Don’t let this happen to you. You own or manage a property or business and unfortunately, there is a fire causing a huge financial loss. Fortunately, you have insurance. But wait – you submit the claim to your insurance company and are quite unpleasantly surprised to find out that the claim is denied.
When purchasing insurance, it’s important to be aware of policy wording that may exist that voids coverage if certain conditions are not met at a time when something goes wrong. Most commonly, these relate to specified fire or burglary-related protections being in place but can also extend to protections from other forms of claims as well.
This type of wording can come in several forms with varying implications and there are many details that can make a difference from one situation to the next. It is important that you bring up any concerns that you may have with your insurance broker who can guide you on the best approach for whatever the specifics of your circumstances may be.
Some common policy requirements pertain to:
- Fire sprinklers
- Fire alarms
- Specified fire extinguishing equipment in the cooking area of establishments that have cooking
- Burglar alarms
- Common for vacant buildings (but not exclusively) – heat maintained (to avoid burst pipes due to freezing)
- Common for vacant buildings (but not exclusively) – secured premises to avoid burglary
What can you do to avoid a similar scenario?
Firstly, be upfront about your property with your insurance professional and discuss any concerns you may have. If you have a given protection in place now but are not sure that you will be able to maintain it for the duration of the policy term you might be best off submitting to the insurer as not having the protection and insisting there be no coverage that will depend on the protection being in place and fully functional. Even if you end up paying more, at least you’ll be covered when you need it most.
With some insurers, this may not be an option as they may require a specific protection type to be in place in order for them to consider offering a policy in the first place. In that case, you might be best off using an insurer that will allow coverage without the protection, again – you may end up paying more but at least you’ll have the coverage if something does go wrong.
If you already have coverage with the restrictive policy wording and the protection becomes absent to the point where it is not fulfilling the policy requirements it is important that the insurance company gets notified right away. The obligation to notify the insurer is often part of the wording of the exclusion and can void the exclusion if followed correctly. It is important to check the specific wording as it can vary by policy.
Upon being informed, the insurer might amend the policy to remove the restrictive wording and may also increase the premium accordingly. Alternatively, they may cancel coverage and give a certain amount of time to replace it with another policy before cancellation would take effect.
It is important to note that sometimes insurers will condition coverage on a protection being in place even if they were not told that the particular protection exists, this is something that a good insurance broker will look out for during the quoting process. The reverse is true as well, an insurer will not always add the restrictive wording even if information is submitted indicating a particular protection is present. A good broker with knowledge of how specific insurers deal with this restrictive type of wording will play an important role in determining an appropriate insurer for any particular set of circumstances.
It is also important to note that as often the case with exclusions, there are exceptions to when they would apply. Sometimes seemingly small details can make the difference between being covered or not being covered. As always you should discuss this with a competent insurance professional who is familiar with your circumstances as well as with policy nuances so he/she can best guide you as it relates to this important issue.
Questions, comments are welcome. You may leave them in the comment section below or contact me directly.
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