Understanding coverage key to protecting property

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Business owners or residents are more likely to weather any storm that blows their way if they are insured — and they understand their coverage.

“It’s always important to read the fine print when protecting yourself from anything,” said Bobbie Baca, director, property casualty and title, Consumer Services for the Colorado Division of Insurance.

There is little difference when it comes to insuring a person’s personal property versus a business and its interests against a catastrophe.

“Other than the type of policy or coverage that you want to purchase, it’s basically the same,” Baca said. “On a homeowner’s policy you are going to cover the structure, liability coverage, and then you are going to do the same with commercial.”

Businesses may need some additional coverages such as for business interruption or employee dishonesty.

“It’s more coverage to protect the business itself and not just the brick-and-mortar part of it,” Baca said.

The major non-cyber threats to Colorado business owners and residents are wind and hail storms, wildfires and flooding.

“A general property policy is going to cover you — business building or home — for fire, hail and wind type exposures or risks,” Baca said. “You are just going to need to know exactly what type of coverage it is you have.”

That includes the amount of coverage included in a policy and any deductibles, she said.

“With commercial, there also could be a coinsurance clause in the policy,” Baca said. “Coinsurance is basically based on the policy contract and is typically 80 percent.”

For example, if a building were worth $100,000 but only insured for $50,000, the business owner would not meet that 80 percent coinsurance clause, which then would impact the claim paid out.

As for flood insurance, it is typically covered under its own policy, both for residential and commercial properties, Baca said.

“Flood insurance has to be purchased as a separate policy, normally through the National Flood Insurance Program, which is through FEMA,” she said. “They write homeowners and commercial flood policies.”

Congress established the National Flood Insurance Program with the passage of the National Flood Insurance Act of 1968.

“It basically was started because the private market couldn’t afford to write [flood] policies anymore,” Baca said. “It was too big of a risk, so they made it a federal program.”

Property owners in participating communities can purchase insurance to protect against flood losses in exchange for state and community floodplain management regulations that reduce future flood damages.

“If a community adopts and enforces a floodplain management ordinance to reduce future flood risk to new construction in floodplains, the federal government will make flood insurance available within the community as a financial protection against flood losses,” the FEMA website states. “This insurance is designed to provide an insurance alternative to disaster assistance to reduce the escalating costs of repairing damage to buildings and their contents caused by floods.”

Most insurance agents can write polices through the National Flood Insurance Program, Baca said, adding that more options for coverage are becoming available in the private market.

“Right now, FEMA still is the primary market,” she said. “It’s also important to note, given the potential flooding with all the rain we are supposed to get over the next few weeks, that there is a 30-day waiting period when you purchase a flood policy through the National Flood Insurance program.”

Vincent Plymell, communications manager for the Colorado Division of Insurance, recommends commercial and residential property owners consider obtaining flood coverage even if the business is not in a floodplain.

“A lot of people look at the floodplain maps and think those are the only people who need flood insurance,” he said. “Those are just the people who really, really should have it, and in terms of bank loans and mortgages, have to. But just because you don’t live in the floodplain, doesn’t mean you shouldn’t consider it.”

Flood insurance premiums are cheaper when the property isn’t located in the floodplain.

“And as we have seen in recent years all over the country, a lot of these floods are going well past the floodplain boundaries,” Plymell said.

According to Sharanne Rothenbucher, marketing and education coordinator for ALINK Insurance Services LLC, flood insurance can be purchased for about $200 a year if the property is not in a floodplain.

“Then a freak thing like the Manitou flood [of 2013], where some of those houses were higher up and still got damaged, they will be covered,” she said.

And while fire, wind and hail damage is currently covered under a general insurance policy, the private market could potentially carve out a particular coverage, Baca said.

“I think we would have significant concerns if companies were to start doing that,” she said. “Instead, I think right now what you will see is the companies have larger deductibles, like instead of having $1,000 you are going to have a $10,000 deductible on a hail claim. But at this point, we haven’t seen or heard of anyone carving out any of those coverages.”

However, those business owners or residents with property located in wildfire-prone areas, called the wildland-urban interface, will pay higher insurance premiums.

“It’s not specific wildfire insurance, but their property or homeowners insurance will be more,” Plymell said.

Woodland Park is one area where residents and business owners can expect to pay higher premiums due to the wildfire threat, Rothenbucher said.

“They get charged a higher rate because of the risk being more there than, for instance, someone who lives in downtown Colorado Springs,” she said.

As for those who lease, renter’s insurance is necessary to protect personal property against possible damages caused by any disaster.

“Particularly for wildfire, because if the building catches fire, you want to have your property that’s inside the building covered,” Baca said. “Most businesses, even if they are just renting the space, need to have their liability coverage for their business and what they do.”

A common misconception is that if the property owner has insurance it will cover the tenant’s belongings, Plymell said.   

“They are under the mistaken belief, ‘Well, my landlord has insurance so we’re covered,’ but that only covers the building,” he said. “It’s always worthwhile to have that renter’s insurance to protect your own valuables from disaster-type damage.”

All things considered, Plymell believes it’s important for consumers to speak up if they don’t understand their insurance coverage.

“Don’t be afraid to ask your agent or the insurance company, because most people don’t sit around and marinate in the insurance world like we do all day,” Plymell said. “We are always telling people be sure and read the policy — the big print and the fine print.”

If consumers do have questions or complaints about their insurance, they can contact the Colorado Division of Insurance consumer services team at 800-930-3745 and 303-894-7490 or email DORA_Insurance@state.co.us.

“We not only deal with complaints when individual agents or companies don’t seem to meet their obligations, we also are a resource for consumers if they don’t understand what something means,” Plymell said.

“Give us a call, and we can explain it and walk you through it.”

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