Hurricane season brings with it the potential for many types of property damage or destruction, from storm surge to rainfall-related flooding, wind damage or tornadoes. Some of the key ways that cities and towns can manage their exposure to property losses is to keep their property schedules up to date, and to check over their insurance coverage ahead of time.
Updating property schedules
Schedules are the detailed list of items that municipalities provide to their insurance carrier when they first establish coverage. Afterward, they should update the schedule whenever they buy or sell assets — things like vehicles, buildings and inland marine items, which is an insurance term that can include things like fencing, mobile equipment, and signs.
Checking over property schedules can help prevent a property from being valued incorrectly or discovering that a property was not covered only after a loss. Out-of-date schedules could mean a city is paying premiums on an asset they no longer own, or that they bought an item that has not been reported to their insurance provider promptly, and therefore may not be covered.
In the case of SC Municipal Insurance and Risk Financing Fund members, staff can make updates and adjustments by logging in and learning about the underwriting portal.
Reviewing coverage
Here are some key issues to consider when checking on insurance coverage:
- Replacement cost or actual cash value – Understand the amount of money that would be paid if a building were to be destroyed. Coverage written on an actual cash value basis, such as for automobiles, would include a deduction for depreciation, which moves the potential payout lower over time even though the cost of replacement would not decline.
- Coinsurance – Know whether coverage includes a coinsurance provision, which requires cities to cover a certain percentage of the value of buildings and building contents. If a city does not insure the property for this minimum amount and experiences a loss, then the city would have to pay a coinsurance penalty amount before any deductibles are applied.
- Flood zones – Know whether buildings are located inside high-hazard flood zones, which are any zones beginning with the letters A or V. The National Flood Insurance Program offers a maximum coverage of $500,000 for a building and $500,000 for contents. If a building is in a high-hazard area and is not insured to these amounts, then any claims payments may be a payout on top of the NFIP coverage. The Federal Emergency Management Agency offers a Flood Map Service Center at msc.fema.gov.
For more information about managing property schedules and coverage, contact losscontrol@masc.sc.