Understanding Your Commercial Property Damage Insurance Policy is Critical
This isn’t some evil rant on insurance brokers. It’s just common sense that’s not so common. Commercial Brokers don’t intend to under insure a property or exclude coverages from your policy, but their job is to find the right balance between proper coverage and staying within their clients’ budget – and that is not always an easy task.
Some policies might have exclusions for flood damage. Others might have a mold and bacteria exclusion. If your business ends up with a flood needing commercial water damage restoration or mold remediation you might not have coverage. These services can be expensive and funding them without insurance is difficult.
We have found that many businesses don’t understand their coverages or are lacking the proper coverages altogether. Oftentimes, they discover this too late – after the loss has occurred. It is important to know the ins-and-outs of your policy before the loss. Here are some items to consider and discuss with your agent or broker right now.
RCV (replacement cost value) VS ACV (actual cash value)
Simple, but can be overlooked. Replacement cost is what it costs to replace the damaged building material right now (no depreciation), and an actual cash value policy is replacement cost minus depreciation that you cannot recover. There are other factors that will come into play, for example, when you can get the full replacement cost or how. Knowing it is even an option should be a good start.
Review the Exclusion Section
This is the part of the policy that will identify non-covered property or perils.
Review Endorsements
Do you have business interruption and service interruption? How is the deductible applied? Does your deductible change during a named storm? Do you understand what a time element deductible means? Do you have coverage for backup of sewers and drains? Do you have coverage if mold is found growing? Do you have coverage for personal property? These are some simple but important questions to ask when reviewing your policy.
Identify Policy Limits
Do policy limits cover the cost of rebuild? Limits can easily be exceeded in a large loss situation. If you’re not insured to “value” you may be denied RCV and only get paid ACV – this varies from policy to policy.
Identify Deductibles
Can you afford your deductible if a large loss occurs? Remember that a higher deductible means it takes more damage to even meet that deductible, which means more money out of pocket.
Review Policies Annually
Always review your policy every year when it renews. There could be important changes that impact your coverage, and it is best to discover those right away.
We aren’t agents, and we don’t work for an insurance company, so be sure to check with the experts before choosing or modifying insurance coverage. We do, however, have a great deal of experience in insurance claims from the property restoration side. Remember! Once a loss happens, the coverage you have in place is what you must work with. Don’t be afraid to ask the right questions today.