Are you properly insured?

Despite a difficult global climate, the good news is that the Cayman insurance industry has been able to keep premiums competitive and avoid increases for the majority of customers.

However, with an uncertain future, most people are looking for quality protection at a lower price. So what should they do?

Avoid under-insuring
One thing to avoid is decreasing your cover, or sums insured, just to save money on your premium. This may seem like a good idea, but if a claim occurs, you risk being underinsured, having inadequate cover. Do not forget that apart from where insurance is compulsory such as for motor vehicles, it is bought to give protection in the event of loss; cutting corners to save on premiums may make the whole exercise an expensive waste, and cost dearly.
People in Cayman should be aware of the dangers of under-insurance and of the need to insure for the replacement cost of their home, as opposed to obtaining insurance purely to cover the amount of an outstanding mortgage. It may surprise you to know between 30 per cent and 50 per cent of all Hurricane Ivan claimants had their claims reduced as a result of under-insurance.

One way to avoid this is to annually review a policy’s “sums insured” to ensure that they are adequate by obtaining a property valuation every few years. There is at least one insurance policy available locally which comes with a free Rebuilding Cost Assessment report. This is designed to assist customers in arriving at an adequate rebuilding cost for their home. You can also ask your insurance provider for a contents checklist to help you to tally up your contents sum insured.

Benefit from discounts
Practical steps to protect your property, and therefore benefit from reduced insurance premiums, include the following:

  • Installing approved shutters, impact resistant windows, or fitting impact-resistant laminate to all windows
  • Adding, strengthening or raising sea walls for ocean front properties.
  • Constructing new buildings with risk-prevention in mind. This includes elevating buildings above the surrounding ground to reduce flood risks, building on higher ground, using the latest methods and roofing materials.
  • Using intruder alarms, safes, and keeping doors locked to reduce loss by theft.
  • Checking fire alarms and firefighting devices to ensure that they remain operable.
The last two points focus on the fact that whilst windstorm and flood risks are perhaps the most likely to threaten property in Cayman, they are not the only ones; fires and thefts occur too.

Get liability insurance
Another area that is often overshadowed by the headline grabbing fears of hurricane damage is liability. Slips, trips, injuries at work or on business premises do occur, as does damage to other people’s property. Public Liability and Workmen’s Compensation covers can offer protection to businesses and individuals against such things. Having such coverage does cost money upfront, (the premium), but can save far more money in the long run.

Shop around
Cayman is fortunate to have a number of insurers, brokers and agents, so you do not need to rely on any one business for advice and quotations, but can use a range of them for your motor, home and health needs. One of the key benefits of using a broker is that they can approach a number of insurers for you, saving you the time of having to do so.

Insurance providers should discuss your requirements with you, and offer you a range of quotations from different insurers, or with differing levels of deductible. Insurers give discounts, (typically 10 per cent), for increasing your deductible for “catastrophe” losses. The drawback is that in the event of a claim you have a larger deductible, so it is always wise to ensure you will not be placing yourself in a difficult financial situation at a later date by taking such an increase; as you may have more than one loss within a year. Therefore many people, especially stratas, set aside money each quarter in order to save up for their deductible. For example, a $1,500,000 property with a three per cent catastrophe deductible would be responsible for the first $45,000 of each hurricane loss. Can they afford to suffer two or more losses in one year if they do not have any savings set aside? You can also ask your insurance provider for details of premium financing options; many companies now offer interest free payment plans.

The same applies for people who select to exclude catastrophe perils from their policies. This does reduce their premium, but places them at risk should a flood or other such loss occur. They may be better off paying a bit more up front and getting cover for these risks but with an increased deductible, rather than excluding this cover altogether.

Do your homework
Thought should be given as to the quality of the insurer. Find out from the Cayman Islands Monetary Authority how large, stable and secure the insurer is, as well as looking into the insurer’s ability to pay claims. There is little point paying for insurance if the insurer looks for loopholes to avoid paying claims, or charges too little in premiums and goes out of business, leaving customers uninsured.

Understanding who is actually insuring your policy and who will be servicing you in a claim situation is vital. Do they have the resources to handle an influx of hundreds or thousands of claims if Cayman suffers another hurricane strike? Ask your insurance provider what the insurer’s AM Best ratings are in terms of size and security. Read and make sure you understand your policy, clarifying queries. If necessary, amend your policy at the outset rather than when you are trying to make a claim.

Remember that not all insurers, intermediaries or insurance products are the same. Be proactive because a little bit of homework at the outset can save headaches further down the line. 

Richard Scrivens is a business development executive with Fidelity Insurance, which is a member of the Fidelity group of companies.