As homeowners insurance premiums rise and business owners look at their insurance premiums for the new year they are amazed at how much more their insurance costs in 2022. Insurance coverage costs are not increasing in 2022, the value of the dollar is decreasing.
From the housing market to the vehicle market we have seen the price and value of different items rise abruptly ever since 2020. This just like insurance all connects to replacement costs. As the power of the dollar decreases, the more
What Is Replacement Cost?
In insurance, replacement cost is the cost of replacing something. There are many things that have a purchase price much lower than their replacement cost. This is because of the increased expense and value found in materials.
How Replacement Cost Impacts Car Insurance
Have you tried buying a car in the year 2022? It seems like new cars cost more than homes used to. Finding a used car for an affordable price is also unheard of. The mechanics and auto body businesses are backed up with work and there seems to be a shortage of rental vehicles. This combination of shortage, as well as increased replacement costs, leads auto insurance premiums to increase.
How Replacement Cost Impacts Home Insurance
The value of homes has increased like crazy over the past 20 years, more specifically over the last 3 years since Covid. This is directly connected to the value of lumber increasing. If you were to lose your home in a fire, it is likely each piece of wood replaced in your home would cost 4 to 5 times as much as when that wood was originally placed.
All of this is because the value of the dollar has also dropped in value. The value of the dollar and replacement costs directly impact home insurance. The cost of lumber has affected almost all types of insurance due to this situation.
How Replacement Cost Impacts Business Insurance
The replacement value of items varies from business to business. The replacement cost of mechanic tools doesn’t directly impact the insurance of a restaurant. This is why we look at a few examples of business insurance below. If you would like to understand the replacement costs for your specific business, contact us for a free insurance quote.
– Restaurant Insurance: Certain restaurants understand replacement cost as the value of food changes drastically week to week. If you own a fine dining restaurant and it is insured for a fire, then the replacement cost of your food comes into play.
As the price of beef and meat in general increases, so does the replacement cost. We all love Seltzers Lebanon Bologna. Imagine the travesty of one of their factories undergoing a fire or accident that doesn’t allow them to produce for a while. That meat is insured and the cost to replace it costs more now than it did 5 years ago. While this isn’t a restaurant, the example holds true for a restaurant.
– Contractor Insurance: The tools and materials of your trade are costly and your primary overhead cost. If you were to lose all of your materials at this very moment how much would it cost to replace them? This is where replacement cost comes into play for your contractor insurance. Make sure your materials are protected.
– Mechanic Insurance: As the value of vehicles increases, you know the value of your tools, car parts, and materials are also increasing. This can increase the likelihood of a break-in, vehicles being stolen or catalytic converters being stolen. Since the value of these items has increased you must consider the cost of these items also increasing. If you were to have a break-in and lose these to a thief, the insurance should cover it.
Contact Strickler Insurance For A Free Quote
As the cost of insurance increases, now is a great time to a free quote for your insurance coverage. A lot of premiums are in flux and Strickler Insurance can help find the best insurance coverage for your home, vehicle, or business.