Does Anyone Know What an Insurance Policy Covers?

I love ah-ha moments when I learn something new or see things in a different light. I recently had such a moment while working on an insurance review (conduct an abbreviated risk assessment and evaluate the quality of the client’s insurance program). After doing this for over 10 years the thrill has faded, becoming a rather rote exercise. But last week while reading an insurance policy (I know what a nerd) I found something I hadn’t recognized before. Unfortunately I can’t remember what caused my ah-ha but suddenly the insurance review project took on a new life for me. There still were things for me to discover and learn about insurance to help my clients.

An insurance policy is a puzzle I need to solve, figure out what is or is not covered. However the puzzle’s complexity  keeps increasing. Prior to 1986, policies were rather straightforward but with “ policy simplification” the size of policies increased exponentially. A package or portfolio policy might have been 50 pages or so but now I am reviewing a 232 page package with only property and general liability coverages (imagine if it also included business auto and crime). The client’s other policies range from 50 to 150 pages long. No wonder no one reads their insurance policies. Even if you did read it would you understand it?  

The insurance companies don’t even know what their policies cover or exclude. Too often anything other than a simple straightforward claim (e.g., auto physical damage) requires you and your insurance agent to argue with the claims adjuster about coverage. The rate of changes to policies has gone into hyper-drive so it is hard for the adjusters and underwriters to stay current. They are behind the curve as insurance companies (like many organizations) dramatically cut their training dollars.

So what does this mean to you? Insurance policies are complex so you have to depend upon your insurance agent, broker or consultant for advice. But don’t be a passive partner in this insurance relationship, you need to know what you are buying and why. Take the time to meet with your insurance professional and review the association’s operations, programs and services of your association or nonprofit.  The agent can’t recommend a coverage if she doesn’t know about a new program so keep her in the information loop when developing new initiatives. I know you are busy but insurance is the backbone of your risk management program – your association’s survival may depend upon it. So talk to your insurance professional every once in a while and not just at renewal time. It will be good for both of you.

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