We currently live in interesting times. Whether it’s a political issue or weather events, it seems that we are constantly bombarded with significant news relating to property losses. As I’ve stated in past articles, catastrophic losses have hit record highs in the past years. Mostly due to tropical storms and wildfires, which seem to create havoc from sea to shining sea. As predicted by climatologists, the severity of our weather events will likely get worse as time moves on.
Of course, that’s why we have insurance, right? To alleviate the financial impact resulting from a peril that we can’t avoid. And thank goodness we have such protection … if we have it. What does that mean? Simply stated, all insurance coverage is not created equal. Companies create insurance policies, which are contracts, to cater to many different consumers. Although regulated by state insurance departments, they can be difficult to read and understand.
There are two key parts of an insurance contract that deliver the info you need to know. The first is what’s covered (Perils Covered) and the second is the settlement clause relating to that coverage when a claim is submitted. Those two areas are the major differentiators between insurance coverage and corresponding companies.
For example, assume you experience a loss which causes you to have to move out of your home temporarily. Company A’s policy might provide for additional living expenses up to a certain limit while Company B’s policy might provide a more liberal settlement such as reasonable living expenses in a habitat more closely associated with your lifestyle. It could be the difference between living in a mid- market hotel vs. living in a luxury hotel or house while you await repairs to your home to be completed. This is just one example of many that should be considered when deciding what type of company and coverage to engage with.
We work with many homeowners who have coverage with companies that specialize in the affluent market. Coverage with many of the standard companies, like those advertising during the commercial breaks of your favorite football game, don’t typically have coverage parameters and settlement clauses that would suit the values and needs of those who have more to lose. In fact, the companies serving the affluent market typically have coverage parameters that are abundantly more liberal than the standard market.
So, what’s the problem? Like any other product or service, it comes down to price. That’s all you hear on those commercials — how you can save more money. And that’s a logical, as we all want to spend less and save more. However, when it comes to financial decisions — of which insurance is one — pay heed to the words of the late Roberto Goizueta (Coca Cola’s previous CEO), “Don’t let price be the tiebreaker.” Simply stated, sometimes you get what you pay for.
Insurance is not a consumer product that you invest in to use. In fact, you hope to never use it, thereby improving your insurance score and creating a better investing opportunity. However, accidents happen, catastrophic weather events occur, and the climate continues to dish out more turmoil. So, make sure you are covered by the right company. Talk to your Trusted Risk Advisor and don’t let price be the tiebreaker. The price doesn’t count until you have a claim. That’s when you find out the value of your policy. That’s when you know how we settle this.