Key Takeaways:<\/em><\/p>\n Inflation<\/a> is changing what it costs to rebuild, repair, or replace business property and many businesses don\u2019t realize their coverage hasn\u2019t kept up until after a loss occurs.<\/p>\n To put this into perspective, the producer price index for key construction inputs such as steel and aluminum has risen more than 13% and 22%<\/a> year-over-year, respectively, with similar increases in lumber prices. Extreme material cost inflation across the industry is not only becoming more common but also more unpredictable for contractors managing long-term projects.<\/p>\n These rising material prices\u2014coupled with labor shortages, supply chain disruptions, and financing costs\u2014have significantly increased replacement costs for buildings, equipment, and inventory.<\/p>\n For many businesses, the risk isn\u2019t that inflation exists; it\u2019s that insured property values haven\u2019t been updated to reflect today\u2019s costs. When coverage lags behind real-world pricing, businesses can unknowingly become underinsured<\/a>, leaving critical gaps that only surface during a claim.<\/p>\n \u201cThat\u2019s where routine property evaluations play a vital role,\u201d says Patti Gundlach, commercial lines small business underwriting manager at Central Insurance<\/a>. \u201cAs inflation rises, everything that goes into rebuilding a property becomes more expensive\u2014materials, labor, financing, even insurance and repair costs. Businesses often don\u2019t realize how much those costs have increased until they\u2019re faced with a claim.\u201d<\/p>\n Below, Gundlach explains how inflation is reshaping replacement costs and why keeping property values current is critical to supporting your business after a loss.<\/p>\n Underinsurance is rarely intentional. In many cases, business owners simply haven\u2019t reviewed their property values in years. Others rely too heavily on built-in inflation guards,<\/a> assuming those automatic increases are enough.<\/p>\n According to Gundlach, most commercial property policies include modest annual inflation adjustments, often around 5% for buildings and 3% for business personal property. While helpful, she cautions that those increases alone may not reflect real market conditions. \u201cYou need to actually review whether those increases match today\u2019s construction and replacement costs,\u201d she explains.<\/p>\n Another common misconception among small business owners involves confusing market value<\/a> with replacement cost<\/a>. Market value reflects what your property could sell for, influenced by land value and local real estate demand. Replacement cost reflects what it would take to rebuild the structure today.<\/p>\n \u201cJust because you paid $1 million for a building doesn\u2019t mean it costs $1 million to rebuild it,\u201d Gundlach notes. \u201cThose are two very different numbers.\u201d<\/p>\n Learn More: <\/strong>Dwelling Coverage vs. Market Value: What\u2019s the Difference?<\/a><\/p>\n<\/blockquote>\n A routine property evaluation is often called an insurance-to-value<\/a> (ITV) review or replacement cost estimator. During these evaluations, small businesses and their independent agents take the time to reassess the cost to rebuild the insured property today, using current materials, labor<\/a> rates, and regional pricing data.<\/p>\n Remember: <\/strong>Insurers most commonly perform small business property evaluations during an insurance renewal, but they can be done at any point during the policy term.<\/p>\n<\/blockquote>\n Agents or insurers use detailed calculators that account for all relevant factors, including building characteristics like:<\/p>\n \u201cA building in downtown Atlanta is going to have a very different replacement cost than one in a rural area,\u201d Gundlach explains. \u201cThe estimation tools used to determine replacement cost help establish a realistic starting point.\u201d<\/p>\n While replacement cost estimates are most accurate for buildings, Gundlach explains that these evaluations can also prompt important conversations about business personal property<\/a> exposures. As inflation isn\u2019t limited to construction materials, replacement costs for equipment, electronics, specialized machinery, inventory, and raw materials should also be evaluated regularly.<\/p>\n Learn more:<\/strong> Deconstructing Your Business Insurance Quote<\/a><\/p>\n<\/blockquote>\n Gundlach recommends businesses review property values every year<\/a> and, at a minimum, every two years because even short delays can create meaningful coverage gaps, especially during periods of rapid cost increases, such as those following the pandemic.\u00a0<\/p>\n \u201cIf you haven\u2019t updated your business\u2019s property values in five years or more, there\u2019s a strong chance you\u2019re underinsured. There\u2019s just been too much change in costs.\u201d \u2013 Patti Gundlach, Commercial Lines Small Business Underwriting Manager at Central Insurance<\/p>\n Beyond scheduled reviews, businesses should reassess their values whenever they experience changes. These might include:<\/p>\n If your own costs are climbing, it\u2019s often a signal that insured values may need to be adjusted mid-policy, not just at coverage renewal time.<\/p>\n When property values aren\u2019t updated, the consequences can be severe. In the event of a loss, insurance carriers can only pay up to policy limits. If those limits are too low, your business may need to absorb some or all of the difference.\u00a0<\/p>\n \u201cThat gap can put a business in a very difficult position,\u201d Gundlach explains. \u201cThey may not have the cash to rebuild, restock inventory, or continue paying employees.\u201d<\/p>\n Additional costs, such as complying with updated building codes, ADA requirements<\/a>, or sprinkler mandates, can further widen the gap if not factored into outdated valuations. Routine property evaluations help support coverage that reflects today\u2019s realities and help businesses prepare for potential financial strain when they need coverage most.<\/p>\n At Central Insurance<\/a>, routine property evaluations aren\u2019t treated as a paperwork exercise; they\u2019re a proactive risk management<\/a> tool built around collaboration. Loss control specialists<\/a> can play a critical role in this process, particularly for accounts where inflation and operational changes may have outpaced insured values.<\/p>\n During on-site visits, Central\u2019s loss control professionals<\/a> can assess your building\u2019s details, occupancy, and business personal property exposures. These reviews can uncover discrepancies caused by rising material and labor costs, added equipment, or operational changes not previously factored into coverage.<\/p>\n Most importantly, Central\u2019s approach is about partnership. \u201cWe don\u2019t dictate values,\u201d Gundlach says. \u201cWe work together with you to make sure the numbers make sense.\u201d<\/p>\n That collaboration is a key differentiator. Central\u2019s underwriters<\/a>, loss control team, and carefully selected independent agents work together to review findings, discuss assumptions, and adjust limits when needed. This collaboration helps businesses better manage the risk of underinsurance and overinsurance, which can unnecessarily inflate premiums.Routine property evaluations are among the simplest and most effective ways to support efforts to address inflation-driven coverage gaps, but only when conducted by knowledgeable professionals who understand how today\u2019s costs affect real-world recovery. As Gundlach states, \u201cDon\u2019t wait until claim time to find out your values are wrong.\u201d<\/p>\n Contact your local independent Central agent<\/a> to discuss how you can stay ahead of inflation, reduce unpleasant surprises, and support long-term stability when it matters most.<\/p>\n The information provided in this blog is for informational and educational purposes only and does not constitute legal, insurance, or other professional advice. It is not intended to interpret or modify any insurance policy. Coverage may vary based on individual circumstances, policy language, endorsements, exclusions, and applicable state law.<\/em><\/p>\n All descriptions, summaries, or examples are general in nature and may not reflect your specific policy or coverage. No guarantee is given regarding the accuracy, completeness, or timeliness of the information. Your policy contract governs, and you should review it in its entirety to understand your actual coverage.<\/em><\/p>\n Nothing in this content creates a broker, agent, or advisory relationship, and you should consult your insurance professional for advice specific to your needs.<\/em><\/p>\n Products underwritten by Central Insurance and affiliated companies. <\/em> Key Takeaways: Inflation has significantly increased the cost of rebuilding, repairing, or replacing business property, creating a growing underinsurance risk. Replacement cost is a key factor in assessing whether coverage may be adequate after a loss. Routine property evaluations can help identify coverage gaps before a claim occurs. Review business personal property regularly, as it […]<\/p>\n","protected":false},"author":1,"featured_media":364252,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[94],"tags":[20212,14928,1409,13808,167534],"dealstore":[],"offerexpiration":[],"class_list":["post-364251","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-insurance","tag-evaluations","tag-property","tag-protect","tag-routine","tag-small-business-insurance"],"yoast_head":"\n\n
The Growing Risk of Small Business Property Underinsurance Due to Inflation<\/h3>\n
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What Is a Routine Small Business Property Evaluation?<\/h3>\n
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Small Business Property Insurance and Inflation: Why Timing and Accuracy Matter More Than Ever<\/h3>\n
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What\u2019s At Risk?<\/h4>\n
How Central\u2019s Loss Control and Agent Partnerships Can Protect Small Businesses From Inflation Risk<\/h3>\n
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Copyright \u00a9 2026 Central Insurance. <\/strong>All rights reserved.<\/em><\/p>\n<\/div>\n<\/div>\n<\/div>\n\n","protected":false},"excerpt":{"rendered":"