By: Joseph C. Smith, CIC, CPIA, CBIA
Georgetown Insurance Service, Inc.
Frederick, MD
Honesty, transparency, and thoroughness are three important qualities that every business owner should look for in their insurance agent. When it comes to protecting your business, it is critical to have an agent who is genuinely looking out for your best interest…not just their bottom line. There is truly nothing worse than thinking your agent has you covered only to find a gaping hole in coverage after the damage has already been done.
One coverage type where this trust is extremely important, is Property Insurance. An underestimate and subsequent underinsurance can lead to costly consequences — some of which many businesses can never bounce back from.
Danger in Underinsuring or Underestimating
Now you may be asking, “How could that even happen to begin with?”. Property Insurance is complex and it takes careful consideration. It is important to have an agent that will guide you through the process of considering all the potential hazards that your business may face as well as help you determine adequate values and business income exposures.
Hazards your agent should help you prepare for could include your business’ proximity to bodies of water, your geographical zones, and even the general risk of what surrounds your property. In addition, in order to correctly obtain adequate coverage amounts and avoid underinsuring, you need to have a realistic evaluation to determine value and the potential business income exposures. Failure to properly assess any of these factors could open your business up to unnecessary liability…a risk you can and should avoid.
Your agent should be able to help you strike a balance between adequate coverage and a palatable price. Don’t assume that an agent who gives you the cheapest quote is automatically the best choice. A significantly lower price could (and usually does) indicate less coverage and more risk.
Two common coverage mistakes seen are undervalued insurance on real property and a failure to adequately insure business income continuation. These can both be easily avoided. Don’t simply take the first quote that an agent gives you…ask them why the policy they suggest fits your business. You should always feel comfortable questioning your agent. If they seem hesitant to answer your questions or get defensive, it may be worth it to explore alternative agents.
Reassess Regularly
What might have been the right property coverage for your business five years ago could be drastically different from the needs of your business today. Don’t sit back and allow your property policy to automatically renew without giving some thought to the right balance of coverage and price.
Consider it a best practice to conduct a thorough review of your property risk, hazards, values, and business income exposure at least every three years. It is important to keep your coverage up-to-date and on-par with your business risk.
As always, if you have any questions regarding property coverage and what you should look for, please reach out to us.