KEY TAKEAWAY:
--Outside experts play a vital role in accurately valuing the insured's belongings and providing like, kind and quality (LKQ) replacement products at best pricing.
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Inflation can have a significant impact on both policyholders and insurance companies. Failure to account for inflationary costs can result in underinsurance, where the insured value of the policy may fail to cover the actual costs of replacing or repairing damaged goods. This can leave policyholders facing financial burdens and disputes with insurance companies over coverage limits.
Let’s explore the importance of updated policy coverage and how insurance carriers and adjusters can help insureds recover under existing coverages.
Rising Costs of Goods Quickly Eats up Policy Coverage
As inflation drives up the prices of products and services, the existing coverage value may no longer support actual product replacement costs. This can leave policyholders bearing most of the replacement costs for structure and contents.
Labor Shortages and Delays Affect Replacement Costs
Labor shortages and manufacturing or shipping delays can complicate the inflation and insurance coverage dilemma. With supply chain disruptions, certain items may become unavailable or difficult to replace. Even if replacement options are available, they will likely come at a higher cost. This can complicate the claims process and result in delays or unsatisfactory compensation for claimants.
See also: What to Do About Rising Inflation?
How Carriers and Adjusters Can Help the Insured Recover More
Insurance carriers may try to save costs by avoiding hiring outside experts to perform contents valuations. However, this cost-saving measure can have long-term consequences, affecting the policyholder-carrier relationship. Outside experts play a vital role in accurately valuing the insured's belongings and providing like, kind and quality (LKQ) replacement products at best pricing.
Contents valuations enable the insured to recover more under the policy parameters. Without the help of contents valuators, carriers may appear to underpay policyholders and be seen as failing to provide adequate coverage.
Carriers should also offer additional help to the insured by allowing complete valuation of all loss items. Continuing the pricing past the policy limit allows the insured to use that data to possibly recoup their losses through deductions on their taxes.
Communicating the Importance of Updating Policies to Compensate for Inflationary Impact
Policyholders need to be aware of the importance of updating their policies to compensate for the inflationary impact of rising costs. This awareness gives them the opportunity of whole recovery during the claim process.
Similarly, insurance carriers must recognize the value of expertise and avoid short-term cost-cutting measures that can result in low policyholder confidence. By recognizing the negative impact of inflated goods, carriers can support policyholders by allowing for expert valuations of products to recover more under the policy parameters.
Awareness on the part of policyholders and insurance companies is crucial to account for the inflationary impact of rising costs, thus avoiding inadequate coverage and underpayment.
