How to Make the Most of an Underinsured Loss

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This coverage usually provides a limited amount of coverage on new buildings and personal property for 30 days (sometimes longer depending on the policy). There are several scenarios that could trigger this coverage. One example is where the insured has products that have been sold but not delivered to another business. The damaged or destroyed items will likely be covered as “newly acquired property”under the purchaser’s policy. This prevents the insured from using their limited business property money to pay for property of others.

3. Review the Policy for Hidden Coverage

This is the simplest and the most likely place to increase the recovery and minimize losses. However, it is also a commonly overlooked step. For those unfamiliar with reading insurance policies, it would seem that the amount of insurance available is the amount listed on the declarations page. This is not the case. Insurance policies contain a variety of language that provides additional coverage that will actually increase the policy limits or pay certain additional amounts regardless of policy limits. When reading insurance policies you may discover that coverage might first be provided then taken away, and sometimes given back. A good example is code upgrade coverage, also known as ordinance and law coverage. Many policies specifically exclude code upgrades in the exclusions section of the policy. Then they add it back, with a specific limit, as an additional or extended coverage. If a building claim exceeds policy limits and it is determined that some of the repairs are required by codes, you may be able to tap into this additional coverage.

Look for an inflation guard endorsement that provides automatic increases in coverage (and, of course, premiums) every year. Often this endorsement increases the coverage on a prorated basis. Thus, the limit of insurance increases slightly over time. Inflation-guard endorsements may be found in commercial as well as homeowners insurance.

It is a good idea in every claim to send a letter to the insurance company adjuster requesting a certified copy of the entire policy, including all forms and endorsements. Another critical coverage to look for is guaranteed replacement cost coverage. This is only found in homeowner policies and sometimes goes by different names (e.g., “replacement cost plus”). In short, this coverage provides for the full cost to replace a structure without regard to stated policy limits. Of course, there are some restrictions and limitations (see the policy for details). Initially, this coverage was unlimited. Now, however, most policies will only pay up to an additional 20 to 25 percent over stated policy limits. Some guaranteed replacement cost policies also increase the contents limits on a prorated basis in conjunction with the amount the building policy increases.

Look for “Coverage B Other Structures”

One other commonly overlooked provision in homeowner policies is “Coverage B Other Structures.”Other structures are typically insured at 10 percent of the dwelling limit. People generally associate this coverage with detached garages or sheds. There may be two significant areas of relief with this coverage. First, some policies allow the insured to add the Coverage B limit to the Coverage A limit under certain circumstances. (This is very policy specific.) Second, the Coverage B language is usually loosely written and the...


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