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Make sure to ask for a copy of your insurance application to check for accuracy. You want to make sure that the information on the application is accurate to avoid problems later.

Things to check for:

Make sure that the title of the property is correct in the application

Make sure that the description of the property is correct

Make sure that the claims history is correct and that if you had 3 claims in the past and the application says 0 claims in the past you want to correct it

Make sure to ask the agent how they insured your property. For example, did you tell the agent how much coverage you wanted on your property or did he/she tell you what amount of insurance you needed?

Ask your agent what method was used in determine what values to insure your property for and to give you a quote on the premium

Your insurance policy has a requirement that you must fulfill in order to be properly covered. The percentage is normally 80% 90% 100%. This is called a co-insurance requirement within your insurance policy. If your policy has this it means you must be insured to 80% 90% 100% of what it would cost to rebuild your property.

Example:

The square feet of your building is very important to know! If you have a 2000 Sq Ft building and it costs $100 per Sq Ft to rebuild. This would be ($200,000) needed to rebuild your property in the event of a total loss to your property. If your policy requires you to be insured to at least 80%. this means you are required to have at least $160,000 in insurance in order to qualify for replacement cost or to qualify to recover what you are insured for. In this example if you had $160,000 insurance on your property ultimately in the event of a total loss you would be able to collect the full amount. If you only had $80,000 insurance the policy has an 80% co-insurance requirement in your policy. The insurance company would penalize you in the following manner by using this formula.

On your building ($80,000) ÷ should have carried ($160,000) = 50% Insured

vs.

80% insured x the loss if you sustained a $100,000 loss you would be penalized $50,000 (50%) for not being properly insured per the language in your insurance policy. This means you have been paying premium for a certain amount of insurance and didn’t know that in the event of a partial loss or total loss you are in a position to lose 50% of your insurance money.

Ask your agent to review your insurance declarations sheet and the insurance policy to make sure you fully understand your coverages.

Questions to ask your agent regarding your declarations sheet

What are the building limits of coverage?

Do I/we have a replacement cost policy or an actual cash value policy?

If replacement cost policy ask your agent if you comply with the “co-insurance” requirements within the policy and ask in the event of any loss are you properly insured and that a co-insurance penalty will not be applied

Ask the agent to put that in writing so that if you would ever have any type of substantial loss you will have documentation that in fact the agent insured the property. It is also important to find out if your agent is an independent agent or an agent that works exclusively for your insurance company

Ask your agent what type of replacement cost policy do you have? There are a few type of replacement cost policies

There is a policy called functional replacement cost. This is a type of policy that limits the type of materials that are used in the event of a loss. For example, if you had an entire house full of plaster this type of policy would only allow for going back with sheet-rock. These types of policies are utilized for insured that do not want to pay the higher premiums necessary to qualify for replacement cost.

There are other types of replacement cost policies that some insurance companies call repair policies. It is somewhat of the same principle when paying a loss with today’s materials vs. the original type of materials like plaster that costs thousands of dollars more.

It is important to understand if you have a large claim that your insurance claims pay out may go down quite a bit because of the type of policy language in a functional replacement cost policy.

If your agent tells you there is only an actual cash value type of policy on your property these policies are very dangerous.

This is why it is important to get a market value appraisal done on your property. They market value appraisal and the replacement cost of your home are sometimes thousands of dollars apart. The market value appraisal has nothing to do with replacement cost insurance until your property sustains a large loss to it. Some insurance carriers use different techniques when it comes time to pay your claim. If you do not have replacement cost coverage then it becomes more important to understand in advance how your insurance company will treat you. When you only have an actual cash value type policy you are never able to recover more that this amount. If you have a replacement cost policy and the insurance company pays you the actual cash value (which is the repair less depreciation) and or the (market value appraised amount)

you are still able to recover the difference between the actual cash value amount and the agreed repair amount once you repair or replace your property.

Other coverages to ask your insurance agent about

Ask your agent how they handle items that will not match in the event of a partial of large loss. Many times your insurance company will not want to pay for items that do not match like roofing, siding, carpet, etc. They may have a company policy that says they inly owe for directly damaged items and do not owe to match. It is very wise to ask now how your insurance company would treat you in the event you would run into these types of claims scenarios.