A disaster such as Hurricane Matthew often leads to not only tragic devastation, but also incredible confusion and frustration when insurance companies refuse to pay the full value of claims. One way that property managers can lower the chances of being involved in a dispute with a carrier is to thoroughly review and evaluate their insurance policies before disaster strikes.
Details, Details, Details
The devil is in the details when it comes to thoroughly understanding an insurance policy. Unfortunately, this type of policy can be filled with so much complex terminology that property managers have no desire to try to navigate through it. But it is critically important that managers are proactive enough to speak to a professional who can sort through the myriad details and make sure the policy contains the proper amount and types of coverage.
One of the most confusing components of the typical residential or commercial property insurance policy is the matter of “coinsurance.” In a nutshell, this is a provision in a policy that allows the carrier and policyholder to apportion any losses that are covered.
The typical property insurance policy will contain a coinsurance clause that the property must be insured for a certain percentage of its value, typically 80-100 percent. If the property is not insured to this ratio, the carrier can shift part of the risk to the policyholder. In addition, if the value of the property, when multiplied by the coinsurance percentage, is more than the insurance limit for that property, the policyholder may be hit with a coinsurance penalty.
If you are a property manager or represent a Homeowners Association, you should have your insurance policy reviewed to determine whether you are subject to the coinsurance provision. If your policy has this provision, you could be subject to a major penalty should a disaster strike.