A New Way to Think About Property Insurance

A New Way to Think About Property Insurance 

LossPerspectiveWhen researching the best insurance policy for your home or business, what is the first thing that comes to mind? Cost, most likely. Buying an insurance policy today can be as simple as a filling out a few questions on a website and clicking a 'submit' button. The danger in this ease of access and application is that the policy is soon forgotten about; that is, until a disaster strikes.

The best way to think about property insurance is not by a cost analysis, but rather by a risk assessment, or loss perspective. What you should be asking yourself is, ‘What policy coupled with which coverages and endorsements will give me the most adequate coverage?’ Use the following questions to create a detailed evaluation of your policy to determine whether it fits all your needs:

What does the policy cover?

In the insurance world, there is no one-size-fits-all policy. Every house, building and property has different needs in regards to coverage. If you live on the coastline where there are frequent hurricanes, you will have different insurance coverage needs than someone who lives in ‘tornado alley.’

  • Does it account for your geographical risks’?
    • Researching the weather patterns your building will be exposed to is a good place to start to figure out what additional coverages you will need in your policy. Some weather events that may involve needing extra coverage would include:
  • Does it account for your special circumstances?
    • Whether you are a homeowner or a business owner – your family, employees, and job all have special circumstances that directly influence the amount of coverage you will need to carry. Some of these unique situations may include accounting for the following if a disaster should strike:
      • Accounts receivable/payable
      • Antiques/Collectibles
      • Customer service in the interim
      • Distributors/suppliers
      • Furniture
      • Lawn care/vegetation
      • Marketing to customers
      • Records
      • Payroll
      • Personal property
      • Temporary living location/hotel expenses
      • Valuables
      • And more

What gaps exist in the policy?

Unbeknownst to many, standard property insurance policies have many exclusions. Even more surprising is that the events that are excluded from policies are actually very common events for property owners, such as flooding.

In an ideal situation, you would be covered for every imaginable event that could ever happen that may damage your property. However, that ideal is unrealistic. Weigh your coverage options and understand what gaps exist in your policy. If you are not covered for a certain event, such as a flood or hurricane, it is in your best interest to understand that beforehand. Then, you can decide whether to purchase additional coverage or, prepare your property for when the risk is higher for these events to occur in an attempt to mitigate the damages.

Are you purchasing for quality or cost?

A low monthly payment may be beneficial to your short-term goals but once a disaster strikes you are going to wish you had the right amount of coverage on your home or business. Not having enough insurance can cost you your entire claim in certain cases. Here are some problems or penalties you may run into by not having enough insurance coverage:

Don’t purchase your insurance based on a monetary value; make smart purchasing decisions by weighing out the pros and cons of including or excluding certain coverages depending on your special circumstances. Evaluate your coverage from a loss perspective.

For more real life examples of people who suffered property damage and hardships they encountered with their claims, read our case studies: