We are occasionally asked by some of our clients if they have to report the total value of their commercial property. We always advise our clients to yes, report your valued property at 100% replacement cost value.
You must report to the insurance company what the values are of each part of your hydroelectric operation. If you do this, you can be assured to be fully indemnified (made whole).
Some policies, however, have a co-insurance clause.
If, by chance, the claim is higher than your stated values on the application, as long as it is not under 80% of the actual value you will have no co-insurance penalty and will again be fully indemnified for your property claim.
If you intentionally undervalue your plant or the values of the plant are less than 80% of the actual value, you will be indemnified only for the percentage of the value for which you listed. For example, if your report values are only 60% of the actual cost of the property you would only be indemnified for 60% of the loss.
Each year we ask our clients to review and update their values prior to renewal. Now is the time to reevaluate current costs of replacement equipment, labor rates and inflation.
Never give an insurance company wiggle room to not pay for 100% of your property claim. Updating your values annually will protect you against being assessed a co-insurance penalty.
Property insurance rates are ever changing. They fluctuate based on claims across each industry and are heavily influenced by interest rates.
This year, the entire energy market is experiencing commercial property renewal premiums raising by 15% to 20%. Some increases are larger if you have experienced a significant property loss within the past five years.
Energy Insurance and Bonds, Inc. is celebrating its 30 year as an agency. We built our agency to specialize on the energy and hydroelectric market because of the need for small power plant operators to get adequate insurance coverage at a reasonable rate.
We continue to expand and refine our insurance providers and coverages to take advantage of ever changing insurance market.
John Marc Knight, President, Energy Insurance & Bonds, Inc.