Updating and Revisiting Your Insurance
In my previous post, I shared with you what happened last month when pipes burst in a vacant apartment and flooded my office below. The severity of the damage and the stress that resulted taught me some important lessons I needed to learn as a leader.
In addition to failing to fully assess the extent and severity of the situation, I had made another big mistake. I had failed to update and revisit the type and level of insurance coverages I had. The policy had just renewed 3 weeks before the loss. The renewal was a hassle due to the short time frame to sign the application and pay the premium. While I had property and casualty insurance on the building (which covers the damage to the structure caused by the water leaking and flooding) and insurance through my law firm on all the contents since the firm rents as a tenant from the building, I still could have made other adjustments to the insurance policies. For example, I should have revisited replacement cost vs. actual cash value to fully understand the cost differences of those coverages. Replacement cost is better coverage but is more expensive, particularly when you are talking about large, old buildings.
As it stands, I will need to work carefully with the adjusters to identify structural components that don’t lose value versus cosmetic items such as carpet that do lose value over time.
The good coverages we had in place are for loss of income, coverage for temporary rental space elsewhere, and insurance on all the contents, including documents and data recovery (not to be confused with coverage that protects you in the event of a data breach). For the insurance coverages we had in place, I give myself a B-. It would have been an A+ if I had replacement cost on the building.
From a property management standpoint, one of the biggest mistakes I made was not promptly changing the locks on the unit once it went vacant and we did a moveout inspection. This meant that it could have been possible for someone to still have access to the unit. Never assume that you got all the keys back or that no copies were made, not even the keys that only a locksmith can duplicate. Someone had turned off the furnace after opening a window. That combination eventually led to the pipes freezing. If we had a policy in place of changing the locks within 24-36 hours of a moveout, this could not happen.
The policy we have in place of getting the utilities switched over was helpful because it showed for insurance purposes that we were doing everything we could reasonably do to have heat both in the building and in the unit in question to make sure we did have coverage under the insurance policy. When the furnace is turned off at the thermostat and a window is left open when it’s 20º outside, pipes will freeze on the inside even when there is heat above, below and in the adjoining unit.
I’m being transparent and sharing my mistakes with you in the hope that you will learn from them. I’ve posted in the past about the importance of revisiting your insurance policies to make sure everything is up to date and adequate for your current needs. I trust this example proves my point.