By Michael P. Bain
Published in the September 2, 2017 issue of the Cherokee Tribune
My mother recently mentioned that her homeowner's insurance premium had gone up. She has lived in the same house for thirty years, and although housing values in her neighborhood have recovered since the economic downturn, values have not appreciated much since she and my father bought their house as a new construction in the 1980s. My mother's comment piqued my curiosity, prompting additional questions about the details in her insurance coverage. Her insurance company valued her house for coverage purposes at more than $20,000 over that which any house in the neighborhood has ever sold, and over $100,000 more than the estimated value of her house. Additionally, the wooden shed in my mother's back yard that could be purchased from a home improvement store today for $1,500, was valued by her insurance company at $30,000. While her insurance company had reasons to justify the rise in coverage on her house, the reality of the situation is that my mother would likely never rebuild her home in the event of a catastrophe, and the extent of insurance coverage was unnecessary. In short, my mother had too much insurance coverage for her needs. The gradual increases in insurance coverage over time led to an increase in premiums, and for years she never gave her insurance coverage a second look.
In assisting clients with their legal problems over the years, I have come to know that my mother is not alone, and many people often overlook their insurance coverage. In this fast-paced world, most people realize the importance of having insurance, but many do not take the necessary time and care to ensure they have the right coverage for their circumstances. This can result in more expense than necessary and less money in your pocket, as in my mother's case, occasioned by higher premiums due to automatic increases in insurance coverage beyond what is actually necessary. While the possibility of cost savings on premiums is certainly a viable reason to reassess your insurance coverage, the possibility that you or your business are underinsured, or have less coverage than you really need, should be a more serious motivation.
From car accidents to lost jewelry, insurance coverage limits can make a huge difference for individuals. I have encountered clients who find themselves in the position of having little or no coverage for sizeable losses. Lost diamond earrings inherited from your grandmother can easily exceed the value of your jewelry coverage in a standard homeowner's policy and leave you with no ability to replace them. Car accidents can result in injuries and damages that quickly outpace a common $100,000/$300,000 car insurance liability policy, exposing your personal assets and income to a potential claimant. For example, a few years ago, I learned of a doctor with a six-figure income who had not changed her car insurance policy since she was in college. When she was found to be at fault for a car accident that resulted in permanent injuries to another person, her minimum insurance liability coverage of $25,000 did not even come close to covering the medical expenses that she was obligated to pay, and she was faced with filing bankruptcy or paying off a huge liability.
Lack of sufficient coverage is no less serious for businesses, but often businesses face a different problem with insurance coverage. Being underinsured does not just apply to limits of coverage in your insurance policies, but it also includes the types of coverage, as well as the exceptions to coverage. You may often hear from an insurance company that "you're in good hands" or that your insurer is "like a good neighbor." However, when an accident occurs, often your insurance company may initially deny a claim, choosing rather to point out technical reasons that your accident is excluded from their coverage. Few things can be as traumatic for a small business owner than hearing from your insurance company after an accident involving one of your employees that you will have no insurance coverage at all. The business you may have spent your life building is suddenly in jeopardy. This happens far too often, and frequently it occurs as a result of overlooking the fine print of your insurance policy. It is also important to note, however, that insurance companies can often overreach in determining that a loss is excluded from coverage under your policy, and receipt of a letter denying coverage from your insurance company does not necessarily mean you have no coverage. Many times your insurance advisor or an attorney can assist you in securing coverage even if your insurer has initially denied coverage.
It is important for you to take time and sit down with an insurance advisor or business attorney to review the insurance needs of your family and business. More often than not, when dealing with insurance matters, an ounce of prevention is worth a pound of cure.
Michael Bain is an attorney at Flint, Connolly & Walker, LLP and assists individuals and businesses in a range of legal matters affecting business, insurance, and real estate.