Higher construction costs due to supply chain issues and demand have led to increased property insurance claims and costs for businesses. This may cause existing insurance policies to no longer provide adequate coverage for repairs in the event of a loss. Businesses should review their policies, consider increasing coverage limits, and consult an insurance expert to ensure they have sufficient protection given current market conditions.

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nflated building material expenses have caused
construction costs to surge over the past year. Several
factors have influenced these higher costs, including:
■ a global pandemic that forced many
manufacturers to shut down production and
caused a supply shortage
■ historically low interest rates that influenced
property purchasing and drove the demand for
building materials
■ numerous catastrophic loss events (e.g.,
tornadoes, wildfires, flooding, ice storms,
hurricanes) that increased the need for
construction supplies Higher building material
and construction prices will influence an
increase in property insurance claim expenses.
As property repairs/rebuilds cost more, your
current coverage may not be sufficient and leave
you financially vulnerable.
How does construction pricing affect your insurance?
In response to the construction supply and demand,
many carriers have implemented property rate increases
and total insurable value (TIV) adjustments. Building
price increases could cause you to suffer coinsurance
penalties for under-reporting/under-insuring your
property’s value. Also, delays in labor and material
shortages could mean interruptions in your repairs/
replacements with a potential loss of income.
As a result, you could discover that your business’
existing policy limits and coverage no longer offer
adequate protection. In light of these ongoing cost
concerns, it is important for you to be proactive.
Consider taking the following actions:
Review Your Policies
■ Inspect and make sure you fully understand
your property insurance policy. Contact
your insurance broker with any questions or
concerns you may have.
How Rising Construction Costs
Can Affect Your Insurance

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(Continued from page 1)
■ Analyze your business owner policy’s limitations
regarding business income and extra expense
insurance.
■ Appraise your current disaster recovery plan.
Make adjustments and apply necessary
contingencies as construction could take much
longer. Include additional backup plans to continue
operations through a longer recovery period.
■ Consult a trusted insurance expert to help you
determine if your policy has sufficient coverage
in the event of a loss. This may require you to
change your policy’s valuation method, increase
your current limits, obtain specialized coverage
or implement a policy endorsement.
■ Inform your insurance carrier whenever you
conduct renovations or implement other
improvements to your property.
■ Review your current policy and contact your risk
management advisor to make sure your business
is covered.
Make Adjustments
■ Remove coinsurance provisions. Request an
agreed value on your property and never accept
a 100% coinsurance as it increases your risk for
an errors & omissions (E&O) claim.
■ Analyze and make adjustments to your business
income and extra expense insurance. This
coverage provides for your income and covered
expenses while your property is repaired.
Recent construction interruptions may require
alterations to your policy.
■ As construction delays could cost you money,
modify any business owner policy limitations
from a 12-month option to a 24-month option.
Communicate
■ Inform your insurance carrier whenever you
conduct renovations or implement other
improvements to your property.
■ Review your current policy and contact your risk
management advisor to make sure your business
is covered.
We’re Here to Help
This rise in construction costs could affect your business.
Your current policy may not provide adequate coverage to
repair/replace in a case of a loss and leave you financially
vulnerable. Connect with a member of our team to learn
how to make sure your business is covered.