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Insurance companies require that property be fully insured
INSURANCE-TO-VALUE EXPLAINED
By Bill Stuart
Insurance companies require that property be fully insured to be eligible for full claim payment subject to the policy's limits of insurance. The industry standard is that property be insured for at least 80% of its value to be considered fully insured. If not fully insured, the amount payable in the event of a loss is determined by the equation: amount of insurance purchased divided by amount of insurance that should have been purchased times the amount of the loss.
For example: say a commercial building is valued at $565,000, but insured for only $100,000 or 22% of the minimum amount it should be insured for. In the event of a loss, the policy would pay the claim at 22% of the loss up to a maximum of $100,000. The same equation would be applied to any covered Business Personal Property.
Personal insurance is no different. If you under-insure your home or a rental property you could be setting yourself up for financial disaster. As you can see, you should sit down with your insurance agent periodically (annually is best) to review your coverage and update it where needed. When was the last time you reviewed your insurance coverage? Does your agent offer you this service? |
