21 Aug The Mystery of the Unknown
Your insurance policy and Surplus lines account
Insurance should not be a scary mystery of the unknown. One trend I have seen in working with clients is insurance companies or agents not providing an actual policy when issuing a surplus lines account. If you are a client in this situation this should be concerning to you and you must take the necessary action to fix it. A smart thinker never takes advice without asking “why?”.
So I’ll answer the why question for you in this instance: Why do I need a copy of my insurance (beyond it just being required by the law)? The very basic premise of insurance is that you have a contract. Would you enter into a contract without knowing what the contract said? No. While I know in reality that people do not always read verbatim every word we sign our name to (think mortgage closing paperwork, car loan documents, and warranty paperwork), it does not negate the fact that we should read everything we sign word-for-word. The small difference here is that you can reference any of those documents at any time because you were given a copy of them. Additionally, some of these documents have become fairly standardized over the years. Surplus lines insurance documents are not standardized!
If you have a question about your mortgage loan you can reference the copies of the document that were given to you. If you wanted to see the insurance requirements for your new car that you just bought those would be outlined in the loan document copies that you were given at closing.
If you don’t receive a policy for the insurance policy you are paying for what will you reference when you have a question regarding your policy? Will you just take your agents word?
Insurance Policy Limits
How do you know the policy limits are actually the policy limits that you are entitled to and not something split amongst other clients? How do you know that you are not being added as an additional insured instead of named insured?
Being a named insured or additional insured exposes you as the client to the possibility of certain risks. If you are on that policy with ten other individuals and five of the individuals use up the aggregate policy limits you’re out of luck if you need to file a claim unless your agent moves you to another policy. Do you really want to run that high of a risk with your investment property? You’ve been paying premiums and when it comes time you want the peace of mind knowing that the claims are going to be cared for properly.
Know your bottom line when it comes to your insurance policy
Here’s the bottom line. You are paying for this policy with your hard earned money! Just because the possibility of filing a claim may be small do not take getting what you paid for lightly. At some point you may have to ask yourself if cheap insurance is going to result in expensive problems. An insurance company can’t create cheap premiums without eliminating “something.” Is that “something” really something you can live without?
Take heed. If you do not have an individual and separate policy for your investment property portfolio, take action immediately. Read through your policy and know for yourself that it is meeting your needs. Know for a fact that you (and your business partners if applicable) are the only ones on this policy. Know for a fact that the coverage limits you have been given are your coverage limits and yours alone. Don’t blindly trust on a whim and a pray that you are going to get the policy you expected. Your investments are too valuable for you to not know what the insurance policy that is covering them says.