Read Your Insurance Policy

Let’s talk a little about insurance policies.  Insurance policies are a contract between you and the insurer.  You pay money to the insurer and, in exchange, they agree to pay for your losses in certain circumstances.  You have rights and obligations that are set out in that contract.

I’ll bet that for the most part, you are aware of your deductible and you might be aware of your policy limits.  But have you actually read the entire policy?  (If so, do you understand it?)

It is important to know what is covered and what is not covered.  Do you know that, for most home-based businesses, you need to purchase additional coverage?  If you don’t, and the insurer finds out, they may cancel your policy.  Good luck getting coverage now, as your permanent record shows that you have had a policy cancelled for misrepresentation.

Reading the policy carefully can mean a huge difference if you have a claim.  I had a client who owned a cottage.  There was a mild spell in the winter, leading to massive melting.  A large pool of water took the place of his snow-filled backyard.  The pool of water went right up to the foundation of the cottage.  Then, it got cold again.  The water froze.  Anyone who has forgotten a soda in the freezer knows what happens when water freezes:  it expands.   The pool of water expanded and actually pushed in the side of the cottage.  It meant that the whole building had to be rebuilt, as the foundation was breached and the pressure caused all of the floor joists to warp, ruining the structure.

The policy excluded coverage for damage caused by groundwater.  However, it included coverage for “freezing”. 

The insurer took the position that the damage was caused by groundwater and denied the claim.

At that point, the owners decided that it would be worth their while to have a lawyer review the claim.

The damage was not caused by groundwater.  The groundwater lying against the foundation might have eventually seeped in, but it sure didn’t cause a breach of the foundation and buckling of the floor joists.  That kind of damage was caused by the massive pressure that happened when the water FROZE.

The insurer’s own expert report listed the cause of the damage as “freezing of excessive water exerted pressure against the building”.

I latched onto that like a dog to a T-bone steak.  The client got his money.  I’m not the one taking credit here.  I just did my job.  The client deserves the credit.  He looked at his policy and was suspicious. 

The point is this:  know what is covered AND what is not covered.  Don’t assume that you are covered for everything.  Conversely, if you have suffered damage, don’t assume it is not covered.  If the insurer tells you it is not covered, ask “Why?”  When you ask “why”, ask for them to point out the specific words in the policy that exclude coverage.