No, we don't mean voluntarily financial goodwill payments to multi - billion dollar insurance companies... but rather claim participation by the insured when unplanned, unforeseen accidental events happen. Yes, most of us become aware of this type of situation when we are assessed a deductible, but other names include retention, self-insured retention (SIR), co-insurance penalty are the terms with which you need to be familiar.
While most policy holders are familiar with the traditional term deductible as it relates to Real Property (Building) or Personal Property (Contents) or Automobile physical damage (Collision and Comprehensive) there is a trend today by insuring companies to expand insured loss participation by implementing various creative deductibles, i.e. percentage (%) of value deductibles in large catastrophe claims such as windstorm, hail, roofs and other peril specific coverages. There is even a 24 hour deductible in Business Interruption / Income / Spoilage and Mechanical Breakdown coverage.
Co-Insurance on Personal Property (Contents) is common. It states that if the amount of Personal Property Coverage (Contents) carried on a policy is not within 10 or 20% (80 or 90% Co Insurance respectively) of its actual replacement value, then not 100% of a
contents claim would be paid, but rather only the percent of what was carried over what should have been carried. This "Co- Insurance Penalty" is in addition to the the regular Property (Contents) Deductible!
Retentions, Self-Insured Retentions, that usually relate to Professional and Umbrella and Excess Liability coverages, can vary, often ranging from anywhere between $5,000 - $50,000 depending on coverage Limit selected and a Person's or Business's type and level (amount) of operations.
Other types of regular Liability coverage deductibles include property damage deductibles for certain trades such as painters, so that if any overspray damages other's property, the painter is financially included in paying claims. Certain types and sizes of businesses with Workers Compensation policies may also include deductible and dividend features.
So if you are concerned about your financial exposure as it relates to claims and/or coverage, contact us for a thorough review.
