A Primer for Property Insurance for Homeowners and the Small Business Owner

1. Know the Market~

Whether it be to insure your company’s location, or your home, from unexpected losses, it is important to know the availability of insurers in your marketplace. For example, your independent agent services a variety of insurers, but not all of them for any given location. Often, an insurance company will want to increase the policies in force that it has in your area.

For that reason, they will often dramatically drop their premiums in order to obtain more business. There is nothing wrong with this and it simply reflects the market principle of supply and demand. However, if your agent does not have any such insurers within their portfolio, you may wish to select another independent insurance agent in the area to see if they have an insurance company who is aggressively trying to move into your market.

2. Always Purchase Replacement Cost Policies~

This can have a dramatic effect on the amount of insurance you are able to recover in the event of a major loss. For example, if you have purchased an “actual cost value policy”, then the insurer will be able to deduct the amount of wear and tear, or usage, and also subtract the amount of the deductible from your claim. For example, let’s say you have a roof which is 10 years old, or half the life expectancy is used, and the roof costs $15,000. If your deductible is $5,000, then the insurance company will only owe you $2,500. The better practice is to purchase a replacement cost policy. In that case, the insurer does not deduct the amount of wear and tear or usage. Using the above example, but substituting a replacement cost policy, your recovery from the insurer would be $10,000.  A much better result for the homeowner.

3. Be Aware Of High Deductibles~

Since the storm season of 2005, there have been literally tens of thousands of lawsuits filed against insurance companies providing commercial property and homeowners insurance. This has been extremely costly for many insurers and, in fact, has resulted in the decision by some to alter or dramatically curb, if not end, the insurer’s decision to provide insurance in our state.

In order to counter this, many insurers have chosen to issue insurance policies with deductibles that vary depending on the cause of loss. For example, many insurers now provide deductibles of 2% to 3%, and even higher, if caused by hail or a named storm, such as a tropical storm or hurricane. If a business owner or homeowner has property insurance worth $400,000, then a 1% deductible will be $4000; so this is a crucial decision and should affect most buyer’s decision.

4. Review Your Policy With Your Agent~

The insurance company with whom you have placed your business will always send you a copy of the insurance policy. The insurer will also provide you what is called a “dec sheet”, which is a shorthand version of the coverages you have purchased together with the endorsements and exclusions. Many people review this dec sheet or page to see what policy is in force. However, you should be careful against relying on this too much. For example, how much coverage have you actually purchased for water intrusion? If the policy says coverage is provided for “sump” or “sewer”, does this provide coverage for a break in a water line or a leak from the hot water heater? The answer is probably not. A catastrophic loss can occur if you are away from the premises and your hot water heater starts to leak as it typically has an open source of water from which it draws when the water level in the hot water heater starts to lower. The result is you can have hundreds of gallons of water spilling into your premises causing tens of thousands of dollars of damages.

5. Document Your Valuables~

We recommend that every owner use a cell phone and take photographs of the valuables at each premises including the receipts and or appraisals of each item. For a nominal amount of money, companies such as Apple will allow you to store these photographs in the “Cloud”. Please take advantage of this as you may lose or damage your phone and not be able to retrieve the proof of your valuables.

6. Always Ensure your Policy is in Force before a Named Storm enters the Gulf.

Once a storm has been named by the National Weather Service and it has entered the Gulf of Mexico, an insurer will not issue a policy to cover your home or business. Please review each insurers rules to obtain the specifics for each of these companies.

The law firm of Thomas M Fountain & Associates, P. C. is an AV Preeminent rated law firm located in The Woodlands, Texas which is in the greater Houston metropolitan area. Thomas M Fountain has 35 years of experience upon which the firm’s clients draw when necessary. The firm prides itself on being proactive rather than reactive. 

For more information see our Website at www.HoustonTrialLaw.com or call (281) 296-6500. 

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Thomas M Fountain & Associates PLLC