Property Coverage for Businesses with Changing Needs

Some businesses have very stable property insurance needs as the value of their non-building property doesn’t vary much during the year. For example, an accountant’s office will have furniture, telephones, computers, reference books, and so on. The replacement costs of these items won’t be much different in July than they were in April. Other types of businesses, however, experience wide variations in the values of their property. Florists tend to carry more stock around Valentine’s Day and Mothers’ Day than they do on most days of the year. Many retailers earn most of their profits during the holiday shopping season, so they must keep larger amounts of stock on hand. Warehouses and manufacturers may have highly variable amounts of goods for sale. Depending on the flow of orders, the value of their stock may change greatly from month to month or even more frequently.

A traditional property insurance policy, with one set limit of insurance for personal property, will not meet the needs of businesses like these. To secure enough insurance, they would have to buy an amount large enough to cover those times when values are at their peak. However, for much of the year they would be paying for more insurance than they need. Businesses in this situation may want to consider two coverage options: Peak season coverage and value reporting coverage.

Peak season coverage is appropriate for firms that can predict those time periods when their values will increase. Examples are florists, toy, electronics and clothing retailers during the holiday season, school supply stores in late summer, and costume shops in October. The coverage form states the location and type of the property, the amount of additional insurance, and the period of time during which the higher amount applies. For example, it might show that insurance on goods for sale will increase by $100,000 from October 1 to January 1. This gives the business plenty of coverage for the busy time but saves it from having to pay for all that coverage the rest of the year.

Value reporting coverage is for those firms with values that fluctuate all year long. This coverage requires the firm to buy an amount of insurance large enough to take care of the peak periods. However, the insurance company will charge a lower initial premium than that amount would ordinarily require. The firm then must make periodic reports of its values to the insurance company. Depending on the option chosen, the firm will send reports monthly, quarterly, or once per year. Again depending on the chosen option, the reports can show values as of the end of each business day, week, month, quarter or year. After the firm has submitted all of its reports for the policy period, the insurance company determines the firm’s average values and calculates the final premium.

Firms that choose the value reporting coverage must take care to submit the required reports on time and accurately. The form gives the insurance company the right to reduce claim payments for losses to the property when reports are late. The company can also reduce a loss payment if it finds that the firm underreported its values. The limit of insurance does not automatically increase if the reports show values higher than the limit; the firm must request an increase in coverage.

Any firm with variable property values would be wise to consider purchasing one of these types of coverage. With some careful planning, a business can limit its insurance costs while still getting the coverage it needs.

NAIC Offers Tips to Expedite Your Insurance Claim

Filing an insurance claim can seem like an overwhelming task, but it doesn’t have to be. The National Association of Insurance Commissioners has put together the following tips to help policyholders facilitate the process:

  • Know your policy – Your insurance policy is a contract between you and your insurance company. Know the terms of that contract, including what’s covered, what’s excluded and the amount of any deductibles.
  • File claims as soon as possible – Call your agent or your insurer’s claims hotline as soon as possible. Your policy might require notification within a certain time frame.
  • Provide complete, correct information – Be certain to give your insurance company all the information they need. Incorrect or incomplete information will only cause a delay in processing your claim.
  • Keep copies of all correspondence – Write down information about your telephone and in-person contacts, including the date, name and title of the person you spoke with and what was said. Also, keep a record of your time and expenses.
  • Ask questions – If there is a disagreement about the claim settlement, ask the insurer for the specific language in the policy that explains the reason why the claim was settled in that manner. If this disagreement results in a claim denial, make sure you obtain a written letter explaining the reason for the denial and the specific policy language under which the claim is being denied. If you have a dispute with your insurer about the amount or terms of the claim settlement, you should contact your state insurance department for assistance.
  • Make temporary repairs to protect property from further damage – Your auto/homeowners policy might require you to make temporary repairs. If possible, take photographs or video of the damage before making such repairs. Your policy should cover the cost of temporary repairs, so keep all receipts. Also, maintain any damaged personal property for the adjuster to inspect.
  • Don’t make permanent repairs – An insurance company may deny a claim if you make permanent repairs before the damage has been inspected.
  • Try to determine what it will cost to repair your property before you meet with the claims adjuster – Provide the claims adjuster with records of any improvements you made to your property. Ask the claims adjuster for an itemized explanation of the claim settlement offer.

Don’t rush into a settlement – If the first offer made by an insurance company does not meet your expectations, be prepared to negotiate. If you have any questions regarding the fairness of your settlement, seek professional advice.