Now Is the Time To Ensure That Your Business Is Properly Insured
One cannot turn on the news nowadays without hearing about twists and turns in the economy, both in the US and globally. For businesses in the forest products industry, the market has been in significant flux since the pandemic started in 2019. A combination of high demand for lumber, supply chain issues, and labor shortages have increased the value of inventory, the cost of ownership, and the expense of doing business. The trouble is that many forest products businesses have not adjusted their insurance with the times.
Are You Underinsured?
That is a very important question to answer and address before you experience a loss. One of the key ways to determine if you have the proper level of insurance is to understand your insurance to value, or ITV.
|ITV is the ratio of your insurance versus the actual cost of replacement. Simply put, your insurer only pays the full cost of replacement with an ITV of 100%. Even then, you still have to pay the deductible.|
If applicable, you also have to factor in coinsurance, where the policy holder covers part of the cost of a claim. This is a penalty in effect, and can take a significant chunk of a payout on its own.
This is why it’s so important to keep your insurance in sync with the economy and the forest products market. If you have not adjusted your insurance to compensate for current values and inflation, you may be significantly underinsured—even without coinsurance. And if you were to experience a significant loss, you would be responsible for the difference between your insurance payout and what it actually costs to get back up and running. That could be hundreds of thousands of dollars.
Make Sure You’re Properly Insured
The good news is that it may not be as expensive—or as difficult—as you may think. For example, we recently found that a customer could increase their coverage from $22,000 to $150,000 with only a $2,000 difference in policy price. But the only way to know for sure is to analyze your business and coverage. Here’s how to get started.
Maintain Open Communication with Your Broker or Agent
Although it’s important to stay on top of insurance industry trends, you have a business to run. Lean on your broker or agent to keep you in the loop about the changes that could affect your business, especially coverages and pricing.
|We recommend having a pre-scheduled check-in conversation every month, backed up by calendar reminders. If your broker or agent has a newsletter, make sure you subscribe to it.|
Prioritize Risk Mitigation
The more comprehensive and proactive your risk management strategy, the lower that both your costs and chances of a significant loss will be. One risk management investment to discuss with your broker or agent is a property conservation program. Our recommended program covers straight-forward, common-sense tasks that should be standard parts of operating procedures. Many of the tasks are relatively low cost and can be carried out by you and your team.
Conduct a Comprehensive Insurance Review
Work with your broker or agent to ensure that you have the level of coverage that you really need going forward. This article from Canadian Forest Industries covers the types of coverage and steps to consider in greater detail, but here’s a snapshot as it relates to proper levels of coverage.
Determine Current Cost of Replacement
Be as thorough as possible—everything from buildings and equipment down to market value of stock.
Calculate Loss of Income
Do your best to accurately determine your yearly sales revenue and gross profit.
Track Significant Investments
Ensure that you have redundant digital backups of receipts for large purchases and assets—make sure your broker or agent is up-to-speed.
Schedule Time for Documentation
Make sure to conduct physical inventories as regularly as possible, and photograph all areas of your property on an annual or even semi-annual basis.
Make the Proper Adjustments to Your Coverage
Once you and your broker or agent have an accurate and timely understanding of your exposure, you can adjust your policies accordingly. You may find that adjusting the amount of coverage on certain policies is the critical step to take, but you may also find that you could benefit from additional types of coverage, such as extra expense or specific location coverage.
Let Us Know How We Can Help
At Continental Underwriters, Inc., we understand that no two operations are the same, and we strive to offer expert guidance for every unique business. If you have any concerns about your insurance, please reach out to us today. We’ll work with you to ensure that you have the coverage you really need.