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Hey, what do you know? I can be taught! I'm officially a blogger. What the heck is a blog anyway? The simplest way to describe it is as my personal journal that’s not so personal because I share it with everyone in the world. This blog is titled “The Bull Stops Here” and focuses on insurance issue that will save you time, money and frustration.

You’ll find regularly posted topics dealing with:
- ways to help you save money on your insurance
- techniques to save you time on managing your insurance
- answers to your questions on coverage issues
- educational resources and workshops that will solve your insurance challenges

My mission is to help you gain more confidence and trust in your business or personal insurance while spending the least amount of money.

Sunday, November 11, 2007

Beware of the Margin Clause In Your Property Insurance

Here is a great article by my friend and mentor Scott Simmonds. Scott is an insurance consultant in Maine and my guest in the January teleconference. You can see more about Scott at www.scottsimmonds.com.


For 20 years or so the best way to insure property was to combine all of your buildings and the contents of your buildings into one amount of insurance. So-called "blanket insurance" provides a single limit of insurance from which the losses of an event are paid.
In addition, it has been common to eliminate the coinsurance penalties by using "the agreed amount endorsement."
The combination of blanket insurance and the agreed amount endorsement provided a high level of protection against the threat of under insurance.
While the above strategy provided exceptional protection for the insurance buyer, it didn't always work out so well for the insurance company. Underwriters are fighting back. It is becoming more common for policies to be issued with a "margin clause” that limits the loss payout on any particular building to a percentage above the replacement cost reported by the insurance buyer.
So, if you list two building on your insurance, each having an estimated replacement cost of 1,000,000, you purchased $2,000,000 of blanket coverage. If a 25% margin clause is added to your policy and, for whatever reason, the actual replacement cost of a particular building is found to be $1,300,000. A loss would be paid only at $1,250,000, leaving $50,000 uninsured.
This policy addition severely limits the advantage of blanket insurance. Some insurers are adding a margin clause without notification to the insurance buyer. I 've taken a strong stand against insurance companies restricting coverage at renewal without a specific notification. Hiding a new endorsement in a renewal makes it appear that the insurer is trying to pull a fast one.
Carefully review your renewal policies. Ask your insurance agent if there are any changes from the expiring policy. Save the e-mails confirming the conversations.


Anonymous said...

Great information on Margin Clauses: http://www.adjustersinternational.com/AdjustingToday/pdfinfo.cfm?pdfID=50

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