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Tag Archive for: inflation

How to COPE in an Inflationary Environment

November 28, 2022/in General Business Insurance, News, Video

Recently, Hartford did a study that showed that 75% of all commercial buildings were underinsured. And of those that were underinsured, they’re at 40% underinsured. That means that if you have a property that’s worth a million dollars, you’re only having it insured for 600,000.

If you have a catastrophe, you’re only going to get paid the 600,000 for the rebuild costs now, and not the million dollars that it’s going to cost to make you whole again. What’s really important for commercial building owners is to understand how the insurance carriers rate your properties and it’s called COPE, C-O-P-E: construction, occupancy, protection, and exposure.

In this blog, we’ll discuss COPE and learn more about it directly from the founder of Competitive Edge Insurance, Brenda Jo Robyn.

What is COPE?

As a commercial building owner, it’s important to understand how your property is being rated for insurance purposes. The four main factors that go into this rating are construction, occupancy, protection, and exposure (COPE).

Construction is how your building is built. Things like the roof, walls, windows, and doors all factor into how well your building can withstand a disaster. 

  • What is the building made of? 
  • What is the age of the building? 

All commercial buildings are going to be rated on a scale of 1 to 10, with 1 being the best. So if you have a fire resistant building, that would be a 1. If you had a wood frame building, that would be a 10. 

Occupancy is what your building is used for. If you have a lot of people coming in and out of your building, or if you have hazardous materials inside, that will affect your rates.

  • Who’s in it? 
  • Is it manufacturing? Is it retail? 

So if you have a retail store, that would be a low hazard. If you had a chemical plant, that would be a high hazard. 

Protection is what you do to protect your building. Things like security systems, sprinklers, and alarm systems can help lower your rates.

  • What are the protections you have there? 
  • How far away is the fire department? 
  • Do you have a fire hydrant on your block? 

So if you have automatic sprinklers, that’s going to give you a better fire rating. 

Exposure is how likely your building is to be damaged in a disaster. If you’re in a high-risk area for hurricanes or tornadoes, your rates will be higher than if you’re in a low-risk area.

  • What is around your building? Fire brush, lakes, potentials for flood? 
  • What is the neighborhood like? Is it in a crime area? 

If you’re on a busy street, that’s going to be a high exposure. If you’re in the middle of a field, that’s going to be a low exposure.

All these factors are what carriers take a look at. Understanding COPE can help you make sure you’re getting the best possible rate on your commercial property insurance. 

Instability Caused By Inflation

Currently, insurance rates have been increasing and they have also been very unstable for the last year. The instability is being caused by inflation.

Supply Chain Issues

The raw material costs are all over the place. They don’t know how much they’re gonna cost when they get ordered by the contractor. Some can order it a week out and some are being told, “Hey, here’s your bill now, but when it comes in, we’re gonna give you what the real cost is.” Obviously, the sluggish supply chain issues haven’t gone away. 

Demand for Skilled Labor

There’s a high demand for skilled labor. Not only are we having people retire, but we don’t have enough people being apprentices and it’s not being able to translate to more people being able to do a job. 

Lingering COVID Effect

And lastly, the lingering COVID effect. Unfortunately, during COVID, people were placing insurance on buildings that were only looked at over the internet on your desktop. And what they come to find out later is that the building has not been maintained, that there’s storage of plastics in there and there’s no sprinkler system. So this has all led to an increase of rates.

What Can You Do?

And what can you do? In order to be a building owner that’s gonna continue to make money, you have to control your costs. And how do you do that? You have to make a commitment to do so, and you’re gonna do it by controlling your losses. 

Steps to control your costs: 

  • Maintain your buildings 
  • Update the electrical wire, heating, plumbing, roofing 
  • Have good housekeeping 
  • Perform regular safety checks 

What is it that’s been able to be implemented in the last three years so that it protects your office building better now than it was three years ago? All these things will go ahead and poise you into a place where the carrier will look at you favorably and give you more credits. 

When you are able to show the insurance company that you are in a mode of safety, maintenance, and security, carriers will give you rates that you can live with and you won’t have to pass on to your customers. It’s a win-win for everybody.

A Final Word

All of these things go into how the insurance carrier rates your property and what they’re going to charge you for premiums. As a commercial building owner, it’s important for you to understand how your property is being rated so that you can make sure you’re properly insured. If you have any questions about your commercial property insurance coverage, reach out to us today! 


Or if you’re interested in learning more from Brenda Jo, you can check out her other videos including, Why You Need to Audit Your Commercial Property Insurance.

https://compedgeins.com/wp-content/uploads/2022/11/Commercial-Buildings.jpg 836 1255 Brenda Jo Robyn https://compedgeins.com/wp-content/uploads/2020/11/logoweb.png Brenda Jo Robyn2022-11-28 09:00:002022-11-28 02:21:01How to COPE in an Inflationary Environment

Inflation and Property: What You Need to Know

November 7, 2022/in News

Inflation is one of those economic concepts that everyone has heard of—especially today—however, few people understand what it means.

In essence, inflation is a rise in prices across the economy. This phenomenon can have several consequences for property owners and investors. This considered, it’s important to understand how inflation works and how it affects property owners.

Below, we’ll discuss:

  • The relationship between inflation and property values
  • Why property owners need to be aware of each (that is, if you want to make smart decisions about your investments!)

What is Inflation? What Causes It?

First things first, what is inflation, and what causes it? Inflation is defined as the rate at which the prices of goods and services increase over time. This can be caused by a variety of factors, such as an increase in the cost of raw materials, or a decrease in the supply of certain products.

While inflation is caused by several factors, the most important one is simply too much money chasing too few goods. When there is more money in circulation than there are goods and services to buy, prices go up.

This is because people have more money to spend, so they are willing to pay more for things.

One of the most important things to understand about inflation is that it is not evenly distributed. Some prices will go up faster than others, and some might even go down. This means that while your rent might go up by a lot, the price of bread might not change much at all.

How Does Inflation Affect Property?

Inflation can have several different effects on property values.

The most important one is that it erodes the value of your money.

This is because, as prices go up, each dollar you have buys less and less. So, if you own a property that you bought for $100,000 and inflation is running at two percent per year, then after five years, your property will be worth $110,000 in today’s money.

In other words, you’ve made no real gain on your investment—inflation has just eaten away at the value of your money.

Of course, this doesn’t mean that property values never go up. They can, and do, go up in nominal terms (that is, in the actual dollar amount). However, if inflation is high, then these nominal gains might not be worth very much in real terms (that is, after taking inflation into account).

Secondly, inflation can affect your mortgage.

If you have a fixed-rate mortgage, then your monthly payments will stay the same even if inflation goes up.

But if you have an adjustable-rate mortgage, then your monthly payments could go up if inflation increases. This is because your interest rate will be tied to an index, like the Consumer Price Index (CPI), which measures the overall level of prices in the economy.

How Does Inflation Affect Property Insurance?

When inflation goes up, so do property insurance rates. This is because insurers must account for the increased cost of repairs and replacements when setting premiums.

The cost of rebuilding your property goes up due to the cost of materials and labor increasing from inflation. As a result, your property insurance rates will likely go up—and if you’re not prepared for this, it could have a serious impact on your finances.

Moreover, inflation can lead to higher deductibles on policies. For example, if you have a $500 deductible on your policy and inflation increases by 20%, your new deductible would be $600.

Ways to Minimize Inflation on Your Property Insurance

So, how can you minimize the impacts of inflation on your property insurance as a building owner?

Luckily, while inflation can have a significant impact on your property insurance rates, there are some things you can do to minimize the impact:

  1. Make sure you have an insurance policy that covers inflation. This way, your coverage will automatically adjust to keep up with the rising cost of rebuilding your property.
  2. Consider raising your deductible. This will lower your premium, although you’ll have to pay more out-of-pocket if you need to make a claim. Make sure you have enough savings to cover the deductible.
  3. Don’t forget about discounts! Many insurers offer discounts for things like installing security systems or being claims-free for a certain period. Make sure you’re doing everything you can to mitigate your risk.

Read on to learn more about risk mitigation.

A Final Word

Of course, there are a lot of other factors that affect property values, such as the state of the economy, interest rates, and demographics. Inflation, however, is one of the most important—and least understood—factors that property owners need to be aware of when making decisions about their investments.

By understanding the relationship between inflation and property, you can take steps to protect your finances and ensure that your property is properly covered. 

Interested in learning more? Contact us today to speak with one of our insurance professionals about what inflation-related changes you should make to your policy.

After all, with a little strategic planning, you can safeguard your property against inflationary increases! Learn more in our article “Top Three Tips to Recession-Proof Your Business.”

https://compedgeins.com/wp-content/uploads/2022/11/inflation.jpg 836 1254 Brenda Jo Robyn https://compedgeins.com/wp-content/uploads/2020/11/logoweb.png Brenda Jo Robyn2022-11-07 09:00:002022-11-07 03:32:40Inflation and Property: What You Need to Know

Why Increases in Inflation Might Mean that Your House is Underinsured

October 24, 2022/in News

Reviewing “Rising Inflation Can Mean Your Home Is Underinsured”

It’s no secret that inflation has been on the rise lately. In fact, it’s been increasing at a steady rate for the last few years. This might have you wondering if your home insurance policy is still adequate. If your policy was purchased when inflation rates were lower, then it’s likely that your coverage is now worth less than it was before. 

With the inflation rate rising, that means that the cost of rebuilding a home after an insured event will also rise. Homeowners need to be aware of this and make sure that their home insurance policy provides adequate coverage. 

Don’t worry, though! According to a recent article entitled, “Rising Inflation Can Mean Your Home Is Underinsured” from Syracuse.com, there are a few things you can do to make sure that your home is properly insured despite inflation. 

One way to do this is to purchase extended or guaranteed replacement cost coverage, which will pay for more of the cost of rebuilding in the event that inflation has raised prices. 

Homeowners should also check their policy for inflation guard coverage, which will automatically raise coverage limits to account for inflation. Finally, if homeowners are worried about being underinsured, they should talk to their insurance company or agent to get a better understanding of their policy and what it covers. 

By taking these steps, homeowners can be sure that they are adequately protected in the event that their home is damaged or destroyed. 

Interested in learning more? Read on for the full article. 

Rising Inflation Could Mean Your Home Is Underinsured

By Ben Moore | NerdWallet

The cost of home construction is skyrocketing due to inflation, and this could spell trouble for homeowners. Increases in the cost of lumber and other building materials, in conjunction with continued supply chain issues and labor shortages, could leave many homeowners underinsured if they need to rebuild after a covered insurance claim.

Should disaster strike, homeowners without enough coverage could find themselves digging into their wallets to cover the shortfall. Now is the time to be certain you have enough insurance to pay the cost of what it would take to rebuild your home, also known as replacement cost. Here’s what you need to know.

Know your home’s replacement cost

Insurers use replacement cost calculators to determine how much dwelling coverage is needed to rebuild your home. Information about your home, like its square footage, construction materials and the year it was built, are all incorporated into the estimated replacement cost.

You can also take steps to determine your home’s replacement cost on your own. One method involves multiplying your home’s square footage by the current cost of construction per square foot in your area, said Alan Himmel, a public insurance adjuster in Florida, by email. “You can get an idea of per square foot building costs by calling the builders association in your area, an insurance agent, or even … contractors.” Most estimates will range from $100 to $200 per square foot, according to HomeAdvisor.

You can also hire a contractor to provide a construction estimate, or have an independent insurance agency pull multiple homeowners insurance quotes to get a sense of what each insurer believes it will cost to rebuild your home.

Be sure to check the declaration page of your policy to see if you’re covered by replacement cost or actual cash value, especially when it comes to your personal property. Replacement cost coverage pays to repair your home or replace your belongings up to your coverage limits, without factoring in depreciation, or the loss of value over time. This means that your insurance company will pay to rebuild your home to the condition it was in before the claim, plus replace your personal property with new items, like paying for a new laptop regardless of the depreciated value of the lost one.

Meanwhile, actual cash value does account for depreciation and will likely mean having to pay the difference between what your policy covers and how much it costs to fully replace your belongings. For example, if your sofa is lost in a covered fire, your insurer will only pay for what the sofa was worth when it was destroyed, not the amount it would cost to replace it with a brand new one.

Consider extended or guaranteed replacement cost coverage

Extended replacement cost coverage can be added to a home insurance policy to help offset such uncertainties. This coverage will pay a percentage over your dwelling coverage limit if that amount isn’t enough to completely rebuild. For example, if your policy’s dwelling coverage is $100,000 and you have 25% extended replacement cost coverage, your insurer will pay to rebuild your home up to $125,000.

If you want full assurance that your insurer will cover the entire cost to rebuild your home, regardless of how much construction costs increase, consider guaranteed replacement cost. “The most confident I ever am when I sell a policy is when the client has a guaranteed replacement cost endorsement,” says Peter Conte, an independent insurance agent in New York City. “They can sleep better because, come time for a claim, they know they’re getting their house back.”

Guaranteed replacement coverage typically comes with a higher premium. It may not be available from all insurance companies, and it may not cover older homes.

Check for other coverage options

Many home insurance policies come with an inflation guard, which can offset the possibility of being underinsured due to expected inflation increases. An inflation guard will automatically raise your coverage limits to account for inflation when your policy is renewed.

Your premium may rise due to the inflation guard, but don’t lower your coverage limits just to save on home insurance. “The inflation guard is actually there to help you stay in line with the inflation rate of the U.S. dollar,” says Conte.

If you live in an older home, check your policy for ordinance or law coverage. In the event of a covered claim, this coverage will pay the cost to meet current building codes when rebuilding. Without it, you’ll likely need to pay out of pocket for any work done to abide by building codes, even if you have guaranteed replacement cost coverage.

If you’re still worried about being underinsured, talk to your insurance company or agent, as they’re best equipped to break down your policy, including what’s covered and what’s not. Be sure to keep them informed of any changes you make to your home, such as upgrades or renovations, so they can increase your coverage limits accordingly.

https://compedgeins.com/wp-content/uploads/2022/10/rising-inflation-affecting-home-insurance.jpg 768 1365 Brenda Jo Robyn https://compedgeins.com/wp-content/uploads/2020/11/logoweb.png Brenda Jo Robyn2022-10-24 07:00:002022-10-24 06:45:41Why Increases in Inflation Might Mean that Your House is Underinsured

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