Page 15 - Mississippi 811 Magazine 2021 Issue 3

low) the balance of the damages comes back on you-the business. To illustrate the impact, let’s slide them into a school bus, one dark and stormy afternoon. No one’s hurt, but the kids got thrown to the floor, so everyone goes to the ER – just to be certain. That $100K/$300 (topside) liability your employee has on their personal vehicle is – GONE. Fast. Let me see – 40-some kids in the ER....
You know I’m gonna tell you – but you should have carried something called Hired & Non-Auto on your GL. That’s what that little $150 premium (OK maybe $250 annual) buys you – protection from what happened above. This coverage should always go on a commercial auto policy – but you don’t have any business vehicles! So now what?
Make SURE your commercial agent puts that coverage on your GL. If you do have commercial vehicles – then it goes on that policy! Don’t leave home without it! This is an easy gap to fill. HE won’t think to ask – but it’s your money. BE sure it goes on – somewhere!
Since we’re trying to close gaps – did we ask how long ago you bought and insured that building? If it is written Replacement Cost (and we hope it was), have the values been updated to reflect current building costs to replace it if was a total loss? OR, tell me you don’t reduce the amount of coverage as your bank loan gets reduced (yes, people do it!).
For Replacement Cost, your building has to be insured to 80% of its replacement cost (if the policy is written with an 80% factor – it could be written 90%.) That’s the cost to build it back, just like it is right now – NOT the price you can get if you sell it – whether up or down makes no difference. Just what it will take to build it back as it now is. If it isn’t, then in the event of a claim, the company will reduce the amount of your payout by the percent you are out of coinsurance (yes, it’s all in the fine print right there in black and white. Every property policy has it in there.)
As an example, let’s say you paid 25% down at the time
of purchase, and financed the rest. The bank wants the policy to reflect their interest – which is what they have loaned to you. Let’s say it is a $100,000 building and the bank financed $75,000. It’s fairly new, so your policy was written Replacement Cost, which is right, but the bank told the agency/your agent/you it had to be insured for $75,000 at least, with them as mortgagee, etc. And your building is underinsured from day one. Now, let’s say you have a $40K loss. In today’s money and construction costs – it will take $125,000 to redo your building, so you won’t get the full $40K to repair your building. You should be insured to $125K but are only at $75K – making you off by 40%. You will only get $24,000 instead of the $40K you need. Close that GAP. Up your coverage on that building to reflect today’s costs to rebuild!
In fact – close all those gaps! Take an afternoon and go visit your agent. Make sure he knows what you have, what it’s worth – and what you don’t have (using your personal vehicle, for example)– and by the way, it’s much much safer to have all your coverages with the same agent. Don’t have your property coverage over there, and your vehicle coverage over here – it’s too easy to leave yourself falling through a gap!
2021, Issue 3
Mississippi 811 • 13