6 Forces Driving Commercial Property Insurance Costs

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commercial property cost increasing

The market for commercial property insurance continues to be challenging. Here are several factors contributing to premium increases for commercial property coverage.

  1. 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

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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)

5 The Harris Poll

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


Winter Losses Are Preventable

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prevent winter loss to your business

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.

Is My Business Covered for That?

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8 Common Business Insurance Gaps

business insurance

Most small and mid-sized businesses are aware of the importance of having business insurance but often simply opt for general property and liability insurance and call it a day. While these policies cover most of the basics, there may be gaps in your insurance that can leave your business exposed to risk and financial loss.

Here are some of the most common potential gaps we see in business coverage and an overview of more specialized policies and endorsements that may help you protect your business and help your business recover after a covered loss. Keep in mind that individual policies can vary widely, so it’s always important to review your coverage options with your agent or broker.

  1. Am I covered if an employee sues my business? Consult your insurance agent or broker about adding these coverages to help close the potential gaps:
    • Employment Practices Liability Insurance – to protect against lawsuits filed by employees who claim their legal rights as employees have been violated.
    • Directors & Officers – to protect your company’s officers and directors if they are personally sued for acts or omissions committed in their capacity as corporate officers or directors.
  2. Is my business covered if it’s sued by a customer for professional negligence?
    • Consider adding Professional Liability or Errors and Omissions (E&O) insurance to help protect against claims directly related to your professional services.
  3. If my business is damaged by a fire or break-in and must close temporarily, are my operating expenses insured?
    • To help cover that potential gap following a covered property loss, ask your insurance representative about adding business interruption insurance to your property policy.
  4. Am I covered if one of my employees accidently infects my company’s computer system with malware?
    • Consider procuring a commercial cyber policy to help provide solutions and services for privacy breaches, network security, incident response, and media liability.
  5. Is my business insured if our mechanical system breaks down?
    • To help close this potential gap, consider equipment breakdown insurance to provide the funds and resources to get you back up and running quickly after a covered loss.
  6. Is my business covered if an employee gets in an accident while delivering products to a customer?
    • A commercial auto policy can help protect vehicles owned by a business; and some may include coverage for individually owned vehicles used regularly for that business (other than commuting to work).
  7. Is my business covered if it is damaged by a flood?
    • Since the typical commercial property insurance policy does not include flood coverage, ask your agent or broker about commercial flood insurance options available from private insurers or the federal government’s National Flood Insurance Program (NFIP).
  8. Is my business covered if my employees are injured while they are overseas?
    • To help cover this potential gap, consider multinational travel accident insurance – to provide resources for international travel, including emergency medical, cash and document replacement, local country reports and travel alerts, and more.

Regardless of the type of business you run, it may be smart to talk to your independent insurance agent or broker to make sure your business is appropriately insured so that you can focus on keeping your business running smoothly, even if you experience a loss.

Please click here to read the entire document.

This document is advisory in nature and is offered as a resource to be used together with your professional insurance advisors in maintaining a loss prevention program. It is an overview only, and is not intended as a substitute for consultation with your insurance broker, or for legal, engineering or other professional advice.

Chubb is the marketing name used to refer to subsidiaries of Chubb Limited providing insurance and related services. For a list of these subsidiaries, please visit our website at www.chubb.com. Insurance provided by ACE American Insurance Company and its U.S. based Chubb underwriting company affiliates. All products may not be available in all states. This communication contains product summaries only. Coverage is subject to the language of the policies as actually issued. Surplus lines insurance sold only through licensed surplus lines producers. Chubb, 202 Hall’s Mill Road, Whitehouse Station, NJ 08889-1600.

Cybercriminals and Artificial Intelligence

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Cybercrime Hand holding Artificial intelligence sign

The past few years have seen artificial intelligence (AI) surge in popularity among both businesses and individuals. Such technology encompasses machines, computer systems and other devices that can simulate human intelligence processes. In other words, this technology can perform a variety of cognitive functions typically associated with the human mind, such as observing, learning, reasoning, interacting with its surroundings, problem-solving and engaging in creative activities.
Applications of AI technology are widespread, but some of the most common include computer vision solutions (e.g., drones), natural language processing systems (e.g., chatbots), and predictive and prescriptive analytics engines (e.g., mobile applications). While this technology can certainly offer benefits in the realm of cybersecurity—streamlining threat detection capabilities, analyzing vast amounts of data and automating incident response protocols—it also has the potential to be weaponized by cybercriminals. In particular, cybercriminals have begun leveraging AI technology to seek out their targets more easily, launch attacks at greater speeds and in larger volumes, and wreak further havoc amid these attacks.

As such, it’s crucial for businesses to understand the cyber risks associated with this technology and implement strategies to minimize these concerns. This article outlines ways cybercriminals can utilize AI technology and provides best practices to help businesses safeguard themselves against such weaponization.

Ways Cybercriminals Can Leverage AI Technology

AI technology can help cybercriminals conduct a range of damaging activities, including the following:

  • Creating and distributing malware—In the past, only the most sophisticated cybercriminals were capable of writing harmful code and deploying malware attacks. However, AI chatbots are now able to generate illicit code in a matter of seconds, permitting cybercriminals with varying levels of technical expertise to launch malware attacks with ease. Although current AI technology writes more basic (and often bug-ridden) code, its capabilities will likely continue to advance over time, thus posing more substantial cyberthreats. In addition to writing harmful code, some AI tools can also generate deceptive YouTube videos claiming to be tutorials on how to download certain versions of popular software (e.g., Adobe and Autodesk products) and distribute malware to targets’ devices when they view this content. Cybercriminals may create their own YouTube accounts to disperse these malicious videos or hack into other popular accounts to post such content. To convince targets of these videos’ authenticity, cybercriminals may further utilize AI technology to add fake likes and comments.
  • Cracking credentials—Many cybercriminals rely on brute-force techniques to reveal targets’ passwords and steal their credentials to then utilize their accounts for fraudulent purposes. Yet, these techniques may vary in effectiveness and efficiency. By leveraging AI technology, cybercriminals can bolster their password-cracking success rates, uncovering targets’ credentials at record speeds. In fact, a recent cybersecurity report found that some AI tools are capable of cracking more than half (51%) of common passwords in under a minute and over two-thirds (71%) of such credentials in less than a day.
  • Deploying social engineering scams—Social engineering consists of cybercriminals using fraudulent forms of communication (e.g., emails, texts and phone calls) to trick targets into unknowingly sharing sensitive information or downloading harmful software. It repeatedly reigns as one of the most prevalent cyberattack methods. Unfortunately, AI technology could cause these scams to become increasingly common by giving cybercriminals the ability to formulate persuasive phishing messages with minimal effort. It could also clean up grammar and spelling errors in human-produced copy to make it appear more convincing. According to the latest research from international cybersecurity company Darktrace, social engineering scams involving sophisticated linguistic techniques have already risen by 135%, suggesting an increase in AI-generated communications.
  • Identifying digital vulnerabilities—When hacking into targets’ networks or systems, cybercriminals usually look for software vulnerabilities they can exploit, such as unpatched code or outdated security programs. While various tools can help identify these vulnerabilities, AI technology could permit cybercriminals to detect a wider range of software flaws, therefore providing additional avenues and entry points for launching attacks.
  • Reviewing stolen data—Upon stealing sensitive information and confidential records from targets, cybercriminals generally have to sift through this data to determine their next steps—whether it’s selling this information on the dark web, posting it publicly or demanding a ransom payment in exchange for restoration. This can be a tedious process, especially with larger databases. With AI technology, cybercriminals can analyze this data much faster, allowing them to make quick decisions and speed up the total time it takes to execute their attacks. In turn, targets will have less time to identify and defend against such attacks.

Tips to Protect Against Weaponized AI Technology

Businesses should consider the following measures to mitigate their risk of experiencing cyberattacks and related losses from weaponized AI technology:

  • Uphold proper cyber hygiene. Such hygiene refers to habitual practices that promote the safe handling of critical workplace information and connected devices. These practices can help keep networks and data protected from various AI-driven cyberthreats. Here are some key components of cyber hygiene for businesses to keep in mind:
    • Requiring employees to use strong passwords (those containing at least 12 characters and a mix of uppercase and lowercase letters, symbols and numbers) and leverage multifactor authentication across workplace accounts
    • Backing up essential business data in a separate and secure location (e.g., an external hard drive or the cloud) on a regular basis
    • Equipping workplace networks and systems with firewalls, antivirus programs and other security software
    • Providing employees with routine cybersecurity training to educate them on the latest digital exposures, attack prevention measures and response protocols
  • Engage in network monitoring. This form of monitoring pertains to businesses utilizing automated threat detection technology to continuously scan their digital ecosystems for possible weaknesses or suspicious activities. Such technology typically sends alerts when security issues arise, allowing businesses to detect and respond to incidents as quickly as possible. Since time is of the essence when it comes to handling AI-related threats, network monitoring is a vital practice.
  • Have a plan. Creating cyber incident response plans can help businesses ensure they have necessary protocols in place when cyberattacks occur, thus keeping related damages at a minimum. These plans should be well-documented and practiced regularly and should address multiple cyberattack scenarios (including those stemming from AI technology).
  • Purchase coverage. Lastly, it’s imperative for businesses to secure adequate insurance and financially safeguard themselves from losses that may arise from the weaponization of AI technology. It’s best for businesses to consult trusted insurance professionals to discuss specific coverage needs.

Conclusion

Looking forward, AI technology is likely to contribute to rising cyberattack frequency and severity. By staying informed on the latest AI-related developments and taking steps to protect against its weaponization, businesses can maintain secure operations and minimize associated cyberthreats. Contact us today for more risk management guidance.

This Cyber Risks & Liabilities document is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. © 2023 Zywave, Inc. All rights reserved.

Commercial Property and Inflation

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Commercial real estate soaring costs

Global, national, and local economies have changed dramatically in recent years as a result of the pandemic, global conflicts, and other factors. The war in Ukraine has resulted in higher fuel costs, which contributes to rising supply and transportation costs. Financing costs are also increasing as central banking systems, such as the U.S. Federal Reserve, raise interest rates. Businesses are also confronting supply chain disruptions, worker shortages, sustained inflation, and other challenges.

Increased risks from natural catastrophes

Businesses also face increased risks from severe weather and natural catastrophes caused by climate change — including wildfires, drought/heat waves, tornadoes, hurricanes, and flooding. In 2020, the U.S. saw a record 22 weather-related disasters that each caused more than $1 billion in damage, and together resulted in approximately $95 billion in losses.1 2021 saw 20 such events with a total of more than $145 billion in damages. 2

Factors contributing to inflation

With multiple economic forces converging, the market is experiencing marked increases in the value — and the rebuilding and replacement costs — of commercial property, including buildings, fixtures, and equipment. Given this situation, now is the time to assess the value of your business property and review your insurance coverage. Notable trends that are continuing to drive inflation and raise commercial property valuations and insurance costs include:

  • Decreased supplies
  • Increased demand
  • Tightening labor market

Property valuation changes and insurance limits

The replacement value of a building is not its market value or what it’s worth in the current real estate market. It is the cost you will incur to rebuild or replace the property with materials of like kind and quality. Because construction costs — including rebuilding costs — have gone up, the cost to repair or replace your building has increased as well.

Furthermore, supply and labor shortages can delay construction projects. If your business needs to rebuild following a fire or other disaster, it may take extra time to reopen facilities and drive up business interruption losses. Delays can add to additional costs—for instance, if you must lease temporary office or warehouse space.

Similarly, supply chain disruptions, labor costs, and other market forces may drive up the costs of equipment and goods specific to your business. When reappraising the replacement cost of your buildings, you may want to consider the replacement costs of equipment and stock that are essential to your business.

Higher property valuation will likely require you to increase the limits of your insurance coverage, resulting in premium increases – but it will also provide peace of mind knowing that, in the event of a catastrophic loss, your business has proper coverage.

Start a conversation with your broker or agent

Insurers are seeing higher claims costs because of increases in constructions costs and the frequency and severity of losses. Together, these factors may result in higher premiums for your commercial property coverage.

Consider reaching out to us to review your commercial property insurance, as well as the stability and track record of your insurer. You may want to discuss conducting a new appraisal of the replacement value of your facilities, equipment, and stock. Look at options for raising your policy limits to adequately cover the increased costs of replacing business assets and keeping your business afloat if your operations are disrupted.

Click here to read the Chubb article in more detail.

Sources

1 https://www.noaa.gov/stories/record-number-of-billion-dollar-disasters-struck-us-in-2020

2 https://www.climate.gov/news-features/blogs/beyond-data/2021-us-billion-dollar-weather-and-climate-disasters-historical

3 https://www.jchs.harvard.edu/research-areas/remodeling/lira

4 https://www.nbcdfw.com/news/local/construction-costs-hit-highest-spike-in-50-years/2891677

5 https://www.levelset.com/news/construction-costs-spike-can-contractors-fight-effects/

6 https://fortune.com/2021/03/31/lumber-prices-2021-chart-wood-production-high-why-is-lumber-so-expensive-right-now-home-prices-data-update/

7 https://fortune.com/2022/01/12/lumber-prices-skyrocket-again-weather-sawmill-production-supply-chain/

This document is advisory in nature and is offered as a resource to be used together with your professional insurance advisors in maintaining a loss prevention program. It is an overview only, and is not intended as a substitute for consultation with your insurance broker, or for legal, engineering or other professional advice.

Chubb is the marketing name used to refer to subsidiaries of Chubb Limited providing insurance and related services. For a list of these subsidiaries, please visit our website at www.chubb.com. Insurance provided by ACE American Insurance Company and its U.S. based Chubb underwriting company affiliates. All products may not be available in all states. This communication contains product summaries only. Coverage is subject to the language of the policies as actually issued. Surplus lines insurance sold only through licensed surplus lines producers. Chubb, 202 Hall’s Mill Road, Whitehouse Station, NJ 08889-1600.

Loss Control Tips

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Read more

Risk Management Ideas

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As 2022 begins its last quarter, now is a good to review various risk management ideas you may wish to consider and or implement for 2023. Risk Management consists of implementing polices, practices or procedures that reduce the odds of loss or the size of a loss once it occurs. An example of reducing odds of a loss, would be reviewing your employees driving records before you hire them and annually. The better your drivers, the lower the odds of a loss. In addition, training the drivers on what to do after a loss can make a big difference in the size of a loss. Do they know to not offer responsibility, take pictures, get names of other drivers, etc.

All clients want the lowest insurance premiums possible and using risk management practices is a great tool in having lower premiums due to having a more attractive loss history.

Most insurance carriers offer loss control and risk management services at no charge to the client. Consider 2023 as the year to make improvements in this important area of your company’s financial wellbeing. Contact your Cleary Insurance Account Executive to discuss risk management ideas.

Fuel Efficiency Best Practices for Fleets

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Improving the fuel efficiency of a company’s fleet of vehicles can have many financial and environmental benefits, especially with fuel prices on the rise. Fuel can be one of the largest and most difficult expenses to predict and control. Therefore, it’s important for vehicle fleet managers to conserve fuel, maximize efficiency and reduce vehicle emissions by implementing fuel-efficient policies, technology and maintenance strategies.

Best Practices

Managing a fleet’s fuel usage—even for just a couple of vehicles—can feel overwhelming. The following are ways to reduce fleet fuel costs and make operations more efficient:

  • Monitor driving patterns. A U.S. Department of Transportation report found that there can be as much as a 35% difference in fuel consumption between a good and poor driver. Monitoring speeding, braking and acceleration patterns can indicate whether drivers are using good practices on the road or operating inefficiently.
  • Cut engine idling. Idling can burn a quarter to a half gallons of fuel per hour. To reduce fuel and oil waste:
    • Turn off the engine while waiting or making deliveries.
    • Turn off the engine while stuck in traffic.
    • Do not idle to warm up the engine.
  • Improve route efficiency. Route efficiency can be improved with GPS tracking technology to ensure operations are streamlined and drivers don’t spend their day and fuel driving back and forth.
  • Remove unnecessary weight from vehicles. Every extra 100 pounds in a vehicle can increase gas costs by up to $0.03 cents per gallon, which can quickly add up over the course of hundreds of thousands of gallons across multiple vehicles. Only travel with necessary packages or equipment.
  • Schedule maintenance. Preventive and regular maintenance can reduce fuel costs, extend the lifespan of fleet vehicles and ensure the safety of drivers and the community.
  • Check the tire pressure. Tires should be inflated to 75% of the recommended pressure; underinflated tires can significantly lower a vehicle’s average gas mileage. Checking the tire pressure should be a mandatory part of the pre-trip safety check since it not only improves the cost per mile but also helps the vehicle respond properly in unsafe situations.
  • Dispatch the closest vehicle. Business margins and fuel efficiency can be improved by dispatching the closest vehicle to a new delivery or appointment. Fleet-tracking programs can help automate dispatching and routing.
  • Leverage a fleet telematics solution. A fleet telematics solution can help managers gain data and insight into fleet status in terms of individual vehicle performance and overall operations, allowing them to make changes that will help fuel efficiency
  • Provide incentives. Fleet managers can encourage efficient driving by offering drivers incentives, such as recognition or special privileges.
  • Implement driver training. Providing drivers with training regarding fuel-efficient habits can increase their awareness of fuel efficiency on the road. It can help them be mindful of things like keeping gears low when accelerating, changing gears early, driving at slower speeds and learning to read the road more effectively.

 

By implementing policies and practices that monitor and reward fuel-efficient behavior, fleet operations can reduce fuel costs. For more risk management guidance, contact us today.

Harden Your Cyber Defenses Immediately!

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In a March 21, 2022 statement, President Joe Biden cautioned businesses in the private sector to harden their cyber defenses, reiterating earlier warnings related to potential cyberattacks against U.S. organizations by Russia.

“I have previously warned about the potential that Russia could conduct malicious cyber activity against the United States, including as a response to the unprecedented economic costs we’ve imposed on Russia alongside our allies and partners,” Biden said. “It’s part of Russia’s playbook. Most of America’s critical infrastructure is owned and operated by the private sector, and critical infrastructure owners and operators must accelerate efforts to lock their digital doors.”

While there is no evidence of an imminent attack tied to the Russia-Ukraine crisis, Biden’s top cybersecurity officer Anne Neuberger noted that the everyday cyber risks businesses face and the potential for Russia-led cyberattacks call for urgency.

“There is no evidence of any specific cyberattack that we’re anticipating for,” Neuberger said. “There is some preparatory activity that we’re seeing, and that is what we shared in a classified context with companies who we thought might be affected.”

While declining to offer more detail on the type of preparatory actions seen by threat intelligence researchers, Neuberger said officials are focused on patching known vulnerabilities at all firms that make attacks far easier for attackers than they need to be.

To further assist private sector companies in strengthening their defenses, the Biden Administration issued a fact sheet with specific guidance on protective measures. Specific recommended actions for private sector organizations include:

  • Mandating the use of multifactor authentication on systems
  • Deploying modern security tools that continuously look for and mitigate threats
  • Working with cybersecurity professionals to ensure that organizational systems are patched and protected against all known vulnerabilities
  • Changing passwords across networks so previously stolen credentials are useless to malicious actors
  • Backing up data and creating offline backups
  • Having emergency plans in place and ensuring those plans are practiced regularly so the business can respond quickly following a cyberattack
  • Encrypting data
  • Educating employees on common cyberattack strategies and encouraging them to report suspicious activity (e.g., slow or poorly behaving laptops)
  • Establishing relationships with local FBI field offices or Cybersecurity and Infrastructure Security Agency (CISA) regional offices

The Coronavirus Pandemic is More Than a Health Crisis

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Presented by: Matthew A. Clayson

 

The coronavirus pandemic is more than a public health crisis. It’s an economic wrecking ball. Since the first reported cases in early 2020, COVID-19 has induced both a global recession and a record setting recovery. It contributed to the highest U.S. unemployment rate since the Great Depression, causing businesses to falter and families to face financial hardship.

Stocks have experienced a wild ride. The pandemic initially wiped out more than $11 trillion of wealth, but Wall Street quickly stabilized as lockdowns lifted and vaccines were introduced, hitting an all-time high in January 2022. But investors now fear a new threat: the surge in “Covid inflation” caused largely by ongoing supply chain disruptions. Against the backdrop of economic uncertainty, it’s not yet clear how long it may take for households hit hardest by the pandemic to get back on their feet financially, but we do know from past experience with economic crises that there are steps families can take today to potentially restore their financial wellness faster.

Those steps include:

Staying calm

If you contribute to a retirement plan or invest in a brokerage account, your future account balance depends on what you do right now. So, avoid making moves based on emotion rather than rational planning.

If you already have a retirement savings program under way, with asset allocation appropriate to your risk profile and long-term goals, you probably want to continue following your plan. Guidance from a trusted financial professional is can also be key.

Paying off credit cards

When the COVID-19 crisis is over and you’re back at work, you’ll need to begin paying down any debt you incurred, which includes credit card bills and retirement account loans.

One way to rid yourself of debt faster is to use any tax refunds you receive to that end. Bonuses and annual raises from your employer may be in short supply this year, but as the economy recovers and your compensation (hopefully) climbs, you may also be able to use that extra income to pare down debt.

More immediately, explore opportunities to trim waste from your budget—including unused gym memberships, premium cell phone plans, dinners out, etc.—and direct those savings to reduce the amount you owe.

Start by paying off the debt that costs you the most. Generally, that means credit cards balances. Many charge interest of 18% or higher, which makes it difficult to dig out and limits your ability to fund other financial goals.

Repaying your retirement account loans

If you took advantage of government leniency and tapped into your retirement savings to help make ends meet, you should also do everything you can to make yourself whole.

Considering a refi

If you’re strapped for cash, you might also consider refinancing your loans to lower your monthly payments.

For example, it might make sense to refinance your mortgage loan if you plan to remain in your home for at least five more years. Depending on your financial picture, however, it could be wise to refi if you can lower your interest rate by even 1 percent, especially if helps you to eliminate paying private mortgage insurance because the equity in your home has reached 20 percent. Be aware, however, that if you turn the clock back on the term of your loan, say, starting it over at 30 years, you will likely pay more in interest over the life of the loan, despite the lower monthly payment.

Insulating yourself for next time

No one knows yet when the COVID-19 crisis with its variants will end, but we can safely assume it will not be the last financial crisis we face.

As you take steps to restore your financial well-being today, don’t forget to insulate your finances for tomorrow.

If you don’t already have one, start putting money away for an emergency fund to pay the bills during bouts with unemployment, or when unexpected expenses crop up such as home repairs and medical bills. Having savings set aside prevents you from having to rely on credit cards or drain your retirement account in a pinch.

Most financial professionals suggest setting aside at least three to six months’ worth of living expenses in a liquid, interest-bearing account.

You should also review your insurance coverage to be sure that your family is protected no matter what. Beyond basic health insurance, you may wish to consider life insurance to protect your loved ones in the event that you should pass away prematurely, and disability income insurance to help replace a portion of your income if you should become injured or too ill to work.

Finally, review your investment portfolio carefully to be sure it’s still on course to meet your financial goals.

You may have discovered, as investors often do during market volatility, that your appetite for risk is not what you once thought. By working closely with a trusted financial professional, you can potentially reallocate your assets as needed to create a portfolio that is diversified enough to help you ride out future storms, but not so conservative that you sacrifice potential growth.

The coronavirus has threatened our health care system and economy like never before, leaving millions of American families struggling to pay the bills. As we continue to practice safe social distancing and make medical progress to combat COVID-19, it helps to know that there are steps we can take today to put our financial house back in order as quickly as possible.

Matt Clayson is a registered representative of and offers securities and investments services through MML Investors Services, LLC. Member SIPC(www.sipc.org). Supervisory Address: 101 Federal Street, Suite 800, Boston, MA 02110. 617.439.4389. CRN202502-1735773