Agreed Value & Blanket Coverage
Have you ever seen the movie ‘Twins’ with Danny DeVito and Arnold Schwarzenegger? Just imagining those two as twins brings about a good laugh. But, it would be great in real life. If Danny needed something from the top shelf, his twin Arnold would be right there to help. If Arnold needed something from a small space, his twin Danny would be there to help. The same applies to the insurance world. If something happens where you need a little extra help, two coverages can come in handy. These coverages are agreed value and blanket coverage. Let’s explore what they are and why they are so important.
All commercial property policies have something called coinsurance. This is basically the insurance company’s attempt to have the client insure their property to its full value, instead of only partially to save a few dollars. You can typically select three options, 100%, 90% and 80%. If you select 80%, this means that you are only insuring 80% of the total value. Pretty nice. But, there is a major catch here. If you say you are insuring 80%, but at claim time it turns out you were only insuring 60%, there could be a severe penalty. To avoid this, companies use the agreed value endorsement. This states that as long as you are insuring your property to 80%, agreed value suspends, or cancels the coinsurance penalty. So, if you are faithfully trying to insure your property to the percentage selected, but insure the wrong number, there is no problem if you have agreed value. Your big brother has your back! For those who are more equation oriented, here is what would happen without agreed value. You select 100% for coinsurance. During the claim, it is revealed you only carried 75% of the total value, so they would apply the penalty equation (did carry, divided by should have carried, multiplied by the claim). So, you did carry 75% but you should have carried 100% (75/100 = 0.75). If the claim is for $10,000, you’ll only get 75% of that, or $7,500. However, if you have agreed value, you will get the full $10,000.
If you have property at several locations or own several buildings, blanket coverage is critical for you. Blanket coverage puts all of the separate coverage’s into one big number. So if you have 4 buildings, each worth $25,000, your blanket amount is $100,000. The benefit of doing this is that if one of your buildings burns to the ground and it is discovered it was actually worth $45,000 you can take the extra money needed from the larger number, instead of being stuck with the original number. It’s like Danny DeVito needing Arnold’s help to get something from the top shelf. He can’t quite reach. Adding blanket coverage to your contents and buildings gives you the protection of a big brother like Arnold.
If you’re not sure you need these or have these coverages, call me at Capitol Insurance (317-253-1155) to talk.