As we approach the beginning of spring, many of us start thinking about cleaning out our closets and garages so we can get rid of unneeded and worn-out items. It’s a chance for us to take a look at what we have collected over the last year and decide what we need to keep and what we can discard. We are trying to simplify and “un-clutter” our lives by eliminating things that are no longer helpful or necessary.
In many ways insurance policies are similar. Policies and coverages that were bought years ago may not be appropriate or applicable to the needs you have today. They may not be “worn out,” but they may not provide you with the coverage you need to protect your lives and possessions. It may be important for you to take a look at the policies and determine where you might need to make changes to improve the coverage. In some cases you might find that minor adjustments to the policies is all that is needed. In other situations, it may take some major revisions to get the right coverage for your situation. Occasionally, you may find it necessary to cancel some of the coverage and get completely new coverage in order to properly protect your business and personal assets.
For example, in property coverage it is important to review all of the real property that you have and make sure that your policies adequately insure the buildings and structures you want to protect. Are all of your buildings and addresses listed on the policy? Are the addresses correct? If you have more than one building at a particular address, is each building listed separately? Is the amount of coverage listed on the policy the amount you need to replace that building? The economy has struggled over the last five years and the cost to purchase property has declined in many areas. However the cost to rebuild properties has risen. Since insurance policies pay to rebuild properties, it’s important you have enough coverage for each building to rebuild the property. So a careful review of the replacement value of all of your properties will prevent you from being underinsured on a loss to one or more of your buildings.
Similar concerns can be found with your automobile coverage. Are all of the vehicles on your policy actually the vehicles you currently own? Business entities often buy and sell vehicles, and many times those changes can be overlooked. You forget to tell your agent you sold a vehicle, so you continue to pay premiums for it. Conversely, you buy a new vehicle but forget to ask your agent to add it to the policy. Although you have coverage for 30 days for new vehicles that are purchased, if not added to the policy within 30 days, you may find yourself without coverage for a loss. You also should decide if you want to continue to pay for physical damage coverage for vehicles that either are too old or have accumulated large numbers of miles or use. Keep in mind that most insurance companies will pay for the actual cash value of a vehicle in the event of a loss. If the vehicle is eight or 10 years old or has several hundred thousand miles on it, the company is going to pay a very limited amount on any loss to that vehicle. You may find that the cost to insure that vehicle for physical
damage is close to or even more than you would receive in the event of a loss. It just doesn’t make sense to keep paying for coverage on a vehicle that has lost most of its value. You should continue to insure it for liability coverage, but physical damage coverage may not be economically practical. Another way to reduce your costs would be to increase deductibles on your vehicles. Most companies can afford higher deductibles, so you might want to consider that as well in order to reduce your premiums.
Liability coverage should also be reviewed. Have you added or changed operations in any way over the last couple of years? Some liability policies have limitations or exclusions on certain types of operations. You can buy coverage for these new operations, but you need to notify the company in order to get the coverage added. If you don’t, a loss may not be covered because standard coverage without an endorsement excludes it.
A few minutes of review can help tailor your insurance coverage to make it both appropriate and cost effective. Western Growers Insurance Services provides insurance coverage reviews and recommendations for WGA members with no strings attached. If you are interested in having a policy review, please contact Greg Nelson, director of commercial lines at (949) 885-2287.
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