If you are a business owner then you need to understand insurance.
The image above is from a loss under our watch due to a malfunctioning bathroom fan on the main floor of this building. Actually, there are three buildings each one with their own civic and legal addresses. This building was unable to be saved and now there is only a large hole in the ground.
For many years while operating this commercial property company, the Jean Burn building as it was known had suffered a number of losses. The first was broken pipes due to 10 days of below zero temperatures causing flooding in to basement and two stores on the right hand side of the image.
A few years later a fire line owned by the municipality fractured and flooded the basement again and three retail stores on the left side of the image. [More on this later as municipalities are not responsible for damage.]
Finally, in 2016 near the end of March I received a call of smoke in the hallway on the top floor of this building. The result was a multi-million dollar loss.
There were a number of steps and segments to the claim.
The first obviously was to notify the broker who immediately notified the adjuster.
Don’t be fooled by the adjuster. While I knew this particular adjuster as both of us had worked on claims previously, he was there to guide the underwriters through the policy. [More on that later]For larger losses, consider a public adjuster
The next call was to various services to support the claim. To bring the loss to a stable point from which to adjust. This included boarding up windows, erecting a fence and placing security guards while various others did their own investigation.
There were four retail tenants, and an art gallery who all suffered a full loss; the art gallery where the fire started suffered the worst of it, while the others sustained mostly water damage. There were a mixture of insured and uninsured artists on the top floor.
There were a number of adjusters involved in this claim. One for each insured tenant, and one for the property company.
One of the first things every business owner needs to understand is that you are in charge. Not the insurance adjustor. Not the restoration company. Not the lawyer for the insurance company. You!
When you purchased your policy, you hopefully had some say as to what you wanted to protect and how much you wanted to pay. [More on that later].
You start that process with an insurance broker. They are suppose to be there for you. This is only partly true. They are there representing you through their own employer who is representing their own bottom line.
Ok. So we know whose who in the zoo.
When you purchase insurance and pay for it through an annual payment, or in monthly installments, you have what is called a policy. That policy is the contract between you and the underwriters not the person or the company you purchased the policy through.
The broker is just an agent, a middle person being paid a commission plus perks from the underwriters.
Your policy may contain several underwriters all sharing the costs of a claim. In our case, there were three for this partial policy. We have multiple policies covering different buildings for different needs.
Inside the policy are called declaration pages. These are pages that outline what is covered, and more importantly what is not. That’s right. A 100 page contract will add and then substract what is covered leaving you wondering if you are even insured at all.
The declaration pages will summarize the 100 pages and it is these pages that are referred to when making a claim. Need more information on what’s may be covered, then grab a glass of water and an aspirin. You have some reading to do.
As this post is going to part of a series on insurance, I will leave you with a special term called Co-Insurance.
Let’s say you own a small retail store. You buy $10,000 worth of inventory and get the doors open. You do well so you replenish the inventory and add another $10,000 in stock.
When you purchased your policy, you were asked how much inventory will you have on hand. You told them $10,000.
A day after receiving all the stock your business suffers a loss. Much like the loss caused by the fire in the image above.
You make a claim. You purchased enough insurance to cover at least the ten grand of the original inventory – right?
Well, not exactly. Because you didn’t inform the insurance company of the extra risk when you added the additional $10,000 in inventory, you will be subject to a co-insurance clause.
Call it a penalty if you like, but its there right in the declaration pages. Co-Insurance 20%.
Check back soon as we will go into detail about protecting your ‘ass ets’..