How to Avoid Water Damage Claims and Combat Rising Homeowners Insurance Premiums

The holidays are among us. Smells of Ugg boots and Pumpkin Spice Lattes fill our marketplace and we are all just a little more basic than normal 🙂 We are bundled in our jeans, sweats, and oversized hoodies and the year is winding down. The entrepreneur in me says this is when we need to … Read more

Why It’s Important to Find the Right Risk Class Codes

I wish I could say that it doesn’t happen every day but ‘It happens every day’ that we are asked to quote risks that have been (for years) incorrectly rated. As an agent, I can’t help but think to myself when I see such things that the licensing exam for agents is just too easy … Read more

Nevada Homestead Act: How Protected Are You?

Often times when first meeting clients and going through and establishing what their current risk management looks like we find that many people do not have Nevada Homestead on their primary home. While this isn’t necessarily a horrible thing, it is inexpensive to protect yourself utilizing this act with a simple declaration form. The Homestead … Read more

A Quick Rule of Thumb for Determining Your Necessary Liability Limits and How Much You Need

At least daily my office is asked to do quotes for state minimum liability limits. What I have noticed is a perpetuation of misinformation by agents who are trying to close a deal and/or ignorance from the consumers because nobody has taken the time to explain what any of it means. When a client or … Read more

4 Things Your Insurance Agent Doesn’t Want You To Know!

If you have ever purchased insurance you no doubt have played your own version of poker. It always inevitably feels like it’s you vs them and you can’t show them the Ace up your sleeve for fear they might pull the royal flush on you and hike your premiums to the moon and back! If … Read more

Fiduciary Responsibility : What is your agent doing with your information

Cyber Security and Cyber attacks are a real thing in today’s electronic world. With so much circulating on the internet many people have become numb to protecting their personal information because they are just so accustomed to giving it to everyone to sign up for anything from a magazine subscription to an Xbox Account. We … Read more

Coinsurance: Why you might not be covered for as much as you think

Many of our best clients come to us with policies that have coinsurance and it’s an unspoken and uncommunicated loophole that is in a lot of insurance policies that clients might not otherwise understand but could lead them a path to being underinsured and a slew of headaches for an agency and an insured.

I recently stumbled across an article of an agency that was notified by an insured that they had over $100,000 in business property and on top of that at least $50,000 in tenant improvements for their space. The agency in this article insured the risk with $100,000 of coverage with a 90% coinsurance clause. Not only did they fail to properly insure the client for the amount of disclosed property and TI coverage necessary they included a clause for 90% coinsurance. So what does this all mean for the insured?

Coinsurance in a commercial insurance policy is very similar to coinsurance for your medical insurance. It’s a portion of the coverage the insured is responsible for in the event of a claim. In this particular case giving someone $100,000 of coverage with 90% coinsurance means they are going to self insure 90% of that $100,000 of coverage and effectively leave the insurance company on the hook for only $10,000 (10%) of that $100,000 coverage.

This can catch many people off guard and many agents fail to explain this feature to their insurance clients properly, if at all.

In the article, this coinsurance clause left an insured receiving $16,000 on a $260,000 loss. Imagine being the insured and thinking you are completely protected for at least $100,000 (while still less than it should have been) and find out your agent was not doing something that was completely up to par or had not communicated this fact to you adequately. The reality is that many insurance policies in the commercial world have this clause in them and many people accept these terms to keep rates lower, but effectively it makes you self insured for major losses and most companies and business owners cannot sustain these losses.

Additionally, this insured’s landlord sued them for not having adequate insurance coverage per their lease agreement so the insured was hit with a double whammy! Ultimately the agent’s errors and omissions paid this claim as the court placed the burden of proof on the agency to show they had explained this to the insured and the agency failed to provide such proof so they had to side with the insured to protect the consumer, but had they provided this proof the insured would still have been on the hook for nearly $245,000 worth of losses out of pocket. Pretty scary to imagine as a business owner myself.

This can be a vital lesson to agents but also a bigger lesson to insureds to watch out for coinsurance and understand your policies better. While the majority of us never experience claims at this level, the reality is that these claims happen more often than people think and insurance is what is protecting your business and its cash flows from these types of claims.

If you would like to read the article and learn more here is the link: