Commercial Insurance US

[scifishipper]

My OC is the owner of a carpentry business that has just burned to the ground (he owns the building in rural Maine). I am trying to establish a reasonable scenario in which the insurance does not cover everything that was lost. One of the ideas I came across in my searching is related to additional riders for things like fine arts. The business

Comments

[minaharker87]

I'm sorry if this is not what you're looking for or does not apply yo commercial insurances, but maybe underinsurance might be a solution to your problem: http://www.investopedia.com/terms/u/underinsurance.asp

[scifishipper]

Yes, this is what I was thinking in general, but I am wondering how it actually works. Why would someone buy insurance that doesn't cover everything? That phrase, underinsurance, does give me a lead for more searching. Thanks!

I am hoping to make it an error that someone just overlooked, but when the fire happens, everyone's totally surprised there wasn't enough coverage. Ideally, the OC would owe money to someone besides his own personal losses.

Trying to figure out what words the insurance agent would use to explain it to my OC and how she would field a few questions about it. It's confusing!

More searching....

[fickledame]

Mostly because it's actually hard to insure, I suppose. When I insure my home contents I pick a figure out the air, but if I had to replace everything, I bet it would be a lot more than than I realise. So, same with anything.

Also insurance companies argue everything, and will often give a value of when you bought it originally, not of what it would cost to replace it.

[minaharker87]

Regarding underinsurance: well, maybe because they were buying something new and didn't realise that they might need to update the insurance. Or maybe because they didn't have enough money to pay a sum that'd cover everything and were taking a risk.

[minaharker87]

I think my last comment was screened because I included a link. In case it won't be unscreened: Maybe the concept of underinsurance might help you solve your problem:
investopedia DOT com SLASH terms SLASH u SLASH underinsurance DOT asp

[jayb111]

I don't know how it works in the US, but here in the UK it's quite common for people to be under-insured. Either they underestimate the value of their possessions or don't allow for the cost of replacing things to go up year by year, or they deliberately under-insure in order to pay lower premiums. So the contents of a house might be worth £50,000 but the person will only pay for £40,000 worth to be insured.

In that case, if the insurance company thinks someone has his house contents under-insured by, say, twenty per cent, even if the policy holder is only claiming for a stolen computer, they are likely to knock twenty per cent of the value of the computer off what they pay out.

If your character is really financially savvy or has really good financial advice that's less likely to work, but if he's the type who's better at the creative side than the business side it might work.

[scifishipper]

Ah, I see. That makes sense. Hmm. He is not particularly business savvy, but he has an office manager who probably just paid the bill every month and didn't update the policy as needed.

Thank you!

[malnpudl]

Have you considered depreciation? Insurance usually covers the current (used, old, worn, etc) value of a building's contents. That's a whole lot less than what it would cost to replace everything with brand new equivalents.

[scifishipper]

That's a good point. I think I can work that in the explanation! Thanks.

[iantojjackh]

Being underinsured is a big issue.

I'm not sure if you are trying to say is $30K in damage because a commercial policy would at a minimum more than that.

Or if you are looking for him to be out $30k of his own money, he could have a cheaper policy that has a high deductible (what he would be out of pocket before insurance picks up the rest)

Or there could be issues where the insurance company disclaimed (they wont pay) coverage. He could have be late in paying premium or there could have been modifications to the building were not covered in the policy.

[scifishipper]

Yes, modifications could work well, since the business has become more successful recently. Thank you!