Ensure Your Protection

Kate McGinn XL Specialty Insurance Co. www.xlinsurance.com Exton, Pa.

ABRAHAM LINCOLN ONCE WROTE, “Property is the fruit of labor.” It can be particularly devastating to see the fruits of anyone's labor damaged or destroyed. Unfortunately, that is exactly what many business owners witnessed this fall with the rash of hurricanes and extreme weather conditions.

Property insurance helps a company cover its losses or recoup the costs to repair damages following catastrophes. In light of recent events, businesses need to ensure that their property insurance adequately meets their needs and that their insurance carrier will address their needs if and when mother nature strikes.

According to the Insurance Services Office (ISO), New York, U.S. property/casualty insurers saw a record $21.3 billion in insured property loss claims from eight catastrophes in the third quarter of 2004 — the industry's worst third quarter ever. According to ISO's Property Claims unit, this compares with insured losses of $3.7 billion in the third quarter of 2003 and $715 million in the third quarter of 2002.

Catastrophic losses for the first nine months of 2004 now stand at $24.7 billion — the second worst nine-month period for catastrophic losses since 2001, when insurers paid $26.1 billion. The amount paid in 2004 was more than double the losses for the first nine months of 2003, which amounted to $10.2 billion.

Twenty-one states and Puerto Rico were affected by eight weather-related events, including four hurricanes. These accounted for an estimated $20.5 billion of third-quarter losses.

The industry's previous worst third-quarter property losses were $19.15 billion in 2001, which included $18.8 billion from the Sept. 11 terrorist attacks. (The Sept. 11 estimate represented only insured property losses and related coverages, such as business-interruption insurance, but excluded liability insurance, workers compensation, aviation, life and health insurance, according to ISO.)

While these monetary figures are seen as losses in the insurance industry, they represent amounts property insurance policyholders want to recover. Thus, the numbers demonstrate the need for companies to invest in appropriate insurance and to know what financial protection their property insurance offers.

Property insurance varies by policy. Therefore, it is important for waste firms to understand the terms and conditions of their policies before they need to file a claim. For example, policyholders need to understand the property that is insured under a policy. In addition to a company's buildings and other structures, a policy may or may not insure: outdoor property such as signs or fences; mobile property such as construction equipment or automobiles; machinery; furniture, equipment and supplies; leased equipment; computers; and records, valuable papers, books and documents.

Perils, or the causes of loss, may include weather-related events such as hurricanes, lightning and hail, or damage that results from robbery, vehicular accidents, or injuries that occur on the insured property.

There are named-peril policies, which cover losses resulting from only specific events outlined in the policy, such as earthquakes and flooding. Additionally, there are more comprehensive or all-risk property policies, which offer coverage for all perils except those specifically named or excluded. Many companies opt for all-risk policies despite higher premiums. However, policyholders must still be aware of what the policy excludes.

It is also important for businesses to know how they will be reimbursed after filing a claim. Does the policy cover replacement costs, or does it give policy owners a cash-value reimbursement based on the replacement cost minus physical depreciation of the lost or damaged property?

Knowing the specifics of your property insurance can ease the pain of devastating damage and can get a company back to business.