Marine business owners often do not fully understand how co-insurance works when they arrange for their marine business insurance coverage.
The problem is finding out what things like co-insurance penalties, co-insurance percentages, and insured to value mean when you make a claim for damages. This is especially true if you weren’t fully informed about how these impact insurance claim payouts.
Here’s what you need to know about marine business insurance and co-insurance:
What is it?
Co-insurance is a kind of coverage that requires the insured pay a portion of the payment made against a claim. For example, if piers and docks are damaged, then the insured will pay a specified amount toward the cost of replacement or repair as outlined under the terms of the policy. The amount is variable, but if the insurance coverage is much less than the insure to value, then there is a penalty.
How does co-insurance work?
Co-insurance determines an insurance limit you need to purchase, perhaps 80% of either replacement cost or actual cash value. Some marine business owners are tempted to reduce annual premiums by opting for less than the total replacement cost because they are willing to gamble that they will never exceed a certain dollar amount. However, there is a penalty for not being insured to value and you will receive only a portion of your entitled insurance coverage. This means you might have to pay a significant amount of the repairs or reconstruction out of pocket.
What is Replacement Cost Value?
This is what it would cost you now to replace the damaged pier or dock, or whatever the insured item.
What is Actual Cash Value?
This is what the value is now, factoring in depreciation – or the wear and tear – that will negatively affected the value.
What is insure to value?
This is carrying enough insurance to cover the cost of total replacement rather than an insufficient amount.
What is a co-insurance penalty?
If a marine business owner does not insure the value of a property or marine asset, then the insurance carrier may calculate a penalty based on the percentage as stipulated in the policy and the amount under insured. In the event of a loss, the insured will receive only a portion of the marine business insurance payout as determined by the percentages stated in the co-insurance policy.
If you would like to learn more about co-insurance, contact the marine business insurance professionals at Global Marine Insurance. We have years of experience ensuring that piers, docks, and other marine assets are insured to value and that the insurance coverage protects against financial strain in the event of a disaster or accident.
