Clarity Means Coverage
Why is transparency so important in the world of insurance? Of course, the usual answers apply but I really want you to sit down and think about why a clear understanding of an insurance contract is crucial. When I look at an insurance policy with the experience that I have now, it is simple to identify the overall parameters including definitions, exclusions, limits, etc. However, before I was an insurance broker, I looked at a policy and saw a lot of details that made little sense to me. I simply thought of insurance as a cozy little blanket that covered me for anything that I may encounter. It did not occur to me that there are various stipulations that may alter the landscape of the situation which could mean coverage is not afforded or it is severely limited. This is the reason that I do what I do. I want to help business owners clearly understand where their coverage begins and ends, what are the limitations of their policies and what are their responsibilities in the event of a claim. I would like to illustrate the need for transparency when purchasing insurance through two stories.
The first is a story that comes from a claims adjuster at one of our cyber liability companies. He had an insured get sued for a data breach situation in which multiple third parties were affected. Luckily, she had purchased the cyber liability to account for this type of exposure. However, when the insurance company was brought in to help with court defense costs, the claim was denied because she did not report the claim within the time frame required. The carrier stipulated that too much time had lapsed between when the breach occurred versus when they were notified. Certain policy parameters are very strict on this matter due to the laws and guidelines in relation to the particular topic. Data breach is highly regulated by the government and thus, the policies must match the law. This story illustrates how an experienced broker could have helped remedy this situation. By speaking to clients in detail about what they are required to do in the event of a loss, we empower them to use the policy as intended. I regularly encourage my clients to read through their policies in their entirety. While this can be tedious and confusing, it is better to feel that way PRIOR to a claim occurring. We can always fix a situation before a loss, but we can never go back in time and provide that expertise retroactively.
The second story is from a client we brought on board just recently. The client expressed concern because her renewals were never sent out until days before the policy expiration date and she wished to move her account as a result. She shared her policy information with us so that we could quote her new coverage apples to apples. Upon review of the current policy, it came to light that the policy included a sunset clause. This means that there is a time period added to the policy stating if a claim is not filed within a certain number of years after the policy term, coverage is null and void. Sometimes, agents will add this clause to lower the premium (usually about 15%). This is an example of a policy endorsement that can be very detrimental to the insured but something that they may not catch on their own. While we do not add sunset clauses to our clients’ policies, we do make it very clear if there are limitations on any part of the coverage form. For instance, often times, contractors will have a limitation to business description included on their general liability policies. We list this on the proposal page and alert them to wear to locate this description in the application. If there is something excluded that they do, we rework it BEFORE a claim could arise. Similarly, many contractors do not do work on new construction projects (defined as before the certificate of occupancy is issued) so they can receive up to 25% off on the premium as a result. This is completely fine if they never intend to do new construction work, but if they even do one job a year, then the exclusion must be removed. As you can see from this illustration, communication about policy provisions is key in all situations.
We encourage business owners to be cognizant about what insurance really covers and how it will work if a loss occurs. We are dedicated to helping business owners navigate the uncertainties of insurance and in turn, hope that they can continue to thrive and succeed. We hope for the best and prepare for the worst.