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Insurable Interest: What’s In It For You?

Insurable Interest: What’s In It For You?

Insurance can be a big expense for businesses or individuals. However, some may choose to insure everything (or everyone) that they can in order to protect themselves financially. The main thing to remember if you are looking to purchase any type of insurance is a concept called “insurable interest”. What is it, and do you have it? Let’s find out. Why Does Insurable Interest Matter? The basic tenet of insurance is to “make whole”. For example: If you own a home or a building and you lose it in a fire, then insurance will pay to replace it. That will make you whole again – by replacing your building or home so that you once again have a place to work or live. Of course, there are other things that factor into it (coinsurance, depreciation, etc) but the main idea of making a person or business whole again is that you’ve lost something you owned or had an insurable interest in. What Can You Insure? Just about anything can be insured by anyone. You can get life insurance on your spouse and children. You can insure your home, your business building, your personal and company vehicles.  You can purchase life insurance on someone other than a spouse or child. You can even insure buildings you don’t own.  For example: let’s say you’ve run out of storage space in your house. Your next-door neighbor lets you store some of your belongings in his backyard shed. You decide that since your stuff is in the shed, you’re going to purchase insurance on the shed and the contents. The shed gets struck...
Application Misrepresentation/Fraud

Application Misrepresentation/Fraud

When researching insurance options the most tedious part of the process is filling out application after application after application. Every company seems to have their own form to complete, and no other application will do. Insurance companies require applications to find out all they can about your business operations. They want to know what they are potentially going to cover so that they can rate your risk properly and charge the appropriate amount of premium. They may also choose to decline a business applicant if the type of business is not something they are interested in insuring. Have You Reviewed Your Application? Depending on the size of the application you may have several pages to fill out, and then there is the signature line that comes at the bottom of the last page. It is usually proceeded by a bunch of legal jargon that most people don’t read prior to signing – but they should. This is what it looks like on the Acord 125 Commercial Insurance Application: That’s a lot to read, but it is definitely worth taking a moment to read and discuss with your broker prior to signing. What Constitutes Material Misrepresentation or Fraud? Material misrepresentation or fraud is defined as a misstatement in answer to a question on an application. That question is so important that if it had been answered truthfully, the insurance carrier may have declined coverage or charged a higher premium for the insurance policy issued.  It can be any of a number of things including: Misrepresenting prior loss history to a new insurance carrier.Failing to disclose criminal convictions or bankruptcies.Misrepresenting the...