Comparing Property Quotes
What to Look For When Selecting A Property Insurance Policy
All property insurance policies are not the same. Make sure you compare apples to apples to ensure you select the policy that will best protect your business.
You've gone through the process of soliciting property insurance quotes. You've provided the necessary underwriting information; your broker has diligently marketed your information and has returned with several premium quotes.
Now is the time you get to sit and analyze the quotes to determine which one is the best for your business. Here are some tips to use when evaluating your property insurance quotes:
- Insurance Company Financial Stability: Before you look at an insurance quote, find out if the insurance company is financially stable. Getting a great quote from an unstable insurance company is tantamount to insuring your own risk. You want to make sure the insurance company will be around when it comes time to pay a claim. Have your broker provide you with the AM Best rating for the company. AM Best performs in depth investigations to determine an insurance company's financial strength.
- Compare Policy Limits: Whether it's easier to place the information in an excel spreadsheet, use pen and paper or make notations on the policy quote itself, always thoroughly check the limits. Compare the building, contents and ancillary coverage limits.
- Review Deductibles: Property insurance policies can contain several deductibles. Check to see if the deductible makes sense. For example, there may be a higher deductible for hail coverage if your business is located in the 'hail belt' while the deductible for other perils are lower. Lower deductibles equates to less out of pocket expense per loss on your part.
- Perils Covered: A named peril policy will cost less, but it also provides less. All risk, on the other hand, will provide more comprehensive coverage. It will cost more, but keep in mind that businesses purchase insurance for the purpose of being made whole in the event of a loss. Sometimes its worth the extra cost. If you're not convinced, request your broker to provide alternate quotes for all risk and named perils. Make an educated decision.
- Compare the Valuation Clause: Actual cash value or replacement cost. Another important factor in claim payment is how the loss is valued. If your building is brand new, the actual cash value and the replacement cost may be the same. However, for older buildings, the difference in valuation can be the difference in reaching deeper into your own pocket to repair/replace your building and having the insurance company claim check pay for the damage.
- Coinsurance Requirement: The higher the coinsurance requirement, the more of a discount on the rate. However, analyze your type of risk. Is an 80% coinsurance sufficient, or do you feel better at 90%?
- Non-renewal Clause: The longer the better. A non-renewal clause of 30 days will leave you scrambling if your insurance company elects not to renew your policy. 45 days are better and 60 days even better. Think about how long it took to pull together the quotes you are currently evaluating. If the non-renewal clause is not adequate, request the company to change it.
- Premium: Although this should be the last item to review when it comes to analyzing insurance quotes, most businesses look at this first. Unfortunately they use it as the primary reason for making a decision. Low premiums are great, but make sure the policy provides the coverage you need.
Tip: Ask for apples to apples - if one property insurance policy contains something that you like while the other has other features you find attractive, go back to the broker and find out how much it would cost to add the appropriate features to the quote you prefer the most.
