What to Do When You Have a Claim

Oh no! The worst has happened, and you had a loss! Now what? First, make sure everyone is okay and call whatever authorities need to be involved. Next, call your insurance agent! Your agent will be able to walk you through all the steps to make this unfortunate time as easy as possible. First, they … Read more

Why You Might Be Considering Firing Your Agent and What’s Happening Behind Closed Doors!

For decades Insurance Agents were synonymous with good financial planning. Your parents’ parents told them who to see for life insurance, auto insurance, home insurance, health insurance, or any other insurance product you can drum up for purposes of this article insert it where it fits. It was like a never-ending flow of people and … 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

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:

https://www.agencyequity.com/eo-cases/3426-260k-in-actual-damages-is-only-covered-for-16k#.Xa8qKZNKhmA

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