Why It’s So Important to Update Insurance Policies To Reflect Inflation
Inflation has been a major topic of discussion lately, so it’s probably been on your mind. In fact,
with the Consumer Price Index rising by 7.9% as of February 2022, we’re seeing the fastest price
hike since 1982. As you’ve likely noticed any time you’ve had to pay for something, nearly
everything costs more now. But you should note that inflation affects more than you might
imagine—as it even has an impact on your insurance policy! So while you try to figure out how to
adjust to the higher prices, take the time to update your propane insurance policy to reflect
inflation. Here’s why it’s important to do this.
Compare Past Building and Replacement Costs with Today’s Expenses
The reason you have insurance is in case the unexpected happens and your property is
destroyed. This could refer to extreme weather damaging your propane tanks or a fire burning
down your business property. Either way, you want to have enough insurance coverage to pay for
repairs and replacements to make your business whole again.
But due to inflation, you’re simply going to pay more for a new propane tank now than you did
five years ago. Similarly, the company rebuilding your property after it’s been destroyed will need
to pay more for building materials than they did five years ago. All commercial insurance
policies have a co-insurance requirement, generally falling between 80-100% of replacement
cost. With costs on the rise for nearly everything right now, it’s more important than ever that
you meet your co-insurance minimum so you can receive your maximum benefit in the event of
a loss.
This is why protecting your propane business from inflation should start with reviewing your
coverage limits. In most cases, your insurer will recommend that you increase the limits of your
policy, or even double them when it makes sense. The premium will go up, too, but it will still be
more cost effective than not meeting your coinsurance requirement and having to pay the
remainder out of pocket!
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