Could You be Uninsured, Underinsured – or Both?
by Mitchell Gorham
Federated Mutual Insurance Company
You just had a nice visit with your insurance agent, and you signed on the dotted line to renew your business insurance for another year. You can relax knowing your policy is in place, ready to cover you should you have a claim. Now, skip ahead a few months...
You get a large order, and the customer supplies the special mold needed to complete the job. The mold is worth $80,000. Then, the unthinkable happens. A fire destroys the machining area of your company and damages the customer's mold beyond repair.
To make matters worse, your insurance company says you're not fully covered for losses involving property of others. Sure, your policy will handle claims up to $50,000, but this loss was for more than the policy limit. Put simply, you're now paying $30,000 out-of-pocket to cover damages. By specifying higher limits on the policy declarations, you could have saved yourself a lot of grief.
Let's say you know the fire hazards at your business and have taken steps to protect your property both through risk management measures and insurance. But, what about a risk you may not have even considered – theft. The metal in those dies you use is worth a lot of money to someone interested in scrapping them.
Naturally, you would expect your insurance company to cover you for this type of loss. But, did you know most commercial property insurances limit the amount that can be paid for loss or damage to patterns, dies, molds and forms when the damage is caused by theft? And, did you know that limit is only $2,500? That's not going to help much when your claim is for thousands more than that. What if that stolen die belonged to someone else? Does your policy cover theft of property of others?
Don't let your insurance policy leave you feeling exposed
Unless your insurance company has set up higher limits for property of others or business personal property coverages, you run the risk of being underinsured for those exposures, which will become crystal clear after a major claim.
The good news is that those types of risks can be found during an insurance audit. By asking the right questions, your insurance company can discover where your risks lie and then offer advice on adding coverage, if needed. Changes to your operations at any time should prompt you to request a policy review to find and close any coverage gaps.
For example, Federated Mutual Insurance Company, MAPP's recommended provider for property/casualty business insurance, supports association member clients with an Annual Client ReviewSM (ACR) to examine current levels of coverage. The ACR includes a discussion on very specific types of coverage, including property of others and business personal property. In the event of a claim, Federated assesses the covered items' value and replacement costs to ensure the claim is paid properly.
Finding out after a claim that you're not adequately insured is not something any savvy business owner wants to experience. It is easy to increase your coverage limits to help prevent an unpleasant surprise after a claim. Imagine how much easier you could be sleeping tonight.
This article and the claims examples herein are for information purposes only and should not be considered legal or coverage advice. The recommendations presented may help reduce the risk of loss but are not guaranteed to do so. Coverage for actual claims will be determined by your individual policy terms and facts of the claim. Qualified counsel should be sought regarding questions specific to your circumstances and applicable state laws. ©2014 Federated Mutual Insurance Company