3 Coverages You Need To Be Familiar With…….
Agreed Value, Coinsurance and Blanket Coverage
Most commercial property insurance policies include an optional coverage called Agreed Value. This coverage waives the coinsurance clause in your policy and if available, you should consider including this in your policy.
If you purchase agreed value coverage, your insurer will not consider coinsurance when calculating your payment for a loss or to put it more simply, your insurance carrier is agreeing with you on the insured values contained in your policy and therefore coinsurance will not be considered in the event of a claim.
The purpose of a coinsurance clause is to encourage property owners to buy an adequate amount of insurance. If a loss occurs, the clause penalizes policyholders who have underinsured their property by forcing them to become “coinsurers.” It means that policyholders must pay a portion of the loss themselves.
If coinsurance applies to your property, a coinsurance percentage, such as 80% or 90%, should appear in the property declaration pages. The percentage represents the amount of insurance you must maintain. This amount is expressed as a percentage of the value of your insured property.
For example, if a property is worth $100,000 and the coinsurance requirement is 80 percent, there would need to be at least $80,000 of coverage limits available to pay the claim without a penalty. Because of the rapid increase of building costs and the complexity of coinsurance requirements, it is extremely important that you discuss your property values and coinsurance requirements with your agent and to avoid these coinsurance concerns, if your insurance company will include the Agreed Value clause, be sure to add it.
Blanket coverage combines the building and contents limits into one insured value. Instead of having a stated value for each building and its contents and restricted to those stated values, you would have a combined value for any loss. This is especially valuable if you have multiple buildings.
For example, if you have three buildings insured for $200,000 each and one burns down, you would receive $200,000 even if it was found to at that time to be worth more. On a blanket form, the total amount of coverage, or $600,000 is applied to a loss at any location. Therefore, if a building burned down and it was determined to be worth $240,000, you would receive a check for $240,000.
If you have any questions on these or would like more information, we’re help to help so please don’t hesitate to contact us.