June 10, 2026
Take Action: Inflation Is Hiding in Your Insurance Policies Too
By E. Andrew Gerner, CFP®
You won’t receive a notice from your insurance company, nor did you or your agent request any changes, but due to inflation the limits on your property policies are probably too low. Stated bluntly, if you experience a large property loss, replacement-cost claim payments from your insurance policies may not be sufficient to replace your damaged or destroyed property. This is not only a business property concern, but also a residential property concern, and inflation exacerbates the problem with each passing month.
Inflation is often referred to as “the silent thief” because of its ability to reduce the purchasing power of each dollar of your savings and income. The passive erosion of dollar value becomes active and acutely apparent for those who unexpectedly need to replace damaged or destroyed property using insurance proceeds. A house or office that could have been built for $400,000 two years ago may easily cost $600,000 to rebuild today. Inventories of new and used automobiles are limited and sold at a premium. Costs of parts and repairs of existing automobiles are significantly higher too. The tables and graphs below provide a snapshot from the Consumer Price and Producer Price indices of selected inputs to property claim adjustment:
https://fred.stlouisfed.org/graph/?g=R1iF
Consumer Price Index (CPI-U) – All items up 3.8% in last year
Motor Fuel: 54.4%
Electricity Services 6.1%
Airline Fares 20.7%
Source: Table 1. Consumer Price Index for All Urban Consumers (CPI-U): U.S. city average, by expenditure category, April 2026
https://www.bls.gov/news.release/cpi.t01.htm
Producer Price Index
Automotive Parts, Including Tires, retailing: 11%
Construction Machinery and Equipment: 4%
Commercial Furniture: 5.9%
Household Furniture: 5.4%
Household Appliances: 2.2%
Home Electronic Equipment: 4.3%
Floor and Floor Coverings retailing: 12.5%
Textile House Furnishings: 6.1%
Source: Table 2. Producer price index percentage changes for selected commodity groupings by Final Demand-Intermediate Demand category, seasonally adjusted [April 2026]
https://www.bls.gov/news.release/ppi.t02.htm
The higher cost of virtually everything required to fix or replace damaged property means you need higher replacement cost limits or a robust extra expense endorsement on property policies for both your business and your personal property. Without adequate limits, the victim of a significant property loss is faced with an array of bad options to cover a shortfall from insurance proceeds:
1. Borrow money at higher interest rates than you have paid in decades
2. Actively reduce your savings (if sufficient)
3. Liquidate investments at a significant loss compared to the market valuations investors enjoyed over the last several years
Fortunately, insurance limits are usually increased easily and at relatively low cost. VDA, WVDA, & DCDS Members are invited to contact your association’s endorsed insurance broker, R.K. Tongue Co., Inc. for a consultation. Copies of your policy “declarations pages” and a ten-minute conversation with R.K. Tongue’s specialized agents and brokers is usually all that is required to assess the adequacy your dental office and/or personal lines of insurance. Consultations to VDA, WVDA & DCDS members are offered with no cost or obligation.
For business insurance:
Mike “Fitz” Fitzpatrick – / (410) 752-3154
Mike Urbanik, CRIS, CWCC – / (410) 369-3957
For personal insurance:
Brian Turek – / (410) 752-4778
