Inflation Should Factor Into Equipment Valuations

June 13, 2022

The Covid-19 pandemic and ensuing supply chain disruptions, labor shortages, and inflation have created headwinds in the equipment market.

Demand for equipment is very high, but supply is limited–and this has a knock-on inflationary effect on equipment values and the limits of insurance that contractors should buy to protect themselves.

“The Covid-19 pandemic was the launching point,” said Heather Frain, SVP and head of Inland Marine for Amwins Specialty Logistics Underwriters (ASLU), in an article in Insurance Business America. “With disruptions and bottlenecks in the supply chain, production of new equipment slowed, and demand for used equipment skyrocketed.”

According to the Associated General Contractors of America (AGC), the producer price index for construction machinery and equipment jumped 10.1 percent in 2021, compared to a 1.1 percent jump in 2020. It is important that contractors acknowledge those price increases in their equipment valuations so that they are not left underinsured, Frain told Insurance Business.

Read the entire article.

“A big part of taking care of our clients is making sure that they’re valuing their equipment correctly on their equipment schedules,” Frain said. “My biggest fear is that someone feels they're not taken care of properly when a loss occurs because they didn't realize they weren't insured to the correct value.

“A business owner needs to think: 'What if my forklift is totaled, or my crane is totaled? What insurance coverage do I need in place, to be able to get this equipment replaced?' The insurance carrier is only going to pay up to the limit the insured has purchased. Whether an insured has actual cash value coverage, or replacement cost coverage, or a coinsurance clause on their policy–it’s very important for them to ensure they have the correct equipment valuation in case there is a loss.”

Source: Insurance Business America