Are We Insuring Property or People?
When you purchase insurance, what, or who, are you actually insuring? Most clients think they are insuring their property. I can understand why they think so. If someone calls for homeowners insurance, we spend a lot of time gathering the value of the home, as well as other information, such as what year it was built, and how far it is from the Fire Department.
If someone calls for a business insurance quote, the same thing happens. We ask questions relevant to how much business property is owned, and what would be the consequences if the building burns down.
In reality, the insurance contract is not written to insure the property. The insurance contract is designed to insure against a financial loss to the insured. This may seem like semantics but it is incredibly important to understand. The named insured is the person or entity named on the policy. It is this person (or entity) that must suffer a financial loss in order for the policy to pay.
So, if your business was a Corporation and changed to an LLC, but you forgot to tell your agent, in the event of a loss the adjuster will decide if the entity named on the policy is the entity that purchased the property and therefore, suffered the loss. It is possible that the claim will not be covered.
If a single man gifts jewelry to his girlfriend, who will suffer financially if there is a loss? Technically, once he has given the gift, the jewelry belongs to her and a policy in his name alone would not pay for a loss to the jewelry, as he no longer has an "insurable interest".
Even in the event of a sale of your home, once the contract is signed, the buyers may already have the possibility of financial loss prior to the closing, depending on the terms of the contract.
Clearly, it is important to let your agent know whenever there is a change in business entities and owners, or if property changes hands.
If you have questions or need further information, give us a call at 877-352-2121, or e-mail us at beready@clark-mortenson.com.
