Replacement Cost vs. ACV
How Is My Property Loss Covered.
When purchasing property insurance, it can be easy to focus on the limit of property coverage you are buying while overlooking the type of property coverage you are buying. However, taking the time to understand if your policy is offering Replacement Cost or Actual Cash Value coverage can be just as important as the limit itself. While both types of coverage are subject to your property deductible and the conditions of the policy, the amount of reimbursement you receive from the insurance company after a loss may shock you if you unknowingly have the wrong coverage.
What is Replacement Cost Coverage?
In its simplest form, Replacement Cost coverage provides the actual amount to repair or replace the covered property. The intent of this coverage is to make you whole again after a covered loss. If the property can be repaired it will be and if the property needs to be replaced the insurance will pay for a replacement of the same like, kind, and quality. This is what is typically expected with property coverage.
What is Actual Cash Value Coverage?
Actual Cash Value is essentially Replacement Cost coverage that is then reduced by depreciation. The reimbursement you receive for a covered property loss is only a portion of the actual cost to repair or replace the property. If your property is older and has already used half of its expected life, you may only receive a payment for half of the cost to repair or replace this property.
Make Sure You Take a Close Look at Your Coverage
DCI just recently assisted a new client who owns a 101 year old building in which the first story is their store and the second story is their home. While we were doing a comprehensive review of the previous insurance program they have had setup for many years we uncovered their property was covered on an Actual Cash Value policy. Even though this policy was through a large carrier who I am sure you are familiar with their advertisements, their previous agent had them unknowingly at risk. If there was a fire that destroyed the entire building the insurance would not pay enough to rebuild both their home and business. Fortunately we were able to catch this before they experienced a shocking loss however this is one of the many reasons I encourage you take the time to make sure you are not in a similar situation.
The Risks of Loaning Your Car
Whose Insurance Covers Your Borrowed Vehicle.
It happens all the time with very little thought. A friend, neighbor, or relative asks to borrow your car so you toss them your keys. It seems like a small enough request and you’re a nice person. Nothing would ever happen but even if they do cause an accident they are responsible and have their own insurance so you have nothing to worry about, right? However, the way in which this situation actually plays out may surprise both you and the driver.
Insurance Follows the Vehicle First
With all of the different insurance carriers in the market, standards are needed in order to avoid a long and drawn out battle over which company should pay. In situations with permissive drivers, this standard is that the vehicle’s insurance is primary and the driver’s insurance is excess. What this means is that because you are the owner of the vehicle, your insurance will pay until the limits are maxed out before the driver’s insurance will respond. However, when the driver’s insurance does respond after your insurance limits are reached, it is protecting the driver and not you. So even though you did not cause the accident, your insurance will pay first and if it runs out the driver will have their additional coverage but you will not. It does not matter how guilty the driver feels and how much they want their insurance to protect you, the policy does not change.
Some Special Considerations For Permissive Drivers
If you have a company vehicle or if they are using your vehicle for business purposes you have to dig deeper through your policy as additional restrictions may apply. Also, if the permissive driver has regular access to your vehicle they may need to be added as a driver on your policy to avoid any issues. It is important to realize the liability you are assuming before you hand your keys over to anyone and the best way to get personalized advice on your specific situation is to consult your insurance partner.
The Hidden Exposure of Hiring Vendors
Why Association’s Without Employees Need Workers Compensation Insurance.
It is important to be mindful of every dollar that an association spends. After all, that is the unit owner’s hard earned money which needs to be spent wisely. That being said, it makes sense to question why an association without direct employees would need workers compensation insurance; however, once the exposure is understood the need for the coverage becomes evident.
How Associations can be Employers of Vendors
Even though the association is hiring contractors as third party vendors and not standard employees, there is legal precedence that has been set in which associations can be determined to be the employer of the contractor for work they are preforming for on the association’s behalf. Along with the legal status of being an employer, the association takes on the obligation to provide workers compensation benefits in the event an employee is injured on the job. Not only does this include medical bills which can be a substantial amount of money, it may also include missed wages and more. This is a large financial burden that can cripple an association, but can be prevented if the association is proactive.
The Need for Certificates of Insurance
It is always best practice to hire only licensed and insured vendors and to maintain certificates of insurance showing the vendor’s workers compensation and liability coverage. In fact, workers compensation policies require this paperwork to avoid additional charges. This helps to lower the association’s exposure as you do not have to provide workers compensation insurance to vendors who already have their own coverage. However, certificates can provide a false sense of security.
The Hidden Exposure
While certificates show that the vendor has coverage is in place at that time, there is no guarantee coverage will remain in force throughout the duration of the vendor’s services. Furthermore, it is very common for contractors who provide certificates of insurance to then pass off work to subcontractors or independent contractors (1099 employees) who do not have their own coverage. Any uninsured worker can quickly become the association’s responsibility to cover and typically you are not made aware of this until issues arise.
There are insurance products available that will cover associations from this hidden exposure. They are commonly referred to as If-Any Workers Compensation policies or $0 Payroll Workers Compensation policies and are available at a minimal cost. While these policies still require the association to obtain certificates of insurance from all vendors showing they have workers compensation coverage in force, these policies will protect the association from the hidden exposure of hiring vendors.
Protecting Your Income Statement
How Business Income and Extra Expense coverage can save your business.
You have always known it could happen, but you just never imagined it would happen to you. That dreaded fire that just destroyed one of your key business locations. Fortunately you had the proper coverages in place for the property so the insurance company will be covering the claim and writing you checks to rebuild the location just as it was. But now the reality of a whole new nightmare sets in: The location will not be fully restored and ready for use for eight months. Can you survive?
Fortunately there is an often overlooked coverage that is available to get you through this situation called Business Income and Extra Expense coverage. This is a rather complex coverage however the general concepts are enough to understand the importance of taking a closer look at your insurance program. There are two main components of this coverage that work together to save your business during the downtime.
Business Income Coverage
Even though your business may be unable to provide goods or services to generate income while the location is being restored, your obligations to pay rent, loans, taxes, etc. do not disappear. To make matters worse, some of your key employees are consider leaving your business to work for your competitors rather than going without pay for an unknown period of time. This is when having a premier insurance program comes into play. Business Income coverage is what provides the necessary funds to keep the business alive while productivity is down due to a covered claim. Through an in depth assessment of your accounting books, Business Income coverage can provide the life support your business needs to pay these expenses and make it through the downtime from the loss.
Extra Expense Coverage
It is important to you, your clients, and your insurance carrier that your business is up and running as soon as possible after a loss. In some circumstances, the best way to do so and minimize the damage is to temporarily relocate the business and rent equipment. Extra Expense coverage can be provided to pay for the new space, equipment, and even advertisements to your customers notifying them of the short-term changes. The goal of this coverage is to minimize your loss and expedite your recovery.
Make Sure Your Needs Are Met
It doesn’t have to be a fire destroying an entire location for this coverage to save your business from devastation. For example, DCI is currently assisting a client whose office is located on the 31st floor of a building through a Business Income claim as the building had a loss leaving their elevators unusable for several weeks. While you certainly do not need to master the complexities of this coverage, it is important to consult with a trusted insurance partner to make sure you get the protection this coverage provides.
The New Look of DCI Insurance
These past six months have been exceptionally busy. In addition to finishing up the best year DCI has had to date, we have been working constantly behind the scenes on an entirely new image for our business. We are thrilled to be unveiling our revitalized look with the official launch of our new website! In addition to the new appearance and functionality, we have composed all new content on every page for an enhanced user experience. Although we may have cut ties with our old logo and colors, our emphasis on service will always remain the staple of our business.
DCI’s New Platform
We have always had a passion for sharing our insurance knowledge with anyone interested in listening, and we are excited to unveil our newest platform to do so. With the addition of our blog, we intend to share valuable knowledge on various topics with anyone who may be able to benefit. We intend to answer some common questions, provide information on changes in the industry, and keep you updated on DCI’s continual evolution.
Your Thoughts Matter
As has always been the case, we encourage you to reach out to us with any questions you may have or topics you would like us to cover. We strive to pass on as much knowledge as we can and hope to provide the insight you are looking for. Please contact us so we can discuss any questions you may have or add additional posts on your topics of interest.