Insurance Coverage - Ignorance is not bliss....

Background - I have 15 years in insurance experience (5 yrs as a Risk Consultant and 10 as an Insurance Adjuster), and now I own Dry Ally restoration and mitigation.

Insurance serves as a crucial safety net, protecting your home and business from unforeseen disasters. However, simply having insurance in not enough. Understanding the specifics of your coverage is essential. Failing to grasp your policy coverages can lead to significant financial hardships and setbacks.

The Basics of Insurance Coverage

Insurance policies are complex documents filled with legal jargon, specific terms, conditions, exclusions, and monetary limits. Home insurance typically covers damage from events like fire, theft, and natural disasters. Whereas business insurance might include liability and business interruption coverage. Each policy is unique and tailored to the individual needs and risks of the policy holder. Which is why, understanding your policy's details is crucial to ensure that you are adequately protected.

Consequences of Misunderstanding Coverage

1. Insufficient Coverage: One of the, if not the most significant risks of not understanding your insurance policy is having insufficient coverage. For example, homeowners might assume their policy coverages flood damage, only to find out that after a flood event that it does not. Similarly, a business might not realize their policy excludes certain types of cyber-attacks, leaving them vulnerable to financial loss. Ex: A homeowner not familiar with their policy coverage might assume that a sump pump failure in their finished basement might be covered. Unknown to them that type of flood coverage is usually added at an additional premium cost in the form of an added endorsement. Without that endorsement there is no flood coverage. 

2. Out-of-Pocket Expenses: When an insurance policy doesn't coverage a particular risk, any damages incurred from that risk must be paid out-of-pocket. This can be financially devastating. For homeowners, this might mean bearing the cost of repairs or replacements. For businesses, the financial strain can be even more severe, potentially leading to operational disruptions or even bankruptcy.  Ex: Luckily, their agent for the homeowner above attached an endorsement that added flood coverage but neglected to insure for the proper amount. The basement is finished with carpet, furniture, drywall, and a fully finished bathroom. The endorsement only covers up to $5,000.00 in damages leaving the homeowner out of pocket for the rest of the costs to dry out and rebuild which can be anywhere from $10,000 to $30,000 in out-of-pocket costs.

3. Delayed Recovery: Knowing the claims process and required documentation is part of understanding your insurance coverage. Misunderstanding these aspects can delay claims, prolonging recovery efforts after a disaster. Quick and efficient claims processing is essential for minimizing downtime and returning to normalcy. Here's what to do: When you file a claim talk and ask questions of your agent. Take a lot of photos, log the time with description of the loss and events that occur. You homeowner/business owner have an obligation to take the necessary steps to prevent further damage which might include hiring a restoration company like Dry Ally. Photos and a written timeline can be crucial to help with the claims process.

Steps to Ensure Proper Understanding

1. Read the policy thoroughly

2. Consult your agent

3. Regularly update coverage

4. Ask a lot of questions to ensure you understand the coverage and limits

5. Consider professional advice from an Insurance or Risk Consultant

Things to Consider

Assess your Risks

• Location of your property, weather patterns, seasonal changes, building material, style of construction, operational risks, loss of income, or operational interruption, etc. 

Limits and Deductible

• Ensure that policy limits are enough to cover items like full build back and maintaining operational budgets. 

• Another item to consider and weight against one another is the policy premium payment vs deductible payment. Maybe it's better for you to have a lower policy premium payment with a higher deductible if you have a little to no loss history, or visa-versa. 

Claims Process

• Personally, I prefer an insurance company who have local adjuster on the ground who will come out and personally inspect claim damages. I'm not saying that an IA (Independent Adjuster) is any less qualified, but I prefer the person handling my claim from start to finish to be the only contact needed for the process. 

• Know if your insurer is a full service claim provider or if they 3rd party parts of the claims process. Discuss this with your Agent. 

Conclusion

Insurance is an essential conclusion of financial security for both homes and businesses. However, the protection it offers is only as good as your understanding of our coverage. Misunderstandings can lead to insufficient coverage, unexpected out-of-pocket expenses, legal issues, and the potential of a full denial from your insurance carrier. 

The more you know the better off you'll be.