Pointers for comparing quotes

Although comparing quotes and forms is often time-consuming and tedious, it’s a very important service that brokers provide to their clients. A thorough comparison is key in helping your clients make an informed buying decision, which benefits all parties involved. Here are a few points to consider:

Inconsistent Coverage Terminology

One carrier’s “ordinance or law” is another’s “increased cost of construction.” The variations in coverage names from policy to policy can make the job of comparing quotes a maddening exercise. Here are a few of the most common:

• Contingent Business Interruption = Supply Chain
• Ordinance or Law = Demolition and Increased Cost of Construction
• Leader Store = Attraction Property
• Claim Data Expense = Professional Fees
• Utility Services = Off-Premises Service Interruption

Please note, however, that in addition to the name, there could be key differences in the coverage itself.  For example, most contingent business interruption clauses cover only direct suppliers and customers   whereas supply chain coverage includes both direct and indirect suppliers and customers.

Blanket limits

It may appear that a quote includes a blanket policy limit, but is it a true blanket limit? Does it contain a margin clause? A margin clause limits the amount an insured can collect to a certain percentage of the reported value for any given location, typically 110 or 125%. It places the consequence of underreporting values back on the client and essentially applies a per location limit. For example, if a client reports $10M in real and personal property (including stock) at a warehouse, values may fluctuate throughout the year and at the time of a loss (during their peak season) the actual value may be $15M.  If the policy included a margin clause of 110%, the client would have a $4M uninsured loss as the loss would be limited to 110% of the reported value, or $11M in this case. Margin clauses can be difficult to find in some quotes and forms. It could be in the lead-in wording to the sub-limit section or in the definitions.

It’s also wise to confirm whether a blanket policy limit applies to business interruption.  Some carriers provide a blanket policy limit for real and personal property, but limit business interruption to the value reported or a smaller loss limit.

Vacancy provisions

Some questions to ask/confirm regarding vacant locations:

• Is there a reporting requirement and if so, within how many days?
• Are certain coverages and/or perils excluded?
• Does the valuation change (i.e., actual cash value)?
• Is there a requirement to maintain the same level of sprinkler protection and/or security?

These are just a few of the many important points to consider when comparing quotes and policy forms.  Remember: “Ctrl-F” (Find) is your friend to search for key words and terms!

For an overview of FM Affiliated coverages, see our policy slip sheets on our website. You can also find our policy and industry endorsements on FM Affiliated Online or by contacting your production underwriter.