Mother Nature and Deductibles

If you live in the Midwest region of the country, or “Tornado Alley”, it is almost inevitable you have experienced some form of wind and hail that may or may not have resulted in an insurance claim. Whether it was your personal home, auto, or maybe a rental dwelling, you have seen the damage that Mother Nature can cause during the storm season.

As a landlord, these storms can impact to your bottom line and it is important to understand how your properties are covered against these perils. There are few different approaches to structuring your insurance deductible, and choosing the correct deducible for your portfolio could mean the difference in thousands of dollars to your bottom line. When explaining deductibles, the Insurance Information Institute says,

“A deductible can be either a specific dollar amount or a percentage      

of the total amount of insurance on a policy. Generally speaking,

the larger the deductible, the less a consumer pays in premiums for

an insurance policy.”

There is not a universally correct deductible option for everyone and it is not a certainty that you will have the liberty to choose which form will apply to your policy, but there are a few factors to understand how your deductible will affect your policy.

Percentage vs. Flat Deductibles

If you have a flat $1,000 deductible, that money would be deducted from your claim. So, if your insurance company has determined that you have an insured loss worth $10,000 you would receive a claims check for $9,000.

Percentage deductibles are based on a percentage of the property’s insured value. So if your house is insured for $100,000 and your insurance policy has a 2 % deductible, $2,000 would be deducted from the amount you are reimbursed on a claim. In the event of the $10,000 insurance loss, you would be paid $8,000.

Per Location vs. Per Occurrence Deductibles

Realizing how your deductible will apply to your property schedule is crucial. Say you have 10 rental dwellings and a single hail storm damages all 10 roofs. If you have a $1,000 per location deductible, that would equate to $10,000 in total deductibles you would pay if you were to file a claim to replace all your roofs.

Using the same situation where all 10 properties are damaged by one storm, if instead you have a $5,000 per occurrence deductible, you would only pay one $5,000 deductible if you were to file a claim to replace all your roofs.

Not all carriers will offer a per occurrence deductible, and depending on the number of locations you have and the total insurable value of your portfolio, it may not be the right fit for you. It is important that you consult your agent to explore all the possibilities that are available to you and figure out which deductible structure suits you the best.

If you have questions or would like to learn more about our unique programs for rental dwellings you can reach me at 405-507-2734 or nbritten@pi-ins.com

Real Cost of Your Property Insurance

What is your TCOR (Total Cost of Risk) for your Property Insurance?

Property Insurance Real Cost

Many Businesses look at their Insurance Premiums as their cost of risks from year to year and do not take into account what their real costs associated with their property exposures are.  You hear a lot of discussions about Workers Comp and Liability when talking about Total Cost of Risk but very little is said about your property exposures. 

The Total Cost of Risk (TCOR) is defined as the overall costs associated with running corporate risk management program.  These include such items as:

  • Insurance Premiums
  • Deductibles
  • Uninsured Losses or Losses exceeding Insurance Limits
  • Risk Control or Safety Expenses
  • Management's time in dealing with issues (claims, contractors, moving tenants)
  • Reputation with Insurance Companies (future premium increases)
  • Loss of Reputation in Community
  • Fines (City, State, Federal)
  • City or State Mandates (ordinances) that force upgrades after a loss

When looking at these issues, most would have to agree that avoiding the loss is by far the best way to lower your TCOR and a key component of risk management.  Even though many say that there is not much they can do to lower their risk cost or, “it is just luck” that could not be further from the truth. 

Here are some items that can lower your TCOR for your property exposures:

  • Inspections of Property to identify problems to prevent losses
  • Fire safety equipment such as extinguishers, alarms, & sprinklers
  • Properly Value Properties before loss
  • Contractor Hiring & Risk Management Transfer
  • Proactive improvements to property such as electric, roofs, plumbing, etc.
  • Disaster Recovery Plan
  • Tenant Screening where applicable

We will explore these in future articles.

Chris Moxley, CIC, CRIS

Do you have a Disaster Plan?

disaster plan oklahoma tornado

As we approach weather season, let's talk about your disaster plan. I have discussed in the past that a good Disaster Plan is critical to reduce your total cost of risk. When we ask clients about their disaster plan, I usually hear, “no we need to work on that” or, “yes our computer guy has us taken care of”.  The problem with the first response is obvious but when I dive into the latter scenario,  I often find many holes in their program.  As we know, having your computers backed up is very important and most of us think and expect that that is being done properly.  Even though you may find that the backup is not being done as good as it can be done, a bigger problem is what are you going to do with that data if your building is a total loss due to a fire, tornado, or ice storm?  Even if your data survives, most businesses never recover from a total loss at their property.  Below are some important elements of a complete Disaster Plan:

  • Data Backup and Recovery – This includes software and not just data.
  • Written plan with procedures,  and contacts.  Copies of relevant data for each key employee  should be kept at their houses.
  • Facilities & Power - If you are shut down, for many types of disasters, so is your power.  Who will provide power, computers, office space, warehouse space, and internet or phone connectivity if these are out.  A disaster can include a major cut in your internet service without any type of natural disaster being the cause.  We partner with firms that provide these services to our clients.
  • Testing – If you plan has not been tested, it will probably fail or not obtain it’s desired result.  Everyone we know that has tested their plan has found huge problems they had to fix after the test. When you test, you should simulate a complete loss and restore just like you would have to do in a disaster.
  • Funding – Now that you have the plan to take care of all of this, who will pay for it?  It’s important that your Risk Advisor structures your insurance to properly fund your plan.

Disaster Recovery Tip of the week

Disaster Recovery Services

Ease into testing.

When testing your recovery plan for the first time, simplicity is key. Build out an annual testing strategy and gradually add layers of complexity to your test program each year.
Start by reviewing your written recovery plan with leaders within your company. Walk through a mock disaster scenario and review the responsibilities of key personnel. Once you've established a comfort level, then move on to testing technology, server recovery, and communications.
To learn more about the value of testing view our blog post, "Practice Makes Perfect in Disaster Recovery Planning."

 

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Disaster Recovery Tip of the week

Disaster Recovery Services

Keep it simple.

Be realistic about who and what you will need during a recovery. There is no sense in trying to bring everyone back to work and have all systems back up if you can survive on less; especially in a short-term recovery. Identify your critical people, teams and define your business critical systems. These should be the focus and your top priority in the immediate aftermath of a disaster. Keep it simple. Simple works.

Thanks to Agility Recovery.  To receive these tips weekly CLICK HERE.