Coinsurance Requirements
Coinsurance
What Insureds Need to Know
Company XYZ had been growing rapidly. Company officials believed they had comprehensive insurance coverage. But when a substantial loss took place, they were able to recover only a small part of their property and business interruption claims. The problem: understated values, far too low to meet the policy's coinsurance requirements.
The time to avoid a potential coinsurance penalty is before the loss occurs. That means both the broker and client must communicate up front. There's no better way to ensure that reported values will be in line with the values at the time of any disaster.
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Key Points and Page Numbers
- The First Contact – 1
- The broker can never assume that the client understands coinsurance.
- Personal Property – 1
- Using historical costs to value inventory or business property are unsatisfactory.
- Buildings – 2
- "Replacement" means to an owner can be very different from what it means to claims personnel.
- Business Income – 2
- A very important element in establishing proper valuations is the time period.
- Coinsurance from a Claims Perspective – 2
- Coinsurance and its requirements should be viewed from a claims perspective.