When you're buying new shoes, you know what makes for a great pair: durability, style, comfort-maybe all three, depending on your preferences. You can walk away from the transaction confident in your decision.
But when it comes to insurance, most entrepreneurs are less familiar with what to look for. That's not good, because an ill-fitting policy can cause a lot more unpleasantness than just heel blisters and pinched toes. With hurricane season upon us, now is the time to make sure your insurance coverage matches your needs. Check these six things to make sure your policy is a good fit.
1. Deductibles and Limits
This one trips up a lot of people, so here's a review:
- Deductible = how much you pay before your benefits kick in
- Limit = the maximum your policy will pay. Most policies actually have two limits: an aggregate, which is the total amount it will pay, and an occurrence, which is the most it will pay for any one claim.
The secret? Be absolutely sure you can afford your deductible out of pocket. If you can't, you won't have access to your insurance benefits in the event of a claim.
These outline what the policy doesn't cover. Insurance companies get a lot of bad press for not covering people after disasters, but usually, the coverage exclusions are in black and white in the policy language.
One common exclusion that causes lot of grief for business owners? Flood damage. Standard Commercial Property policies don't cover damage from floods or earthquakes, so if you think you'll need that protection, get on the phone with your agent.
These are the flip side of exclusions. Also called "riders," endorsements tack on extra protections that standard policies don't offer. Endorsements can customize a policy to fit your unique business needs-for example, by adding a flood endorsement to a Property policy.
These are the obligations you have to meet if you want your insurance to pay out. Most of them you'd probably do anyway-report claims quickly, protect property after a loss, cooperate during an investigation. But you want to know the specifics. If you don't, you risk unknowingly skipping a step and having a claim denied.
5. Supplementary Payments
Supplementary Payments are the extra costs your insurer is responsible for paying when defending you in a lawsuit. These may include investigators' fees, bail, even travel expenses that pop up as they work to resolve your claim. The best part about supplementary payments? They don't reduce your to policy limit, at least not for most General Liability policies.
That might seem too good to be true, but there are some less-than-happy surprises here, too. For example, if you're on the losing side of a lawsuit, the opposing attorney's fees may come out of your aggregate limit, leaving you less money for future claims.
6. Duty to Defend
The Insuring Agreement for each coverage type includes one of two phrases: "right to defend" or "right and duty to defend." Of the two, you want yours to read "right and duty." That way, the insurer is obligated to defend you in a lawsuit. Eliminate the "duty," and you eliminate that obligation.
Remember: don't judge a person until you've walked a mile in their shoes. And don't buy an insurance policy until you've considered these make-or-break policy features.