Construction Material Cost Continues To Increase. What Does This Mean For My Commercial Building?

Construction material costs increased by 7.4% in September compared to the same month in 2017, according to an Associated General Contractors of America (AGC) analysis of U.S. Labor Department data. In the past year, tariffs have caused producer price index increases of 29.3% for diesel fuel, 22.1% for steel pipe and tubing and 11.7% for fabricated structural metal, among other cost increases. Over the past year, contractors increased their construction fees for nonresidential properties by 3.5%, which indicates firms are absorbing increased costs, according to the report. Additionally, 80% of respondents to an AGC August survey reported difficulty filling hourly worker positions, resulting in 62% of firms paying higher salaries to attract and retain workers.

What does this mean for my Commercial Building Insurance policy? 

If you own a commercial building, whether it be an apartment, industrial, office, or retail building, you should pay close attention to the Building insurance limit you have on the policy.

Perhaps you secured a policy years ago and haven’t looked at it in a long time. Or, have no idea how much you should be insuring your building for in the event of a fire, or earthquake.

Our economy is cranking right now. Contractors have more jobs than they know what to do with. Their employees are in high demand and they need to pay high salaries to keep their talent. More demand equals higher costs.

This isn’t 2009 when contractors were begging for work and you could basically name a price when hiring them for a job. They are busy and selective on which jobs they choose in today’s economy.

From what we’re hearing from Southern California based general contractors right now, their costs for material and labor are at least $300-$400 per square foot to build. So if you have a 20,000 square foot commercial building, you should probably be insuring that for at least $6M Replacement Cost value (20,000 x $300 per sq/ ft).

My suggestion is that you dig up your commercial building insurance policy and check what limits of insurance you have for the building coverage. If you’re severely underinsured, call your commercial insurance agent/broker and ask them what it would cost to endorse your policy with the limits suggested above. You’ll be happy you did if you suffer a loss in the coming day/week/month/year.

-JCK

Small Businesses Are Opening Faster Than They Are Closing

Yesterday, the Small Business Administration (SBA) Office of Advocacy published a fact sheet by research economist Daniel Wilmoth that indicates more small businesses are opening than closing. In 2017, the number of businesses in the U.S. increased by about 118,000 with various levels of growth depending on the region. In all, 975,000 new businesses had opened by the end of 2017. The number of businesses that closed fell from 859,000 in 2016 to 857,000 in 2017. Business openings have exceeded business closings for 28 consecutive quarters, Wilmoth noted. California accounts for nearly one-third of the net increase of businesses in 2017, with 38,000.

Source: Long Beach Business Journal

-JK

Risking It All

Almost one-third of small and midsize business owners have no business insurance whatsoever according to InsuranceBee.

When the company recently researched 1,000 U.S. business owners to find out how well-equipped they are to mitigate risk, it found that of the respondents without an insurance policy, 47% are sole proprietors and more than half have a gross revenue of less than $50,000 a year.

Meanwhile, 43% of sole practitioners do not consider themselves to be risk-takers. When asked why they have no insurance policy, responses included “I don’t need insurance because my business operates in an ethical manner,” and “I can take care of problems myself.”

Other than insurance, 27% of business owners claim to have put money aside to help mitigate risk, while 18% say they have contracts and procedures in place.

Source: InsuranceBee; iamagazine.com

-JK

Summer Dress Code For The Workplace

Summer is in full effect and it’s been hot and muggy in So Cal. Another heat wave is on the horizon this week. We spend our summer weekends at the pool and the beach and when it’s 90+ degrees outside, the last thing we want to do is slip into our wool suits or heavy dress clothing when we go to work. As an employer, how do you treat the dress code standards at your workplace? Do you have a dress code?

Click here to read the California Chamber of Commerce Human Resources Department’s thoughts on the subject that employers should consider – especially during these hot summer days.

-JK

Why Employment Practices Liability Insurance Coverage Is So Important

Quite honestly, I am floored by how many small businesses do not purchase Employment Practices Liability Insurance (EPLI). For those who are unaware, Employment Practices Liability is coverage against claims by employees alleging that they suffered damages as a result of the employer’s discrimination, wrongful termination, sexual harassment, or various other employment-related offenses.

man in brown long sleeved button up shirt standing while using gray laptop computer on brown wooden table beside woman in gray long sleeved shirt sitting

Photo by rawpixel.com on Pexels.com

When saying I am floored by how many small businesses do not purchase EPLI, I am basing that off my own experience in helping businesses with their various risk exposures and insurance needs.

I understand there’s a price tag associated with the coverage, but there’s a reason why premiums can be hefty in California for EPLI.  Statistics show businesses are more likely to face an employment claim than a property or general liability claim.

Check out these statistics:

  • The average amount paid for out of court settlement is $40,000.
  • Defense of an average EPL case, through trial, costs over $45,000.
  • The median compensatory award for EPLI cases is $218,000.
  • 67% of all employment cases that litigate result in judgment for the plaintiff.
  • 41% of all EPLI claims are brought against small employers with 15 to 100 employees.
  • Six out of ten employers have faced employee lawsuits within the last five years.
  • 91,503 charges were filed in 2016, slightly higher than the past two years.

Most importantly, buying an EPLI policy provides defense coverage in the event of a claim or suit regardless of the legitimacy of the claim. A simple allegation cannot be ignored. When you receive that summons in the mail, you cannot just throw it away. It must be addressed and defended. EPLI provides defense coverage to protect your business.

Also, when buying EPLI, you have 24/7 access to Human Resource professionals and Employment Law attorneys to consult with if you need guidance on how to address an employment issue. Carriers don’t want to pay claims, so this offering is pushed on their part to help mitigate the potential of a more serious matter.

In my opinion, Employment Practices Liability Insurance is a must for any business with employees in California. The annual premium cost will seem like pennies on the dollar compared to the cost of a claim. Don’t believe me? Take a second look at the statistics above. You should act today before it’s too late. You can’t buy a policy for an Employment Practices claim or incident that already happened.

-JK

Uber and Lyft Passengers Can Now Buy Insurance Before Their Rides

Uber and Lyft passengers can now buy insurance before their rides to cover any accidents or even death. Chubb, one of the world’s biggest property-casualty insurers, is joining ranks with startup Sure to sell policies on an “on-demand, per-day basis,” to cover accidents or death. The initiative will be called RideSafe and will pay up to $10,000 in medical costs per accident and include a $100,000 death benefit. Eventually, RideSafe plans to offer insurance for autonomous vehicle rides.

Source: LinkedIn

Free, Three-Day Webinar For Small Businesses 5/1 – 5/3

In honor of National Small Business Week, the United States Small Business Administration and the SCORE Association are hosting a three-day virtual conference on topics such as consumer behavior, discrimination, and harassment, gaining repeat business, marketing and more. The free conference for small businesses is from 9:30 a.m. to 3 p.m. each day from May 1 to May 3. Click here to register.

The webinars include the following topics:

5/1/18

  • How Changing Consumer Behavior Impacts Your Business
  • Addressing Discrimination and Harassment in the Workplace
  • Get New and Repeat Business On Autopilot with Email Marketing
  • Creating and Sustaining a Strong Social Presence

5/2/18

  • The U.S. Economic Outlook and Its Impact on Small Businesses
  • Managing Your Finances in the Cloud
  • Grow Your Business in 2018
  • Simple Steps to Choosing the Right Financing

5/3/18

  • Simple Steps to Choosing the Right Financing
  • Sharing Your Story Through Video
  • Pop & Play: How Opening a Pop-Up Shop Can Help Launch Your Retail Brand
  • Fusion Marketing: The Next Generation of Marketing

-JK

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