There have been plenty of headlines lately about Florida’s skyrocketing homeowners insurance prices. Unfortunately, we’re also beginning to see rising commercial property insurance premiums as well. Some of the same troubling trends plaguing homeowners insurance are also driving up the cost of commercial property insurance.
Troubling trends in commercial property insurance
As a business owner, you carry commercial property insurance to protect your company’s physical assets—such as office equipment, inventory, and the physical property you own or rent. You can buy commercial property insurance by itself, or as part of a Business Owner’s Policy (BOP). Covered perils generally include fire, explosion, storms, theft, and vandalism. Since the coverage protects your financial investment in physical property, the premium increases are being driven by factors which include:
Catastrophic losses—In the U.S., we’ve endured more frequent and catastrophic storms, floods, tornadoes and fires than usual. There have been 89 weather/climate/disaster events over the past five years with losses totaling more than 764 billion dollars, according to NOAA National Centers for Environmental Information (NCEI).
Rising construction and replacement costs—Replacement cost is the amount needed to replace damaged or destroyed property without deducting for depreciation, up to the policy limit. Rising retail prices mean property items are more expensive to replace.
In addition, construction costs have risen, largely driven by the cost of lumber and steel. Shortages in materials, project delays, and a shortage of skilled labor are also increasing the amount of time and money it takes to rebuild after a loss.
Cost of reinsurance—Reinsurance is “insurance for insurance companies.” It’s a way for insurance companies to limit the extent of their own losses in case of disaster. Global reinsurance rates have been rising for several years.
The danger of being underinsured
Even though the cost of business insurance is rising, it’s still an essential part of your business plan. As the U.S. Small Business Administration notes, statistics show 1 in 4 small businesses will have to close if hit by any type of catastrophe. Carrying the proper business insurance can help you avoid that fate. Even if you carry commercial property insurance, you should remain vigilant that you’re not underinsured, meaning you don’t have the right coverage or enough coverage for the risks your business faces. That’s where an expert in insurance can help!
Lakewood Financial—your partner in commercial insurance
Is it time to review your commercial property insurance? Let Lakewood Financial help you protect your business. We are an independent insurance agency, with the expertise to find the best coverage for your unique situation. Please call us at 941-747-4600 to discuss your commercial property insurance needs, or click here to request a quote online.