Protect your policyholders against inflation

Due to COVID-19 and travel restrictions, funds usually allocated for vacations or company events were redirected to home or building improvements. With reduced workforces and closures of businesses that supply building materials, supply was unable to keep up with the increased demand.

The cost of construction and building materials sometimes recedes, but it rarely reverts to pre-demand pricing. The average annual building materials inflation has risen 5% (not including labor costs) over the last eight years.* To protect policyholders against rising inflation and ensure their property is insured to value, an inflation guard endorsement is commonly used. However, the average inflation guard percentages are only 2-4%. Without further intervention, rising inflation can outpace the impact of the inflation guard in just a few years and leave a property underinsured or subject to coinsurance penalties.

With inflationary costs rising even higher during COVID-19, and not expected to return to pre-COVID levels, there is no better time to review property limits with your policyholders to ensure they are adequately protected. Encova has coverage options for commercial lines that can offer additional protection, including higher inflation guard percentages up to 10%, margin clause endorsements and increase in rebuilding expenses following disaster endorsement.

Our Exceed Homeowners policy includes inflation protection coverage, which provides for an annual increase of policy limits in alignment with the continually updated construction cost index used by Encova. We also offer an endorsement that provides up to an additional 50% over the dwelling coverage limit when the loss to the dwelling is greater than the insured value. As you review your policyholder’s property needs, your Encova underwriter is ready to assist you in making necessary changes to your policies or discuss the right options for your customer.

*Source: Construction inflation report