As Prices Go Up, Check Your Insurance Policies
With the economy gaining momentum as more states and localities lift COVID restrictions, many industries and their customers are seeing rapid increases in the prices for goods and services. For example, at Stratus, we do the majority of our work with independent business owners in the lumber, building materials, and hardware industries. These businesses have seen prices rise for many building materials, with the cost of lumber being a prime example. Besides being a source of frustration for customers and salespeople, rapidly increasing prices and disrupted supply chains have led many independent dealers to increase the inventory they are holding. Even if they have not increased their inventory, the fact that lumber prices have increased by several hundred percent means that the value of your inventory is much higher now than it was 18 months ago. For example, if your inventory was insured for $750,000, will that policy still cover the current value of the inventory in your yard? Further, what is the current value of the property where you operate and is your current policy sufficient?
In times of volatile prices, it is important for any business owner to sit down with their insurance broker and review their coverage. Especially as we head into the summer season, with its fires, floods, and windstorms, knowing where there may be gaps in your coverage can mean the difference between a going concern and a liquidation. Few things can stop a business faster than having an insurance policy that has not kept pace with inflation. For example, if your inventory has doubled in value since the policy was written, would you be able to cover the shortfall from cash on hand? It's not a scenario most of us want to envision, especially since many owners are approaching retirement and thinking about how to monetize the value they have built in their business over the previous three or four decades.
Therefore, we suggest that you call your insurance broker and go through your current policy to confirm your current coverage and the limits for each line item. Also, if you do not have a hard copy and an electronic copy of your current insurance policy, ask your insurance broker to send them to you immediately. Finally, make sure that your insurance broker is familiar with how changes in prices have impacted your local and regional markets. In many businesses, but particularly in the lumber and building materials industry, local knowledge is just as important when setting up your insurance policies as it is when selling to your contractor and DIY customers.