Understanding Your Insurance Policy

By Jared Sonnenberg, Managing Partner, Oakwood Insurance Group, LLC

Jared Sonnenberg, Managing Partner, Oakwood Insurance Group, LLC

Insurance policies are written in a unique “language” that takes time and practice to fully understand. This means, in many cases, policies can be difficult to read. No matter what kind of insurance policy you have purchased, one commonality must exist and should be the starting point – each policy must spell out what is covered and what is not. If you have questions about what your policy is or is not covering, start by asking your agent. Most policies that nurseries, greenhouses and garden centers purchase come with significant premiums. So if you have questions, again, start with your agent – you are paying them for a reason.

Why does the insurance language have to be complicated? Even with an insurance agent’s help, why can’t things be easier to read? Simply put, an insurance policy is a legal document. And that document must hold up in court. Translation = legalese and specialized terms eliminate legal ambiguity. However, there is something interesting: legally, insurance contracts are supposed to be easy to read. Insurance policies (contracts) have readability standards, which were established in the 1980s. Typically, the target standard is scoring between an 8th and 10th grade level. For example, in Colorado, auto insurers cannot issue policies that exceed the 10th grade reading level.

Knowing the above information, here are a few quick tips to keep in mind as you examine your insurance policies.

  1. As already stated, if necessary, get help. Ask your agent. Many policies are very dense and contain a lot of information that can be somewhat confusing to sort through.
  2. Get a second opinion. If your current agent seems unhelpful, most other agents will look at policies and even generate quotes for free.
  3. Pay attention to any words that are in UPPERCASE. Even words that are Capitalized. They are typically defined in the policy with specific meanings. Some words even reference other sections of the policy.
  4. If another section is referenced, move to that section and read through it. It likely contains information that will be helpful in reading the section containing the reference.
  5. Make sure your policy has the Insured(s) listed correctly. It is not uncommon to “do business” under a different name. Or have different LLCs or Partnerships handling different aspects of the nursery, greenhouse or garden center operation. Are the different relationships listed as “Additional Insureds”, if necessary? Ask your agent.
  6. Make sure you specifically read the Exclusions section of your policy. Even read the Exceptions to the Exclusions section, if available. Policies will list the insured perils and coverages, but one of the most difficult times is when a claim occurs. If a certain peril is excluded – there is no payable indemnity. Know what your policy is covering and what it is excluding.
  7. Almost everything, “good” and “bad” will be revealed in the event of a qualifying loss event (covered peril). This leads to probably the most important part of purchasing an insurance policy: Tip #8.
  8. Confirm that the coverage limits are adequate in the event of a qualifying loss event. Adjusting coverage levels to meet certain self-determined premium thresholds seems like a good idea when the policy is written, but if the coverage is not adequate, it WILL SHOW UP when the claim is being worked.
  9. And, a final quick tip is: make sure that Policy Conditions are met. For example, if the insurance company has agreed to accept your Application WITH THE CONDITION that two of the greenhouse polyethylene sheets be replaced – then get the sheets replaced.

We hope this brief list of tips is helpful! Let’s keep our fingers crossed for an uneventful and profitable 2021.

About the contributor: Jared Sonnenberg is a managing partner at Oakwood Insurance Group, LLC, along with managing partners, Sam Sonnenberg and Tim Sonnenberg. You can reach Jared at 970-521-2707 or jared@sonnenbergagency.com. Oakwood Insurance Group is the partner company of Sonnenberg Agency, LLC based in Sterling, Colo. The company offers nursery crop insurance to wholesale nursery operations through the USDA’S Risk Management Agency (RMA) crop insurance program.