months, if not longer, before rebuilding begins due to the current projects in the pipeline. This is another important factor when reviewing coverages and limits.

To make sure we avoid potential coverage shortfalls, coinsurance penalties, and E&O claims, we ask that you review existing coverage and look at a new replacement cost estimate before renewal. 

We have a tool on our website e2Value to help you navigate these increases based on today’s market conditions.