As the New Year rolls around, the time comes for many of us to renew our insurance policies for work and home, property and liability. While many of us just keep writing that premium check without thinking twice about it, ever changing life and business situations also change our risks and exposures. A little attention to insurance coverage now can avoid large problems later when it comes to evaluating whether insurance coverage provides the protection required. Here are four things to keep in mind when it comes time to renew an insurance policy.
1. Read the old policy.
While insurance policies can be intimidating, one needs to try to be familiar with the contents of the policy. Absent unusual language or circumstances, the law generally assumes that policy holders read and understand their insurance policy. While they aren’t expected to be an insurance lawyer, they do need to know if the policy covers all the risks that that may be encountered. Does the property insurance have a high enough coverage limit to replace jewelry or computer equipment in the case of a burglary? Does the policy contain language excluding coverage for a risk that didn’t exist in the past but does now (such as a swimming pool or a large dog)? It is difficult to assess whether the coverage is sufficient without knowing what the coverage is.
2. Communicate with the broker about life or business changes since the last renewal, including major purchases that should be protected.
An insurance broker can be an excellent resource for helping to obtain coverage and comply with the terms of the policy. A broker can help work through the application process, help to file claims, and discuss the different types of insurance products that are available. The assistance the broker provides, however, can only be as good as the information provided to the broker. Under New York law, an insurance broker does not have the obligation to advise clients regarding the sufficiency of coverage, only to obtain the coverage that the client specifically requests. The policyholder will bear the consequences for any mistakes, so they are responsible for adequately communicating the risks. Many brokers provide their clients with a checklist at renewal time to go over any major life changes that could affect coverage. If they don’t, however, the insured has the responsibility to provide the broker with any information that would be relevant to the renewal, including new risks or the need for new limits.
3. Be wary of quotes for significantly lower premiums.
Insurance companies make their money by pooling risk and taking in more money in premiums than they pay out. As such, they have teams of underwriters and actuaries determining the amount they need to charge for the coverage they provide. If, when obtaining a variety of quotes for coverage one comes back substantially lower than all the others, make sure that there aren’t any hidden exclusions or limitations on the policy. For example, liability policies that contain exclusions for injuries to employees or injuries arising out of completed operations are generally much cheaper than policies that provide coverage for those risks. Depending on the business, the majority of exposure may fall into one of those categories and having a policy that contains such an exclusion could lead to financial disaster if a loss is suffered. It is a good idea to bring the policy to an attorney for review prior to jumping on what seems like a good deal, only to find out that it isn’t the type or amount of coverage needed.
4. Make sure the insurance covers the obligations under a lease or other contract.