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Inflation forces builders and contractors to reassess their budgets to account for increased spending on building materials and transportation costs. Your insurance policy is not immune to the ravages of inflation. Here’s how to make sure you’re properly protected.

We may be eager to embrace a post-pandemic world, but today’s business environment is not the same as before. The repercussions of the pandemic will continue to be felt in all sectors, including construction.

Canada’s inflation rate jumped in mid-April to a 31-year high of 6.7%, triggered by the pandemic and other factors such as supply chain imbalances, record interest and conflict in Ukraine.

However, with the cost of everything skyrocketing, transport and shipping costs are leading the surge thanks to soaring fuel prices, which are up around 39.8% since March last year.

These relentless pressures are forcing builders and contractors to re-evaluate their budgets and as a result, increase their rates to account for increased spending on building materials and transportation costs. But it does not stop there.

The escalating cost of building materials and fuel is just one of the concerns. There is also the cost of maintaining, replacing or upgrading the tools, equipment and vehicles contractors need to do their jobs. Unfortunately, there do not seem to be any winners in this financial climate.

But a more immediate, if not underlying, concern can be found in how inflation affects your existing insurance coverage. Specifically, does your current insurance policy adequately cover you should you need to file a claim for damage or loss? Let’s say that your existing policy’s coverage and deduction limits that you chose were set almost a year ago. Are these limits adequate in today’s hyper-inflated financial climate if you suffer a financial loss? They may not be.

Revisit your operational expenses

You need to carefully consider several operating expenses to determine if your existing insurance policy is up to snuff or if changes are needed. Start by considering your inventory.
For example, if you are a carpenter and you have an inventory of wood stored in a warehouse or on your commercial property, at what price did you buy it?

Well-known lumber prices have reached near-record highs over the past year, and while they may have fallen by around 20% in early 2022, many housing market experts predict costs will rise again. This is partly due to the difficulties faced by factories in transporting their goods to market due to fluctuating freight rates and difficulties in finding adequate transportation.

Still, the price you’ll pay to replenish your wood supplies will undoubtedly be significant compared to what you distributed a year ago.

Now imagine if a fire ravaged your warehouse and destroyed your existing inventory.

Naturally, you would file a commercial property insurance claim with your insurer to cover the cost of repairing your warehouse and replacing your inventory. But, hypothetically speaking, if your policy’s coverage limit is set at $1 million and the damage to your property and inventory exceeds $1.5 million, then obviously your existing policy coverage will not be enough to repay you, leaving you with out-of-pocket payments to settle the balance.

Apply the same train of thought to other parts of your business, including your tools and equipment, the vehicles you use, your business property and its contents. The goal is to have an accurate record of the value of your assets and inventory and what it will cost to replace them if they are damaged, destroyed, stolen or lost.

How to make sure your insurance coverage is adequate

Once you’ve assessed the current expenses you face, and in addition to raising your prices for the work you do, it’s time to do an insurance checkup. Call your broker and request a review of your existing policy. Find out precisely what you are covered for, the amount of your coverage and identify gaps in your policy that need to be filled by improving it.

Also, it may be worth asking your broker to shop around to see if they can find you a better deal than what you currently have. Contrary to popular belief, changing insurance companies is neither difficult nor unusual before the renewal date. An insurance company may charge you a fee for canceling a policy before your renewal date if you decide to switch providers. Whether you do this depends on the nature of the charge – it could be a flat rate or a percentage of your overall premium.

Either way, it’s your business and your call. It never hurts to shop around to see if you can get the optimal coverage you need at a fair price. But when buying insurance, aiming for the cheapest price you can find isn’t always the best option. In our current economic environment, the last thing you should skimp on is protecting your business and your wallet.

Jon Hogg is a Chartered Broker and Team Leader, Digital Solutions, Entrepreneurs at Zensurance, Canada’s leading digital business insurance broker. Get a free quote for your insurance needs by visiting