Inflation and Your Business Insurance Coverage

Everyone knows inflation makes products cost more, which means your dollars are less powerful. But have you ever stopped to consider how that affects your business insurance coverage?

Commercial Property Insurance

The limits on your commercial property insurance are meant to cover the rebuilding costs should you face the destruction of your building due to a covered peril. Inflation increases the cost of the materials that will be used to rebuild your commercial property thereby making it more expensive in future years to rebuild. That means, a few years from now, your current limits may not be sufficient to cover rebuilding costs. In order to keep pace with inflation you must complete an annual insurance review that analyzes your limits in relation to actual rebuilding costs and adjust your coverage accordingly.

Inflation and Supplies

Your business has property on-hand at all times. This property may take the form of computers, office supplies, equipment, stock, and the merchandise on the floor. The limits in your business insurance policy cover the replacement of these items either at actual value or replacement value. If your policy provides replacement value for lost, stolen, or damaged property then inflation, as it increases the cost to replace property, will reduce the buying power of your insurance benefits after a covered peril. That’s why it’s important to reassess your business property limits annually.

Business Continuation Coverage

If you have business continuation coverage, and you should, this can be adversely affected by inflation. Inflation increases the general cost of running a business and often results in a business owner raising prices to help increase profits. Your business continuation coverage may have limits that are based on income from before inflation forced you to raise prices. Reviewing your business continuation coverage annually allows you to increase the limits based on current profits which will reflects any in increased pricing.

To go over your business insurance policies and to discuss how you can increase your insurance limits to combat inflation, give us a call at 512-518-6292 for a Austin Business Insurance quote.