Wednesday, April 1, 2015

Do You Have Adequate Property Insurance?

When was the last time you thought about the value of your property? Many people don't pay any attention to property values until they need to file a claim. At that point, you can only hope that your Lake of the Ozarks insurance coverage is adequate. With the fluctuations in the market and property values, spending a little extra time to make certian your property is adequately insured is worth the investment! Naught-Naught Agency is here to help you understand property insurance!

How is Property Valued? 

On the majority of direct damage property forms, coverage will be valued in one of two ways:
  1. Replacement Cost - is defined as the cost to replace the property, new today, with materials of like kind and quality.
  2. Actual Cash Value - is the replacement cost less actual physical depreciation (not accelerated accounting depreciation).
In some cases, actual cash value might also make a deduction for economic obsolescence, as well as actual physical depreciation. The only different between the two valuation methods is depreciation. Therefore, if your property is brand new, with no depreciation, there would be no difference between the two methods. Accounting or book value has no relevance when it comes to either of these valuation methods and the choice of method will not affect your insurance rate.

The only difference in cost between replacement and acutal cash value is the cost of insuring the higher replacement cost values. The limit of coverage you select serves as the maximum on the amount to be paid in the event of a loss. In general, your Lake of the Ozarks insurance company has the option of repairing or replacing your property, subject to the limit of coverage for that property. 

Appropriate Building Coverage

When selecting an appropriate limit of coverage for your building, you're basically using the cost to rebuild a similar structure to the one that is being insured. The "building" is defined in the policy, but basically means the building or structure, as well as completed additions, fixtures, including outdoor furniture, permanently installed machinery and equipment, and personal property that are used to maintain or service the building.

Unless already covered by other insurance, coverage is also extended to additions under construction, as well as alterations and repairs to the building, and materials, equipment, supplies and temporary structures within 100 feet of the described premise, which are being used to make additions, alterations or repairs to the building or structure. There are a number of ways to accurately determine the replacement cost value of a structure including: 
  • Professional Appraisals
  • Original Cost Figures, Appropriately Indexed 
  • Square Footage Multipliers 

Be sure not to confuse the amount you paid for the building and property for the amount you need to insure them.  Market values here at the Lake of the Ozarks can vary greatly from the cost to replace a structure.  You could significantly underinsure or over-insure your property by using the market value as your insuring basis.

Business Personal Property 

Business personal property includes things such as: 
  • Furniture
  • Machinery 
  • Equipment
  • Stock
This also includes leased personal property that you have a contractural responsibility to insure. In general, when you lease a copier, computers or similar equipment, you are responsible for providing insurance. 

A long list of items are specifically not covered including, but not limited to: 
  • Money
  • Animals
  • Automobiles
  • Electronic Data
  • Cost to Restore or Replace Valuable Documents
  • Property Covered Under Another Coverage Form
There are insurance coverages available for many of these items listed above. However, this is under different policy coverage forms. 

Blanket Limits 

Does your business have multiple locations? If so, you should consider blanket limit of coverage. With blanket coverage, a single limit of liability will apply for all types of prperty at all locations covered by the policy. For example, if you have two buisness locations, each with $2 million in business personal property, you could select a blanket limit of $4 million. In the event of a catastrophe at any one location, you would have up to $4 million for that specific location. Blanket limits can also be helpful in situations where inventory is moved between two or more locations. 

Coinsurance Clauses

Most property policies are written with a coinsurance clause. A coinsurance clause requires you to insure your property to a specified percentage of its full value. This will typically be 80%, 90% or 100%. At the time of loss, if it is determined that the limit purchased is less than the limit required by the coinsurance clause, the loss recovery will be limited to that same percentage of loss as the ratio of the insurance amount carried to the insurance amount required. This is the penalty for being underinsured on a partial loss.  On a total loss the company would still pay the policy limits.

Agreed Value Provisions

An agreed value provision voids the coinsurance clause. This usually requires a signed statement of property values and sometimes, a recent property appraisal. An agreed value provision should be considered if available. 

For any further questions on adequately insuring any type of property, contact Insure the Lake at 573-348-2794. Your insurance agent at the Lake of the Ozarks is happy to answer any questions and assist you with all of your insurance needs!

Contact Insure the Lake today for all your Lake of the Ozarks insurance needs! 

About the Author: Steve is a double back-flip insurance ninja. He was named Young Insurance Agent of the Year by the Missouri Association of Insurance Agents in 2010 and is a Certified Insurance Counselor. When he is not helping customers, he enjoys community service, Latin dancing with his beautiful wife and going on adventures with his two awesome sons.

Steve Naught, CIC

3736 Osage Beach Parkway
Osage Beach, MO 65065
Next to Golden Coral

T: 573-348-2794
F: 573-348-0191