Many companies go year after year doing their business, all the while thinking that they are adequately insured should a covered loss occurs, but are they? I have seen companies that are start-ups just place coverage with a broker after giving them all the particulars for the business. Their policies will typically auto-renew year after year, with little to no follow-up done by the broker or the insurance carrier.
Sometimes, a company gets put in a small business unit where little to no contact is made with the insureds. Why is this important? Well, let’s say that you had $10,000 in Business Personal Property (BPP = Furniture, Fixtures & Equipment) when you started your business five years ago. You are now five years down the road; the company has grown, and you now have five times the employees with BPP that has grown to $30,000 in assets.
If you have a major loss or theft with most or all of the assets taken, you will file a carrier claim. You proceed to list those items that were lost in the fire or stolen to be compensated by your insurance carrier. To add insult to injury, you received a questionnaire from the carrier every year asking if you had purchased any furniture, fixtures, or equipment in the past 12 months or need to make any changes to the policy. If you neglect to send back the questionnaire every year and your broker has not contacted you because the account is in the small business unit and customer contact is limited.
The final blow, the claims adjustor receives your documents for your loss and proceeds to tell you that you have $10,000 in coverage minus the deductible of $1,000. In essence, you will get $9,000 for your loss, out of $20,000 for company or broker failure to notify the carrier of increased asset purchases.
The moral of the story – make sure that you check your policy on an annual basis and that your broker or carrier is aware of any changes to your coverage limits.
True story, this happened to a friend of mine; quite costly to learn a lesson of this nature! This not how I conduct business with my clients, but you can see how easy it is to let things go because more assets mean a higher premium and who wants to pay more until you have the covered loss!
