Insurance Insights: The Cleary Insurance Blog
The Cleary Insurance blog covers insurance, risk management, and financial planning for New England businesses and individuals. Our team of licensed advisors and specialists publishes regular articles on commercial and personal coverage, employee benefits, life and financial planning, and insurance compliance. Browse recent articles below, or use the category filters to find topics relevant to your business or personal situation.
6 Forces Driving Commercial Property Insurance Costs
The market for commercial property insurance continues to be challenging. Here are several factors contributing to premium increases for commercial property coverage.
- Catastrophe losses
Hurricanes, floods, wildfires, tornadoes, winter storms. The frequency and severity of major catastrophes continue to stress the industry. In the last four years, these events have caused annual insured losses of more that $100 billion globally.1 In 2023, total insured losses globally were an overwhelming $118 billion.2 Severe convective storms (SCS) represented 58% of the losses globally, and in the U.S., six of the 10 most expensive events were SCS events.3
- Reinsurance
Although reinsurance capacity improved in 2023 and into 2024, the cost of available reinsurance capacity remains high. The continued impact of catastrophic events is a major factor driving up costs, along with the increasing cost of capital, financial market volatility and inflation. This is an expense carriers need to pass along to customers.
- Underinsurance
After years of increased material and labor costs, insured property replacement values continue to lag.4 Just 43% of business owners say they have increased their policy limits to accurately reflect what it would take to replace insured property now.5 Customers must have accurate valuations for their assets so they don’t come up short after a loss, and premiums will reflect those high values.
- Property replacement costs
Led by a 65% increase in fabricated structural steel and a 37% increase in the price of concrete products, nonresidential construction costs remain high with a 37% increase over the past four years.6 Similarly, machinery and equipment costs have increased 22% over the same period. Many contractors continue to struggle with a supply chain that, while better, is still far from pre-pandemic levels.
- Skilled labor shortage
Nearly half of construction costs are wages and salaries, and wages have increased 22% over the past four years.7 Even with the higher wages, 77% of contractors are struggling to find skilled labor.8 Higher rebuilding costs and longer delays may trigger an increase in business interruption losses.
- Property rate need
For years, escalating loss trends have outpaced rate increases, primarily because of the costs of catastrophes, severe weather and large fires. Expect carriers to raise rates again this year to close the gap.9
6 Forces Driving Commercial Property Insurance Costs | Travelers Insurance
Sources
1 2023: A historic year of U.S. billion-dollar weather and climate disasters
2 Aon
3 Insured nat cat losses hit $123bn in record-setting 2023: Gallagher Re
4 Insurance Information Institute (III)
6 Bureau of Labor Statistics – 12/2019 – 12/2023 Table 9
7 Bureau of labor statistics, Table B-8B
8 AGC 2024 hiring and business outlook report
9 Commercial property insurance rate hikes come off highs
6 Signs You May Be Underinsured
Presented by Matthew A. Clayson
How do you know if you are underinsured? If you’ve purchased life insurance, you’ve taken an important step in protecting your family’s financial future, but you still may be underinsured. Such coverage can help your loved ones maintain their living standard in the event you should pass away prematurely, or at least eliminate some of the stress of making ends meet.
But how do you know if you have enough coverage? That can be a complicated question. And possible answers are likely to change over time. Life insurance is not a “set it and forget it” financial solution. As circumstances change, so do your coverage needs.
You may need to revisit the amount (and type) of life insurance coverage you have if:
- Your family has grown.
- Your stay-at-home spouse is not insured.
- You only have group life insurance through work.
- Your income rose.
- You have significant debt.
- Your financial goals have changed.
Life Insurance Policy Review
There is no one right answer. The appropriate death benefit amount differs for everyone depending on their assets, income, and financial goals.
How Many are Underinsured?
Underinsurance is common. According to Life Happens, a nonprofit consumer education group, 41 percent of U.S. adults — both insured and uninsured — say they do not believe they have enough life insurance protection.1 Some started off with sufficient coverage, but failed to increase their policy amount as their income and financial obligations grew.
Of course, the “right” amount of coverage is relative. People purchase life insurance for different reasons. Often, it’s used to replace the policyowner’s lost income if he or she should die unexpectedly, so their surviving spouse and kids can pay the bills. Others buy whole life insurance to provide for a spouse in retirement or cover long-term care expenses. And some use it as an estate planning tool to pass money along on a tax-favored basis to their heirs, so they may not realize they are underinsured.
1. Your family has grown -If you added a new family member to your flock, it may be time to increase the size of your life insurance policy. According to the most recent government estimates, it will cost the average middle-income, married couple nearly $311,000 to raise a child through age 18. That does not include the cost of a college education. If you aim to cover your kid’s college education, braces, and future wedding in the event that you are no longer around, those expenses should be factored into your death benefit as well.
2. Your stay-at-home spouse is not insured-It’s a common misconception that stay-at-home parents do not need life insurance coverage. True, they don’t produce an income. But if they should pass away when the kids are still young, the breadwinner would need to pay for day care or a nanny.
One more reason to insure a stay-at-home parent: It protects the earnings potential of the breadwinning parent, so he or she would not have to scale back hours or take a less-demanding job to keep their household afloat.
3.You only have group life insurance-Employer-provided life insurance is a great benefit for many, but the amount provided may not be sufficient to protect your family from financial loss. Group life insurance is typically not portable, either. And, if you develop a health condition between now and when you leave your job, you may no longer be eligible for the lowest rates, or qualify for private insurance at all.
To estimate how much life insurance coverage his clients should have, Guarino said he starts by calculating the cash-flow needs (through retirement) of each spouse and any dependent children with the assumption that the other spouse has passed away. He then compares that figure with their cash flow sources.
4. Your income rose-A bigger paycheck is a good thing, but if your family depends on your income to cover their living expenses, your life insurance coverage needs to keep up. It may be time to review your coverage needs if your salary has grown substantially since you purchased your policy.
Remember, the purpose of life insurance is to provide a big enough safety net that those you leave behind would be able to maintain their lifestyle if you were no longer around. If that lifestyle has changed, your coverage amount should, too.
5. You have debt-You may need more coverage if you have private student loans, mortgages, medical bills, or other debts.
Remember, the purpose of life insurance is to provide a big enough safety net that those you leave behind would be able to maintain their lifestyle if you were no longer around. If that lifestyle has changed, your coverage amount should, too.
6. Your financial goals have changed-Many couples purchase budget-friendly term life insurance when they start a family, primarily because it costs less. But as their income and financial goals change, they may no longer have the kind of protection that’s right for them. Term life insurance provides coverage for a specific length of time. The beneficiaries receive the death benefit only if the policyowner dies before that term is up, so you may still me underinsured.
By contrast, a permanent (or whole) life insurance policy costs more because it guarantees a death benefit to your beneficiaries when you pass away at any age, as long as you maintain your policy. It may also enable policyowners to accumulate cash value that can be used to help meet their retirement and other long-term accumulation goals. If you currently have a term life policy, but wish to leave a legacy to your heirs (or a favorite charity), you may not have the type of coverage you need.
Conclusion
Underinsurance is common in U.S. households. To be sure your family has the protection it needs, review your coverage regularly to ensure that you have both the amount and the type of policy that’s right for you.
About the Author
Matthew Clayson is a Financial Advisor at Commonwealth Financial Group. He is a registered principal of, and offers investment advisory and financial planning services through, MML Investors Services, LLC, Member SIPC (www.sipc.org).
Winter Losses Are Preventable
Before the Storm Starts…
Call your Cleary Insurance representative. Ask how your coverage will help you in a variety of scenarios, including burst pipes, roofing incidents, business interruption, ice dams, or accidents involving company cars. We can work with you to uncover gaps in your coverage and help you develop plans for your greatest risk areas to prevent winter losses.
Building Preparedness
Whether it’s you, an internal team, or a trusted contractor taking care of your building during the storm, make sure you:
- Know the locations of your water mains and supply lines. Mark them so they can be easily shut down in the event of a burst pipe or structural damage.
- Get your heating and electrical equipment inspected and in good operating condition. Licensed, insured plumbers and electricians can help you with this before the storm starts.
- Research or designate fully insured and reliable contractors for snow removal, salting, and sanding of parking areas and walkways. Or, if you choose to self-perform snow removal and maintenance, make sure your staff is properly trained and capable of operating necessary equipment, such as snow blowers. Document the building’s conditions before, during, and after the storm with checklists and photos.
- Prepare your grounds. Remove any trees or branches that are in danger of falling on your building and note any areas that may become risky in icy or snowy conditions.
- Check your supplies. Ensure that all snow removal equipment, backup generators, and company vehicles have enough fuel, and that you or your contractors have salt or sand available for your walkways and parking lots. If anyone is staying in your building, keep a well-stocked emergency kit in an accessible area.
- Consider installing water sensing equipment. Modern water detectors will notify you when your pipes grow cold, or if there is excess moisture present. Some can even shut off your water automatically in an emergency.
- Consider installing fully programmable and Wi-Fi-enabled thermostats. Today’s thermostats are more accurate, can be adjusted using smart devices, and can even send alerts should internal building temperatures dip to dangerous levels.
- During the storm, keep all exits, air intake, and exhaust vents clear of snow and ice during and after snow events.
- Monitor snow accumulation on your roof to prevent potential collapses, especially on flat or low-pitched roofs. If the snow starts piling up, professional roofers can help you keep your roof clean. First and foremost, though, stay safe! Be mindful of wind and weather conditions before asking anyone to work on your roof.
Business Interruption
Storms that cause winter losses become costly when businesses must close for repairs or power restoration. Working with distributors, vendors, suppliers, or even industry counterparts to develop contingency plans can help reduce your business interruption costs. In the past, we’ve seen coordinated efforts—such as co-packing arrangements with competitors and shipping extra product to customers in advance—reduce the impacts of a storm.
Prepare Your People
The key to successful emergency preparedness is communicating with your people to help prevent winter losses. Develop and test emergency communications systems and build redundancies into your methods. Be open and proactive about communicating your inclement weather attendance policy or work from home policies so that no employee feels the need to put themselves in harm’s way. Conduct training sessions on cold exposure and slip and fall safety, as necessary.