According to the U.S. Fire Administration, large-loss building fires are most prevalent in the months of May and July, so this is an important time of year for businesses and commercial policyholders to review their coverage and consider their fire risks. Although commercial fire insurance policies may all look the same on the surface, Attorney Bill Voss has seen many policyholders make assumptions about their insurance coverage that ended up being costly mistakes. Before you make assumptions about your fire coverage, let’s talk about how different even similar fire insurance policies can be.
Three Ways Similar Commercial Fire Insurance Policies Can Differ
Many people assume that insurance policies issued by the same company for the same risk are effectively identical. However, how fire insurance policies are generally written isn’t how they’re always written. Even experienced underwriters can make mistakes when just taking a guess.
In reality, commercial fire insurance policies vary significantly because they often include:
- Changes over time. Over the years, commercial insurance policies can change, and what was true about your policy five years ago may not be true today. Two fire insurance policies that were closely similar when purchased can provide very different coverage after years of small changes. This is why business owners and commercial policyholders should review their coverage annually or more often, even if they plan to stick with the same insurer and agent.
- Different details with different agents. Buying the same coverage from the same company doesn’t necessarily mean that the fire insurance policies are identical. Different insurance agents may offer different options or endorsements that aren’t available or standard through other agents. Be sure to read through all the attachments and fine print before choosing between similar policies through different agents.
- Different endorsements. Different companies use different endorsements, so included and excluded losses related to a fire can vary dramatically. For example, some policies may include limits on the recovery from fires that occur on vacant properties, or they may vary in how they cover water or mold damage from sprinkler systems. Ultimately, these kinds of differences in endorsements can mean that two similar-looking policies actually come with big differences in what is covered and when that coverage kicks in. Be sure you understand what kinds of losses might be excluded from your specific coverage if your property if is damaged in a fire.
Every Policy Is Different Because Every Insured Business Is Unique
Why is there so much difference between fire insurance policies? It’s because every business is unique and comes with its own needs and risks. Different types of coverage may be needed—or simply preferred—depending on the company’s size, the type of buildings insured, structural attachments, building materials, and how the property is used. In the end, you can’t make assumptions based on policies from other companies, experiences with the same insurer, or experiences from the past. You must read and understand the fire insurance coverage you carry and review it regularly.
Did you find this information helpful? Join us in our next newsletter for Part Two: Why Every Fire Insurance Claim Is Different. You can also learn more about your rights as a business owner or policyholder by reading through our free book, Commercial Insurance Claims: The Basics.