Is the Margin Clause Making The Agreed Value Option Extinct?
As disasters and their ramifications have dominated property insurance headlines in recent years, a less publicized development has been the gradual implementation of the “margin clause” on commercial property insurance policies.
Essentially, the margin clause nullifies the benefits of purchasing blanket coverage that is written on an agreed amount basis. Many see this as a move by insurers to reduce or restrict coverage – and do so quietly.
The Adjusting Today issue entitled "Margin Clauses Making Agreed Value Options Extinct" examines how the margin clause works, how it can work against the policyholder and why today’s business managers and insurance brokers must be on the alert for the growing use of this provision.
Chances are very good, however, that with the possible exception of highly protected risks (HPR), many more insurers will be incorporating the margin clause into their commercial property policies. This means that the agreed value provision is likely to go the way of carbon typing paper and telephone booths.
It took a long time for insurance buyers to learn how to capitalize on their insurance coverage through the use of the blanket, agreed amount approach, even though it has been more expensive than schedule insurance on a specific value basis. It is probably safe to say that it will also take time for them to now undo what they have learned.
Time, however, appears to be of the essence, since insurers are not wasting it in applying the margin clause to their policies.
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Adjusting Today is provided free of charge as a public service by Adjusters International, Inc., disaster recovery consultants. It is provided for general information and is not intended to replace professional insurance, legal and/or financial advice for specific cases.
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