The Impact of High Lumber and Supply Prices on Your Insurance Policy |
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For months now, the high prices of popular building materials, particularly lumber, have been impacting retailers and customers alike. According to the National Association of Home Builders, although prices are now falling, lumber still costs about 80% more now than it did before the pandemic — a premium that builders say is adding tens of thousands of dollars to the price of a new home. And the supply of lumber is still not growing very fast. The demand for remodeling is decreasing and construction has slowed due to high costs. Some sawmills have resumed normal conditions, but many are having issues finding enough labor.
What does all this mean to you when it comes to your insurance coverage? As a retailer, you may not know that increases in building material prices could also have extreme effects on your insurance coverage. You run the risk of being underinsured and not having proper limits on your current policies.
How does the short supply and high lumber and building material costs impact your insurance program?
- Increased cost in raw materials directly impacts the cost to repair/rebuild your building(s) in the event of a loss.
- Shortages in materials will prolong the time frame to rebuild and get back to normal.
- Your Business Income limit may not be sufficient to cover a prolonged period of restoration.
- Your coverage may not provide for an extended period of restoration.
- Since short supply of stock will impact your sales, multiple suppliers may be necessary.
- Many insurance policies contain a coinsurance clause that requires you to maintain a limit of insurance that meets proper insurance to value. If your coverage limit falls below that threshold your claim is subject to a penalty, and you receive a reduced loss settlement.
Let’s dig deeper as we examine lumber and building material supply pricing, insurance coverage, and policy review. Lumber, roofing materials, hardware, and nearly every home improvement product have seen price increases. To rebuild a structure, lumber costs are going to be hugely different than when a retailer’s insurance policy was first written.
For example, if a lumber retailer had an inventory worth $500,000, that inventory may be worth as much as $2 million with price increases. If their insurance policy only covers $500,000 worth of inventory, that’s a big problem. Some policies have inflation coverage, but those limits are usually modest and don’t usually exceed 10 percent. So, a retailer could face a situation where they really need to review the value of their inventory and the replacement cost of their buildings, because there’s a very good chance their current insurance policies are inadequate.
As we examine insurance coverage, let’s carefully consider the impact of pricing hikes. For example, let’s consider that you are a lumber dealer, and your building is worth $2 million, and your inventory may equal $1 million. When you bought your insurance policy, you bought coverage for these specific amounts and were adequately insured. Now, let’s say a windstorm destroys the building and your inventory entirely. If that happens, the cost to replace that building may now be roughly 25 percent higher than anticipated when the policy was written. And the cost to replace inventory could very likely be double. As a result, you may have to fund large amounts of money out of your own pocket to rebuild and quickly find yourself underwater.
What we’re advising is that if your policy is up for renewal soon, sit down with your insurance agent and carefully consider the cost to restore inventory and your building amid this new pricing situation. Even if your policy isn’t up for renewal, it’s still a good idea to review the policy midterm and ask your agent to endorse the policy to have proper limits.
With all this change and issues facing your insurance program, what questions should you ask your insurance agent to ensure your business is protected both short and long term? First, ask to confirm the limits of your coverage. You should have a copy of your current policy and be sure to confirm those figures. Then, you and your agent should carefully review what’s happened to building costs in your geographic region and the rising cost of your inventory. Be sure to check the lumber index for current figures. A lot of retailers have done well during the pandemic, so you should review your current sales with your agent.
Together, carefully examine the cost to restore the building and the inventory. Compare that to your current coverage and request any increases necessary to ensure your business is adequately covered. Be sure to review your business interruption coverage within your property policy. Similarly, to the cost of lumber, you and your agent should consider the loss of sales you may experience if your building is destroyed and how it would impact your business. A retailer should review their business interruption worksheet with their insurer to be certain those figures are in line with current realities.
At American Hardware & Lumber Insurance, we anticipate that lumber prices will continue to fluctuate, but the good news is the fact that prices are on a downhill trend as challenges in the lumber supply chain continue to work themselves out. We are here to help ensure your business continues to receive the right coverage with limits that are correct for your operation. Our staff is available to guide you, provide options that work best for you, and review your current policy limits to make sure they adequately account for increased costs.
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TELEHEALTH – Care from Anywhere |
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What does telehealth mean exactly? It is likely a term that you are hearing more often lately. That is because telehealth services have skyrocketed over the last year. Telehealth, sometimes called telemedicine, is the use of telecommunication technologies to provide care when you and the doctor are not in the same place at the same time. With telehealth, you use digital technologies, like your smartphone or computer, to connect with your healthcare provider to discuss and receive remote medical care. This includes videoconferencing as well. You can get treatment options and prescriptions for medications, if needed. Telehealth care reduces the need for in-person visits to the provider’s office. Generally, telehealth is popular and widely available for non-emergency related health issues. Providers can easily diagnose and treat conditions like sinus infections or allergies over the phone.
What are the benefits of telehealth?
- Getting care at home – no need to sit in a waiting room, especially if you are not feeling well
- Reduces transportation time and the need to take time off work
- Ability to receive care from a specialist who is not close by
- Receiving care after office hours
- Quicker access/more communication with your provider
- On-demand options
- Lower cost, since virtual visits may be cheaper than in-person visits
- Receiving care while on vacation or work trip
What types of care can I get using telehealth?
- General health care (non-emergency)
- Prescriptions for medicine
- Nutrition counseling
- Mental health counseling
- Allergies, bronchitis, colds/flu, sore throats, infections, etc.
How do I make a telehealth appointment?
You should be able to make an appointment by calling your doctor’s office and simply asking for a telehealth appointment. You may also be able to make an appointment online by using a patient portal. Once you schedule your appointment, the office will send instructions for how to connect with your doctor online. The instructions from your doctor’s office will guide you.
Virtual health care will continue to be an essential component of the health care delivery system. However, it is not a one-size-fits-all solution. There are times when it may still be preferable to go to your doctor’s office. How well you and your doctor communicate with each other is one of the most important parts of getting good health care. Being prepared can help you make the most of your visit, whether it is in person or through telehealth.
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Putting the Focus on Safety in the Workplace
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Successful businesses know safety is critical to their day-to-day operations. Safety should remain at the forefront of everyone’s work day and should be woven into your business’s policies and procedures. By doing so, you demonstrate your commitment to your employees and customers, and strengthen your business’s ability to grow and thrive.
Everyone in the business should share a vision for safety that is demonstrated by core values and behaviors, where everyone walks the talk. By being proactive and tackling unsafe acts and conditions before they result in accidents, you create your safety culture.
Four Steps to a Safety Culture
To get started with building a safety culture, follow these four steps.
1. Assess risks.
The risks you face on a daily basis must be understood in order to build a safer workplace. For every task and every associated risk, there must be an assessment and safety-based changes should be taken into account.
- Carefully consider past incidents and near misses. Recognize that past incidents can aid you in determining root causes and detect risks and exposures that endanger the safety of your employees, your customers, and the success of your business.
- Avoid losses by recognizing the risks. Your goal should be to prevent or mitigate loss by assessing your work policies and procedures, employee work practices and behaviors, buildings, stock and equipment, and building locations. Once the practices and procedures are in place and understood, be sure to hold people accountable to your safety culture.
2. Design a safety plan and stick to it.
Your goal should be to eliminate or minimize risk by following the policies and procedures set forth in the safety plan.
- Create engagement. Your employees should be engaged and committed to a safety culture.
- Remain focused on the risks and exposures identified during your assessment.
- Prioritize your risks and exposures and focus on the risks of greatest concern. Carefully consider frequency and severity of the loss potential, in addition to the opportunity to prevent or mitigate risks.
- Determine solutions and the appropriate resources. Get your employees involved to help implement positive change and stay focused on safety goals. Make sure your management team is aware of the safety plan and is committed to finding the right solution for your operation.
3. Execute your plan.
Communicate the plan, explain the details, and conduct employee training and reviews to ensure all employees understand the continual focus on safety.
- Communicate and educate – go beyond what is written on paper and continually communicate and educate your employees about the safety program. Your goal is to create a team of proactive and engaged employees that can effectively deliver the content in your safety plan.
4. Observe, assess and improve your plan.
As your business grows and thrives, so you should your safety program. Be sure to regularly assess your plan to ensure it still matches the goals of your business and fits the needs of your operation. As new employees come on board, be sure to maintain the same level of commitment and training to ensuring all staff are properly trained and educated in your safety plan.
- Continually monitor the plan, request feedback on the plan’s effectiveness, and maintain a proactive work environment committed to safety.
- On a regular basis, examine your safety performance against the plan’s objectives and expectations.
- Be prepared to adjust the safety plan when necessary.
- Celebrate success. Safety successes should be communicated and celebrated!
At American Hardware & Lumber Insurance, our focus is making sure our clients have the tools necessary to build an effective safety culture. For more information, contact us at [email protected].
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Could Your Business Survive a Data Breach? |
Small businesses are quickly deploying various technologies to better serve their customers and manage their business more efficiently. Different kinds of technologies,however, come with a variety of risks and, thus, require alternative strategies to protect them.
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Email Security
Require strong, unique passphrases on email accounts. Turn on two-factor authentication. Do not use personal email accounts for company business. Employees should know not to open suspicious links in email, tweets, posts, online ads, messages or attachments – even if they know the source. Employees should also be instructed about your company’s spam filters and how to use them to prevent unwanted,harmful email.
Point of Sale Systems
Create unique, strong passphrases. Separate user and administrative accounts. Keep a clean machine and update software regularly. Avoid web browsing on POS terminals. Use antivirus protection.
Software Security
Make sure your computer operating system, browser, and applications are set to receive automatic updates. Ensure all software is up to date. Get rid of software you don’t use. Your business should have clear, concise rules for what employees can install and keep on their work computers. When installing software, pay close attention to the message boxes before clicking OK. Make sure all of your store(s) computers are equipped with antivirus software and antispyware (update regularly). Limit access to data or systems only to those who require it to perform the core duties of their jobs.
Wi-Fi Security
Physically secure Wi-Fi equipment. Do not connect to unknown, generic or suspicious Wi-Fi networks. Use your mobile carrier’s data plan to connect. Turn off Wi-Fi and Bluetooth when not in use on your devices. Secure your internet connection by using a firewall, encrypt information and hide your Wi-Fi network.
FREE Cyber Quote
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Take Steps to Protect Employees from Extreme Heat |
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Surging temperatures across the country this summer are exposing another way that the changing climate threatens the country’s future: the danger it poses to workers, particularly those who work outside and in warehouses.
The issue has become such a concern that the Labor Department’s Occupational Safety and Health Administration has put a new heat illness rule on a list of agenda items for the Biden administration to consider, calling it a top priority. Right now, there is no specific federal policy that governs heat-related workplace safety, leaving states to set their own approach.
Employers with workers exposed to high temperatures should establish and implement a heat-illness prevention program and communicate it to supervisors and workers.
This includes:
- Providing workers with water, rest and shade;
- Allowing new or returning workers to gradually increase workloads and take more frequent breaks as they acclimatize to, or build a tolerance for, working in the heat;
- Planning for emergencies and training workers on heat hazards and appropriate first aid measures;
- Monitoring workers for signs of illness and taking prompt action if symptoms occur.
Don’t wait until a worker fall ill to address heat stress – take action. Effective preparation and knowledge of the hazards of heat can save lives today, and in the future. Three simple words: water, rest, shade can make a huge difference when implemented in the workplace.
OSHA’s Occupational Exposure to Heat page explains what employers can do to keep workers safe and what workers need to know, including factors for heat illness, adapting to working in indoor and outdoor heat, protecting workers, recognizing symptoms and first aid training. The page also includes resources for specific industries and OSHA workplace standards.
OSHA has numerous other heat safety tools and information available free for employers and workers including a heat safety app for Android and iPhone devices. Click here to access the site.
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Own a Rental Operation? Know Your Risk. |
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Ask yourself these questions:
- If I have GPS tracking on my equipment and register my equipment with the National Equipment Register, how does this affect my insurance?
- My insurance denied my claim for a stolen piece of rental equipment. It was never returned and I could never find the renter. How can I avoid this in the future?
- I have replacement cost coverage on my inland marine policy, and yet the insurance company would only pay for a depreciated piece of equipment. Why did this happen?
- I was sued by a renter who injured herself on equipment I rented to her. The manufacturer claims that I held them harmless by contract. How can I avoid this in the future?
- How can I protect myself from claims due to the negligence of the renter?
- What should I do if there is an accident or I need to submit a claim?
The more knowledge you gain about how to limit equipment rental liability, the better you can protect yourself and your assets.
rental business.
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New Podcast Episode!
On this episode, NHPA and AHLI discuss all the things that keep you up at night -- the emerging threats that could forever alter your business.
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