{"id":22879,"date":"2022-12-01T00:00:29","date_gmt":"2022-12-01T00:00:29","guid":{"rendered":"https:\/\/todaysveterinarybusiness.com\/?p=22879"},"modified":"2022-11-29T19:18:39","modified_gmt":"2022-11-29T19:18:39","slug":"property-insurance-1222","status":"publish","type":"post","link":"https:\/\/navc.sitepreview.app\/todaysveterinarybusiness.com\/property-insurance-1222\/","title":{"rendered":"Insure Your Property Properly"},"content":{"rendered":"

News on the economic front is not good. According to the U.S. Labor Department, inflation is at a 40-year high. Meanwhile, the Consumer Price Index rose 7% in 2021 and maintained the pace in 2022. Unfortunately, no substantial near-term relief appears in sight. Consumers are painfully aware of the ever-increasing cost of managing their expenses, be it purchasing and operating a car, buying groceries or eating at a restaurant. But what does this mean for the delivery of veterinary services? Business costs have risen dramatically, forcing most practices to hike prices<\/a>.<\/p>\n

The critical physical components of veterinary hospitals, meaning property, equipment, inventory and other contents, have gotten costlier, too. Supply chain disruptions, coupled with the soaring prices of construction materials and labor, have dramatically inflated the cost of rebuilding and repairing properties and replacing vital equipment and supplies.<\/p>\n

You\u2019re likely insufficiently protected if you haven\u2019t adjusted your insured property value limits recently.<\/p>\n

Meaningful Terms<\/strong><\/h3>\n

Veterinary facilities typically are insured on a replacement cost or agreed (guaranteed) value versus the actual cash value. Replacement cost is what it would take to replace or repair property with that of a similar kind and\u00a0quality. Agreed value is what your insurance company will pay when the insured item is damaged or lost. It differs from replacement cost and actual cash value in that you are guaranteed 100% of the amount listed on your insurance policy. Agreed value does not consider the replacement cost, age or condition of the damaged or destroyed property, only the stated value at the start of the policy.<\/p>\n

In addition, agreed value waives any coinsurance penalty if your property is not adequately insured to the value. Some replacement cost and actual cash value policies include a coinsurance clause that might go into effect during inflationary times if you fail to increase your policy limits adequately. A coinsurance clause ensures that policyholders insure their property to the current value and that the insurer receives the appropriate premium for the risk. Coinsurance is usually expressed as a percentage. If the policy limit you selected does not meet the specified insured percentage, your claim payment will be reduced in proportion to the deficiency.<\/p>\n

Good and Bad News<\/strong><\/h3>\n

Remember that the current market value of a property is not the same as its replacement cost or agreed value. Market value is the estimated amount a property would sell for at the time of valuation. During high inflation, the market value can be significantly lower than the cost of the labor, materials and ancillary administrative, regulatory and legal expenses associated with a replacement.<\/p>\n

The good news is that even when a policyholder is underinsured after a covered loss, a business property policy will respond and replace the damaged or destroyed property up to the policy limits. The bad news is the underinsured policyholder will exhaust the policy limits, with or without a coinsurance clause, before everything damaged during a catastrophic event, such as a fire, hurricane or earthquake, is replaced.<\/p>\n

Also, be aware that in most jurisdictions, if the cost to repair the damage exceeds 50% of the building\u2019s market value, the entire structure, including nondamaged portions, must be brought up to current building codes. That requirement includes electrical, plumbing, sprinkler and roofing systems. Authorities sometimes will condemn an entire building and require it to be razed and rebuilt from the ground up under current codes and construction material requirements.<\/p>\n

Other Considerations<\/strong><\/h3>\n

A commercial property policy includes two basic categories of coverage for direct physical loss to property owned or leased. They are real property and business personal property. In addition, tenant improvements and betterments and ancillary contractual requirements must be considered.<\/p>\n

Here\u2019s a breakdown:<\/p>\n