Here are five tips for making sure you come out ahead in any squabbles over how much your insurer will cover:
Keep Detailed Records. A record of all your transactions, inventories, and assets is key. Store up-to-date duplicates of these safely off-site.
Be Prompt. If you're slow to inform your insurer that you've been sued, and the insurer can argue that your delay prejudiced its ability to defend you, you can lose coverage. Timely notice is especially crucial with so-called claims-made policies, under which coverage is based on when the claim was made rather than when the event took place, says Jay M. Levin, an insurance litigator at Reed Smith.
Follow Up. Check in periodically with the insurer on your claim. If your insurer is mounting a liability defense on your behalf, cooperate with the lawyers the insurer has hired, and keep current on the case.
Know Your Rights. Most states have a version of a model law known as the Unfair Claims Settlement Practices Act, which sets standards for handling claims and prohibits policies that, for example, require you to sue to collect. Read it, and you'll be better equipped to know whether you are being treated fairly.
Hire a Lawyer. The first sign of trouble might come with a "reservation of rights" letter, in which an insurer informs you that while it will defend you in court, it may not (depending on the outcome) pay all of your claim.