In most cases and in most jurisdictions, the insurance agent is not responsible for the coverage amounts that are selected on your policy. What does this mean exactly, why is it important and what can you do to make sure that you are properly protected?
First, let’s recognize that there is no such thing as “full coverage.” If you think that you are covered for everything, the bad news is that you are not. The insurance policy contract has coverage limits, exclusions and conditions that determine when and how much coverage applies. Unfortunately, this is often when a dispute occurs and it’s usually because someone thought that they had the appropriate coverage amount or perhaps even unlimited coverage. While most claims go smoothly, sometimes a policyholder will receive the unpleasant news that the claim is not covered or that the coverage limit is inadequate. This is why it is extremely important to pay attention to your coverages and the coverage amounts that you have on your policy.
The laws and the courts most often favor insurance agents and insurance companies in cases in which a policyholder has a dispute about coverage. In general, courts favor the contract terms involved in any dispute, and an insurance policy is no different. If such rulings did not favor the policy contract and the coverage limits, the floodgates would open for disputes about every coverage limit, and insurance companies would no longer be able to price coverages properly if they could even afford to make insurance available at all.
Finding out that your policy falls shortly after submitting a claim is not a pleasant experience, and it can be financially devastating. Here are some tips to increase the likelihood that you have proper coverage:
- Always work with a reputable insurance agent.
- Review each coverage amount with your insurance agent.
- Review your coverages annually or as circumstances change.
- Never accept the quote terms as presented; ask questions, because one size does not fit all.
- Coverage, not price, should always be your first concern.
- Secure an umbrella policy in high coverage amounts.
- Have your property’s replacement value updated and insure with current values.
The most important step that you can take to be properly insured is to have a detailed discussion with your agent and perhaps other experts, such as a contractor, who can tell your property’s current replacement value, or an attorney, who can address your liability exposure. Although your coverage amounts may need to be increased, you will significantly reduce your chance of facing the unpleasant situation in which you have a claim with insufficient coverage. It is up to you to make sure that you are properly covered, most especially when the legal system almost always rules that you are bound by the coverages and amounts stated in your policy.