News Matrix Insurance Group

Month: July 2021


The 2021 Ultimate Guide to Coinsurance and Underinsurance Clauses
The 2021 Ultimate Guide to Coinsurance and Underinsurance Clauses

Posted on July 27, 2021 | by | Posted in Uncategorized

Coinsurance is a provision typically expressed in percentage that firms employ in contracts for property insurance policies, such as in buildings. The condition will guarantee you that your property is insured for a specified and reasonable amount. In addition to that, as a policyholder, you will be entitled to obtain a premium for the risk. 

Most commercial plans include a coinsurance clause that specifies how much of your property’s worth must be covered to be compensated entirely in the event of a loss. Furthermore, the most frequent split in terms of coinsurance is 80/20. Here, the insured will be responsible for paying 20% and the insurer for the remaining 80%. 

An inadequate insurance policy is referred to as underinsurance. An underinsured business policy will leave you accountable for substantial financial costs if an unforeseen catastrophic incident occurs. This happens when a property is insured for less than its actual value, making the coverage insufficient. 

What happens if your property is underinsured? 

Let’s say you own a building you initially determined was worth about $120,000 in replacement cost. You then have established an 80% coinsurance in your policy, not knowing that the replacement cost of the building was actually $200,000. A fire then unfortunately burns the property, and you were accountable for covering $80,000 in damages. To determine how much your insurer will cover, we will need to divide the determined insured replacement cost of $96,000 (80% of $120,000) with 80% of the actual price of $200,000 or $160,00. In this case, you will receive only 60% of the claim, which is $48,000. 

On some occasions, your insurer may even void the policy or cancel it entirely and return any premiums paid. 

Therefore when purchasing insurance, one of the most crucial factors to consider is the amount of coverage you require. If your insurance is insufficient and you encounter accidents or disasters, you may pay a lot more than you expected. Since each insurance type offers various levels of coverage, you should also take your time to choose the best fit for your requirements.

Reasons why your business may be underinsured: 

If you’re underinsured, it means your assets are undervalued and insured for less than their current rebuilding or reinstatement cost. As a result, like the example above, your insurance reimbursement may be decreased if you file a claim. 

Most common causes of underinsurance: 

  1. Your property and or its contents were not adequately valued.
  2. You’ve renewed your insurance, but you haven’t gone through the specifics of how your situation has altered. 
  3. You have done remodeling or improvements inside your property and have not accounted for them yet. 
  4. You failed to include the costs of rebuilding, demolition, or debris removal in the overall cost. 

How to avoid underinsurance: 

While the consequences of having an underinsured building seem irreversible, underinsurance is completely avoidable. With that said, here are some ways you can avoid an underinsured building. 

  1. Utilize a construction calculator 

When it comes to your property and contents insurance, everyone’s demands are different, so determining their worth is definitely tricky. Carpenters, building contractors, and construction management professionals often utilize a construction calculator to estimate and calculate other construction parts. 

Moreover, to determine how well you’re protected, perform an approximate calculation of how much you are insured for per square foot. It’s crucial to remember that calculators are just intended to serve as a reference for rebuilding your current structure. Due to local government rules, reconstructing the same design and materials after a total loss may not be possible. Therefore, always take into account the change in costs and adjustments in policies.  

  1. Study building regulations 

Building rules vary over time, which can increase the rebuilding costs. So if you have owned the property for a while, there is a huge chance that its overall value has changed substantially.

As a property owner, it is your responsibility to check whether your insurance includes enough coverage for building code improvements. Read your policy paperwork to understand what is and is not covered. 

  1. Account for the additional expenditures of rebuilding.

If you have installed remodeling and renovations in the past years, it is imperative to include them in your policy. It is also a good idea to notify your insurance company of any of the new work done so that you can update the property coverage. Not only that, but make sure your insurance includes additional expenses like debris disposal, architectural, demolition, and engineering, and council fees.

This is essential because when the value of your property increases, it will influence your premium and excess amount.

  1. Seek for professional property appraisal

Aside from the fact that specific insurance plans need an appraisal before a policyholder can submit a claim, having a current assessment on hand is a good habit for a property owner to develop.

The cost of rebuilding your building may also differ substantially from its market value. Through the help of an agent or broker, you can either increase or maintain the policy limits. Instead of making a rough estimate, get a formal assessment from a licensed builder or professional valuer. Not only will they be able to provide you with an accurate rebuild cost, but they will also factor in other charges.

Obtaining an appraisal for your commercial real estate or retail location will make submitting an insurance claim easier. When you know you’re insured, you don’t have to worry about whether the damage to your property is covered.

What to Know When Dealing with the Death of a Business Partner
What to Know When Dealing with the Death of a Business Partner

Posted on July 27, 2021 | by | Posted in Uncategorized

Death alone is a difficult subject to broach. But it is essential to have this discussion, especially at times when necessary. Moreover, trying to figure out what will happen if you or your business partner dies is a genuine concern to all business owners. While nothing really prepares you for the loss of a person, you can alleviate most of the difficult matters by arming yourself with adequate knowledge.

Death of a business partner 

When handling the risk management strategies for your business, you should not only include physical injuries or illnesses. Rather, you should also take into account the possibility of unforeseen tragedies happening to a partner, such as death.

When safeguarding your company from the consequences of such an occurrence, you should not leave it all up to your attorneys to settle the matters after the incident. With that, here are the options available to you should you encounter death of a partner:

  • Liquidation and distribution of remaining assets:  

If forming a new partnership is not in your plans, this is the alternative to pick. However, you should not opt for liquidation if you are not willing to invest a lot of time and effort. It is possible that the remaining owners may realize that liquidation is sufficient to satisfy the estate of the late partner. If this is the case, you may be required to sell the remaining assets based on their market values and distribute the profit to the remaining partners. 

  • Dissolve the company completely: 

Ultimately, the remaining partners lose their ability to bind the partnership once a partner’s death triggers dissolution and winding up. Moreover, your agreement or state law may compel or allow you to terminate your partnership. Before doing so, the majority of the remaining partners must agree with the decision. In the event that the majority has opted for termination, the company will then proceed to wind up its operations. This will include completing or closing projects and settling existing debt.   

  • Buy your late partner’s assets:

The main issue that comes with this option is determining the right price of the assets. Moreover, this can be especially challenging for new companies who have valued their inventory based on future revenue. Therefore, the most advisable step to take is to seek help from professionals. 

  • Sell out to the heirs:

You may also want to consider selling your company to the surviving spouse of your partner or other remaining heirs. However, only choose this option if you are confident that the heirs of the late partner are willing, qualified, and competent enough to take part in the company. Just like the previous choice, the most challenging step of this option is establishing the right values for all the assets.

Business Partners’ Life Insurance

A life insurance payment might help a firm get through a difficult period by providing operational funds. Moreover, it can also assist remaining partners if they plan on purchasing the shares of the deceased partners from his or her heirs. With that in mind, you can come up with an insurance policy that clearly identifies the beneficiaries of a partner. 

Do you have a buy-sell agreement? 

Before you take any action, you must first determine whether a buy-sell agreement with the late partner has been established. This is a legally enforceable contract that specifies how a partner’s shares will be transferred if that partner dies. Moreover, the contract is often entered into by the partners and their spouses. In most cases, a buy-sell agreement is established along with the initial partnership arrangement. If there has been an agreement in place, the stated steps your company will take if a partner passes away will be followed. 

Furthermore, the contract may state that the business share must be sold to the company or the remaining partners based on a respected formula or percentage. Also, partners may be prohibited from selling their shares to other investors unless they receive the approval of the remaining partners. 

If you have failed to make a buy-sell agreement with the late partner, you can turn to the Partnership Act of your state. 

Why should you have insurance protection for your business? 

Just like you, your business partnership needs life insurance. This is a necessary component of your operation, as your company might incur serious penalties if you fail to secure one. 

Moreover, there is no harm in planning ahead and preparing your business for unforeseen and unfortunate events. The main reason you should acquire life insurance is to safeguard yourself in the instance where one of the partners passes away. Insurance plans for businesses can be designed such that the earnings are returned back to the firm to help with cash flow and cover extra expenditures. Specifically, it will help you deal with loans, expenses, funds, and assets easier.

How can I acquire business insurance

Business life insurance works in the same way as ordinary life insurance. Furthermore, it is just as essential to find the proper insurance provider as it is to acquire adequate policy coverage. You will need the guidance of an expert who can help you create a strategy to deal with such a situation. 

Each company has its own set of requirements. Therefore, you need to consider your sales, number of employees, assets, location, etc. The insurance representative will guide you in determining your needed coverage and most applicable policy. After you’ve learned about the various insurance coverages available, you should look into which ones are ideal for your company.

HANDLING AN UNDERINSURED HERITAGE BUILDING
HANDLING AN UNDERINSURED HERITAGE BUILDING

Posted on July 01, 2021 | by | Posted in Uncategorized

Every property owner, company owner, or homeowner should be aware of the requirements to attain proper building insurance. In the case of heritage structures, there are several conditions that should be met. As we always recommend, it is worthwhile speaking to a leading insurance broker in Perth if you require any additional information.

Replacement Value 

Getting insurance for heritage-listed properties is one of the most prevalent worries of owners. For one, these infrastructures need to be insured for their total replacement value. This figure is essential as it determines the amount it would cost to entirely replace the property. Furthermore, to arrive at the replacement cost, you will need to compute for the following: 

  1. Cost of labor: total cost for all workers in terms of salaries, benefits, and payroll taxes
  2. Cost of materials: cost of materials used in the construction of the property
  3. Architect fees: most of the time, this number is a percentage of the project’s total construction cost
  4. Engineer fees: this is somewhere between 1% and 20% of the project’s total construction cost

Typically, the replacement value of properties is not inclusive of premiums on materials, overtime fees, and bonuses. Furthermore, the appraiser will also take into account foundation and footings, exterior walls, interior walls, finishings, framing materials, etc.  

Rebuilding Cost 

Moreover, most insurers require a valuation for the costs of rebuilding such premises. As the name suggests, this is the total cost you would incur to rebuild your property should it be damaged beyond repair. 

In addition to labor cost, material costs, architect fees, and engineer fees, you should get in touch with a professional to help you compute for the following: 

  1. Development of property: includes but is not limited to the construction cost, government fees, permitting cost, inspecting fees, etc.  
  2. Debris removal fees: in computing this amount, you will need to establish the area covered by the debris, the amount of waste, etc. 
  3. Demolition fees: similarly, this is computed by square footage 

Other factors that contribute to the reconstruction or rebuilding cost involve the removal of mold and other hazardous materials. Unlike the replacement value, reconstruction costs may consider premiums and other added payments. 

Essentially, the main difference between the two is that replacement costs pertain to the amount required to reconstruct the building entirely. On the other hand, reconstruction cost is the amount needed to replicate the infrastructure.

Average Clause 

An average clause is found in almost all insurance policies. This is basically an insurance policy provision that calls for you to bear a part of any loss if your property is insured for less than its total replacement value. So, if you have underinsured your property, your insurer will only pay a percentage of your claim. 

For instance, Kara’s building was only insured for $200,000, when in fact, the building actually cost $800,000. Following an electrical fault, Kara went on to claim her insurance. Accordingly, the damages brought by the incident are worth $50,000. However, since her building was only 25% insured, she only received a $12,500 payout. 

Another way to compute the amount to be claimed is by multiplying the actual loss and insured amount. The product will then be divided by the actual value of the property during the incident. 

In the example above, we derive at: 

Claim amount= ($50,000 x $200,000) / $800,000 

Claim amount= $12,500

This was the case for Kara because she was only able to cover a certain percentage of her property. As a result, her claims will also cover the same rate. 

This is only one of the many reasons why you should ensure that your property is adequately insured. 

Heritage Building Valuation 

There seem to be no definitive criteria for valuing historic structures. While there have been established concepts applicable to more modern buildings, they do not always apply to historic structures. 

Designs, locations, conditions, local and national legislation are all factors to consider. 

Materials and maintenance 

Another factor examined by valuers is the general condition of the structure. This is inclusive of the building’s electrics, plumbing, and how well it has been constructed and maintained over the years. A failure to comprehend the proper materials and skills required for heritage building restoration could result in underinsurance.

Historic building preservation and repair calls for specialized knowledge and abilities. Specifically, there is a need for a thorough understanding of locating and using traditional materials and techniques.

Furthermore, if you are seeking insurance for your heritage building, ascertain that the property is in good condition or repair. 

Condition and improvement 

It is ideal to seek advice from site inspectors as they offer independent and accurate evaluations of your property. In addition to that, you should also conduct surveys and analyses. 

Specifically, you will need to assess and document the notable features and updates on the area. 

For these improvements, it is strongly encouraged to keep receipts of them for more additional records. 

Possible risks 

Insurance is primarily concerned with risk underwriting, which involves estimating the possibility of loss and its frequency and severity.  Furthermore, calculating a rate or premium that is proportionate with that risk is also necessary. 

Loss of heritage value 

Suppose the heritage value of your property has been lost due to damage or deterioration. In that case, the Queensland Heritage Act 1992 states that there is no more need to conduct any replication of the building. If it is partially damaged, any reconstruction work must be done in a way that respects the building’s heritage values.

In line with this, it is also imperative that you understand the true significance of your structure along with its essential characteristics. 

You should also take into consideration the demand of the property or who is willing to purchase it.

How Insurance Brokers Save You More Money
How Insurance Brokers Save You More Money

Posted on July 01, 2021 | by | Posted in Uncategorized

Insurance 

An insurance policy is primarily a form of financial protection against some loss or damage. You pay a monthly or annual premium to insure your life, health, car, property, and other assets over a certain period of time. 

In exchange, the insurer compensates for any financial losses covered and insurance policy.

Why is getting insurance important? 

We cannot prevent the unexpected. Moreover, the least we can do is prepare for it. Although there is no way you can mentally prepare for the death of a loved one, having insurance to cover the hefty funeral costs will lift significant weight off your shoulders.

Injuries and diseases are the same way. When faced with high medical costs, having health insurance is tremendously beneficial. 

Furthermore, insurance can considerably reduce or even eliminate your expenses.

Who are insurance brokers, and what do they do?

Helping individuals protect their homes, properties, businesses, and families, insurance brokers are skilled professionals who guide their clients in finding the most suited insurance plan. They will select a policy that best matches your demands at a fair price using both your history and their insurance expertise.

Insurance brokers work by representing their clients instead of insurance companies. Ultimately, this implies that dealing with insurance brokers entails working with them directly.

Insurance brokers vs. insurance brokers 

Off the bat, the main difference is that insurance agents work on behalf of the insurance company. While both are obliged to help you find the right insurance plan, insurance agents are known to be representatives who insurers appoint to work with clients. 

Why get an insurance broker? 

With all that being said, here are only some reasons why working with an insurance broker is worth it: 

Save money and time 

Having an insurance broker by your side will save you not just time but also money. In addition, these seasoned professionals are qualified to alleviate your concerns as they have years of education, training, and experience in their arsenal. 

Everyone can hire an insurance broker, especially those with complicated concerns. For example, if you have multiple cars or homes, properties with various policies, and more. It will be such a hassle to deal with those problems independently, which is why you should seek help from insurance brokers. 

They will spare you the time by finding the right plan for you. Moreover, brokers assist clients in navigating regulations and relaying policies before they purchase since they are already knowledgeable of the investing industry. On top of that, brokers will take the responsibility of settling your claims for you. 

Also, because firms know brokers help their clients get the right policy with the right coverage, they give lower prices to brokers. So, the chances of you being insured at a fair cost are higher. 

Plus, working with an insurance broker will allow you to negotiate with the policy premiums as there are no middlemen in that particular circumstances. 

In the end, you get to save your money by not investing in the wrong insurance and paying unnecessary fees.

In-depth understanding 

Insurance brokers have studied the Product Disclosure Statement (PDS). Essentially, this is a document that contains the key features of a product, along with its benefits and risks. Moreover, they will walk you through and help you understand the contents of your policy. Insurance brokers will aid you in comparing several insurance policies to select one that best matches you and your needs.

Since you will be working closely with them, they will answer any questions you have regarding the terms of your insurance throughout the route. 

Risk assessments 

Similarly, you will also be aware of the possible risks other insurance plans can bring you. Insurance brokers are keen on weighing the risks and rewards of each policy. Therefore, they know the right coverage that will suit your condition, budget, and goals. 

Direct business 

As mentioned earlier, insurance brokers are not representatives of insurance companies. Which means, they have your best interest. Insurance brokers do not have a whole company to back them up should there be any mishaps, so you are more certain that you will receive the best service and advice. On top of that, working directly with them will mean more speedy service as they do not need to coordinate with a company. 

More policy options

Since you will be communicating closely with insurance brokers, you will be receiving more alternatives than you would get through an insurance representative. As you explore all of your alternatives, you will have better chances of finding the best option at the most reasonable price. 

In addition, a broker can give access to specialty markets where going directly to an insurance provider isn’t always possible.

Regular policy reviewing 

Insurance plans are highly susceptible to change over time. If you have an insurance broker, they will be communicating the possible renewals for the plan. In addition to that, they can also introduce better alternatives should your current plan not be serving you anymore.   

Final thoughts 

Insurance brokers are industry specialists with a knack for getting the greatest coverage at the best deals. Not only will your broker help you find the finest offers on the market, but any claims will be handled by your broker, saving you the time and effort of dealing with what can be a complex and unpleasant process.

Request a FREE Quote

    Top