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“Alarming” Things About Insurance

“Alarming” Things About Insurance

If you have property insurance (and you should) the application may have asked about your security measures. Do you have armed guards? Do you have a sprinkler system? Do you have a burglar alarm system?

In some cases your security measures may earn you a discount on your policy premium. However, they probably also include something else: a Protective Safeguards endorsement. What is that, and could it be a problem?

Protective Safeguards Endorsement

The Protective Safeguards endorsement will look something like this:

The premises and building numbers will correspond with the location(s) scheduled on the declarations page of the policy, and each one will have one or more symbols listed next to it, each starting with “P-”.

P-1 is an Automatic Sprinkler System

P-2 is an Automatic Fire Alarm

P-3 is a Security Service that makes hourly rounds

P-4 is a Service Contract with a privately owned fire department

P-5 is an Automatic Commercial Cooking Exhaust and Extinguishing System

P-9 is any other protective system shown and described in the schedule

Why List Protective Systems?

If you list a protective system on your application, you will most likely receive a discount on your coverage. However, the insurance company will require that the protective system be in complete working order at the time of a loss, otherwise they will not pay on the claim.

The endorsement itself includes a provision adding an exclusion to the policy that says if the policyholder knows that the protective system was not working prior to the loss, then there is no coverage. If the protective system fails because it was not properly maintained, there is also no coverage.

What About Burglary?

It can be noted that most of the protective safeguard symbols on the policy relate to the hazard of fire, and that the exclusion added on the Protective Safeguards endorsement relates to fire.

The P-9 symbol encompasses other types of protective systems, including burglar alarm systems, and it may be noted elsewhere in the policy that if the P-9 system is not functioning properly at the time of loss then there is no coverage for theft.  

Some companies may also include the Burglary and Robbery Protective Safeguards Endorsement.

The symbols for this endorsement include:

BR-1 is an Automatic Burglary Alarm monitored either by a central station or police station

BR-2 is an Automatic Burglary Alarm protecting the entire building that has a loud gong or siren on the outside of the building

BR-3 is a Security Service that makes hourly rounds when the premises are not in actual operation

BR-4 is any other system described on the endorsement

As with the Protective Safeguards endorsement, coverage for loss or damage due to theft are excluded if the system described on the endorsement is not functioning at the time of the loss.

How Can You Protect Yourself?

Your insurance company needs to know if there are any changes to your protective safeguards. Notify your insurance company as soon as possible:

  1. If the system you have in place to protect your premises is not functioning properly and cannot be fixed within 48 hours or less.
  2. If your monitored alarm system service is disrupted due to outage or is discontinued for any other reason, including nonpayment.
  3. If the system on your application has been replaced by a new system.

Current systems should be properly maintained with records kept showing this maintanence. Failure to maintain systems will result in no coverage in the event of a claim should the system fail during the claim event.

Check your policy today to see what protective safeguards endorsement is on the policy and make sure that the system noted is the system that you actually have. If it isn’t contact your broker immediately to make the necessary changes to your policy.

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