Increasing Lumber Prices and Your Insurance
Over the past few years, the forest products industry has seen an uptick in lumber prices with more significant increases just this year. On the surface, this is great news and serves the industry in many ways. Increasing lumber prices drive greater margins and profits which lead to expansion, reinvestment resulting in better safety and working conditions for employees, higher employment, and higher wages. What many mill and manufacturing company owners may not think about is how the increase in prices can affect their insurance.
Often, insurance is an afterthought, especially in a market of increasing margins and profitability. It is at this time, however, that it is most important to review your values and coverages. The rising lumber prices in the marketplace result in an increase in the value of your stock, which means an increase in the value of what is exposed to risk. This is why it is an important insurance risk management practice to periodically re-value stock and adjust for current market pricing, especially when there are wide fluctuations or extended periods of price movement. Keeping insurance limits current with stock values helps minimize underinsured surprises if a loss were to occur.
Your insurance agent, along with Continental Underwriters, Inc., can help you with this process. The easiest way to maintain your values is to review with your agent on an annual basis 90-120 days prior to your policy renewal. Take this time to review your current policy in detail, and update values as needed. There will be times, however, when once a year is not enough. If material swings in prices are happening more frequently, consider options to minimize significant gaps, including the following:
- Periodically review your values compared to the insurance coverage you have in place, and adjust accordingly throughout the year. This can be done through an endorsement to your policy, which your agent can help you with.
- Be conservative in your estimates and purchase a bit of extra coverage, just in case. Peace of mind is invaluable. Work with your agent to determine the coverage you need, then add a little more on top to avoid surprises like coinsurance penalties, or additional fluctuations in prices. When that claim occurs, you will be happy you did so.
Three-Year Trend Chart on Lumber Commodity Prices
Source: NASDAQ.com Commodity Price Quotes - Lumber 8-1-2018
Staying in touch with your agent and reviewing your values and coverages on a regular basis will help you through any market cycle. Be sure to follow Continental Underwriters, Inc. to keep up with forest products industry trends, and learn more about insurance coverage specific to your industry. We could serve the insurance needs of any business, but we choose to serve the needs of your business. Reach out to us to learn more!
The Continental Underwriters’ Team
As your ‘National Solution to Your Local Risk’, we share best practices that alert companies on strategies to protect their assets and manage risk. Our bulletins shares insight into relevant topics and offers benefits and costs associated with the topic. While items presented here give an overview of the subject matter, any individual decision to make changes in operations should be individually considered based upon the unique aspects of a business in addition to the decision-makers individual tolerance to risk. Any decision should involve the expertise of appropriate professionals specializing in disciplines needed to implement such changes (including but not limited to attorneys, CPAs, engineers, architects).