If I’ve learned one thing in my 19 years as a commercial insurance agent, it is that clients don’t enjoy being dragged into the weeds when it comes to their insurance policies. Unfortunately, the weeds are where coverage is discovered or lost, so I ask you, dear reader, to try and lend your attention to the following five helpful tips regarding property insurance.
TIP No. 1: Your correct property insurance limits have nothing to do with what you owe your lender.
I can’t tell you how many times I’ve had to counsel business owners who think they need to insure their buildings or equipment based solely on what they still owe. While that is likely all the lender cares about, you risk a coinsurance penalty from your insurance carrier if you fail to insure to the true replacement cost. More importantly, while you might pay a lower premium by electing a lower limit, few businesses have the cash to self insure for the difference in what they owe and what they truly need to replace in the event of a claim.
TIP No. 2: Time is money.
Should a property loss occur and business ceases as a result, failure to adequately insure for that business income can spell doom for your prospects of reopening. Spend some time with your agent discussing the impact of your physical location being damaged and be sure you understand how your policy will respond with regard to replacing your normal income.
TIP No. 3: Small percentage deductibles can spell big dollars.
Seeing a 2 percent Wind and Hail deductible on a policy declarations page can seem insignificant. But, when you realize that it is 2 percent of your $1,000,000 building and $400,000 of business personal property, you will quickly realize that spells a $28,000 deductible. Percentage deductibles related to windstorms are a fact of life in Florida, so talk with your agent and be sure you realize how the deductibles would be applied in a loss situation. Also, see if you have any options to reduce the percentage or improve the terms from a Wind and Hail deductible form to a Named Storm or Hurricane form.
TIP No. 4: Older buildings mean building code changes.
The Unendorsed Commercial Property form does relatively little to pay to bring a building up to code following a loss. However, there is a reasonably priced endorsement called ordinance and law that can help with all sorts of issues related to building code mandates. I’d argue that even new buildings face an Ordinance and Law exposure related to being required to demolish a partially damaged structure. Coverage is available to help fill this void.
TIP No. 5: Cleaning up after a loss can be expensive.
If your property is destroyed by fire, wind, sinkhole or other covered cause of loss, the property insurance policy does a great job of rebuilding what you had, assuming you followed my advice in Tip No. 1. However, carrying ample Debris Removal limits is important in terms of making sure there is enough insurance to clean up the mess before the repair and reconstruction takes place. Depending on the value and size of your property, the basic amount of Debris Removal coverage included in most policies ($10,000) may not be enough.
Because I care, I’m even going to throw in one extra special bonus tip for those who slogged through the weeds with me thus far: Hire a good agent, and make the time to discuss your coverage. If your agent’s only request when first underwriting your business was to see what limits you carried in the past, you might consider staging auditions for a replacement. As I said at the outset, proper coverage is the result of a thorough discussion with a competent insurance professional. Failing to properly discuss your business coverage with an agent can only yield disappointing results at claim time.
BRIAN SCARBOROUGH is a Principal at Scarborough Insurance, an independent agency that sells all lines of insurance and has been serving the community since 1961. Visit scarins.com for more information.