Rising rebuild costs: the Co-Insurance quandary


As inflation, labour shortages, and general costs of goods drive up rebuilding costs, the repercussions extend to your insurance strategy.


Reminder: Deciphering Co-Insurance

At its core, co-insurance is a clause typically integrated into property insurance policies. It requires policyholders to insure their property to a minimum percentage, often 80-90% of its actual value. If the insured amount falls short of this percentage at the time of a total loss, the policyholder may bear a proportionate amount of the loss.

Let’s take an example: Suppose a building valued at $1 million has insurance coverage of $700,000 (70%). If a loss of $100,000 occurs, the insurance will cover 70% of the loss, leaving the policyholder to cover the remaining 30% out-of-pocket.


The unintentional underinsurance pitfall

It’s easy to assume that a property’s insured value remains static. However, as rebuild costs escalate, businesses can unintentionally slip into underinsuring, thereby unknowingly exposing themselves to potential financial burdens.


Avoiding the Co-Insurance trap:

  1. Update property valuations: Reflect the current market and reconstruction costs.
  2. Align your policy: Discuss your coverage limits with your broker to ensure they mirror the property’s updated value.
  3. Consult your advisor: Stay informed with expert insights on trends and evolving circumstances.

Today, being proactive isn’t just an option – it’s a necessity. If you’re uncertain about your coverage or the ramifications of the co-insurance clause, contact us to find out. As partners, we’ll ensure your protection stands up to rising rebuild costs.