Scott Simmonds - Insurance Newsletter

Insurance from an Unbiased Point of View
www.ScottSimmonds.com

November, 2007
Issue #90 - Since 2000

Beware of the Margin Clause In Your Property Insurance

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.

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Maine and Other Stuff

There are reports of snow fall in Maine. All the leaves are now down. I'll use the mower one more time then put it away.

We moved the bird feeders closer to the house about two weeks ago. I'm not sure why we haven't done this before. I have one hanging right outside my office window.

A reader asked about the bear we have had visit in the past. No sign of him/her for about a year now. We had moved the feeders and bird houses out of reach. I admit it was fun telling my NY clients about the bear we had. City folks!

I recently finished two interesting books. The Black Swan by Nassim Nicholas Taleb and Alan Greenspan's new book. I recommend both to business people. Black Swan explains the unpredictability of almost everything. Greenspan brings the reader through an economic history from the 1960s through today.

I just started the third version of The World is Flat by Thomas L. Friedman. The first version was published in 2004. The world is not only flat, it is exceedingly fast changing.

Do You Have The Right Insurance? Contact me to discuss an unbiased review of your insurance program. Do you have the right coverage? Can your policies be fine-tuned to improve the protection? Can changes be made to ease the administrative burden insurance causes? Are you getting the service you should from your broker? I can help. Remember, I don't sell insurance so I'm unbiased.

Need A Speaker? I'm pleased to speak to trade, business, or service associations about insurance topics. See my speaker's page.

Please Forward This Newsletter To Your Business Associates

Scott Simmonds, CPCU, ARM, CMC
Insurance Consulting
Phone 207-284-0085
Fax 802-992-4027
Scott@ScottSimmonds.com
www.ScottSimmonds.com

See My Insurance Blog - www.InsuranceBuzzer.com

Comments regarding insurance policies or products in this newsletter do not constitute an endorsement. I accept no fees of any kind from any company mentioned in this newsletter.