Insurance Coverage: More Is Usually Better

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Insurance: you hate it until you need it. Over the past few months, we’ve had a number of clients call to discuss their insurance coverage not only for their businesses, but also for their families. The Coronavirus pandemic certainly has businesses and families thinking: am I covered? What’s going to happen if I don’t have enough coverage? Our encouragement to most clients, once they actually do a thorough review of their policies in place, is to ask themselves: “Is more insurance actually better?” As someone who previously worked in the insurance industry, the simple answer is no. Instead, clients should be thinking that more insurance is usually better.

While I hope none of my insurance agent friends ever read this, the common statement that “more is better” isn’t always true and especially not in the insurance context. Insurance companies are in the business of taking care of their clients– there is absolutely no denying that. However, they’re also in the business of making money (aren’t we all?) and therefore want to find ways to limit or exclude coverage when they can. (At this point, if you’re still reading, go read your Homeowner’s or Automobile policy, and flip to the “Exclusions” section and try not to freak out). The simple point: lots more incidents are actually excluded than are actually covered. There are whole departments of these companies and divisions of law firms devoted to finding a way to exclude or deny coverage. I digress.

The main point: more insurance is usually better but not always better. The more policies you have in place, the more opportunities you have to find coverage for whatever loss you or your business may incur. However, you may be overpaying for policies you don’t actually need that will inevitably result in a loss that will be excluded under your policy. Think about the analogy of having too many policies this way: a pot full of spaghetti noodles (i.e. all those policies you don’t need) vs. one or two noodles in your pot (i.e. one or two policies that may provide coverage). Or, consequently, a pot full of Mama’s homemade spaghetti (better coverage and higher limits) vs. one spaghetti noodle trenched in Newman’s Own (your one policy that may not provide coverage).

The takeaway: instead of worrying about how many insurance policies you have in place, you should instead consider raising your coverage limits — or consider whether certain actions you or your business take will be covered under your current policies in place.

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