Does Your International Property Insurance Provide the Right Protection?

Many organizations and businesses are in need of affordable coverage that protects property and assets located in foreign countries. Property losses are one of the highest areas of loss for businesses. According to the Summer/ Fall 2016 Edition of The Clements Worldwide Risk Index, property damage was ranked as the 2nd highest area for losses (the margin was close with 29% of respondents ranking business interruption as the greatest loss and 28% ranking property damage).

When international organizations have headquarters and offices in foreign countries, it can be tempting to take out only a local property insurance policy in that host country. It may seem like a way to save money, but in reality relying only on a local policy can be costly and those polices often don’t provide adequate coverage as a result of three main factors: low overall policy limits, low sub-limits, and lack of political violence protection. 

Under-insurance due to low policy limits

International schools are one industry where Clements Worldwide often sees under-insurance, meaning organizations do not take out policies that cover the full value of their assets.  This is particularly common with schools that own their buildings. Schools and many other companies think a local policy is sufficient because they don’t expect to have a total loss, but with most local policies, the amount of a partial loss claim will be in the same proportion as the value of the under-insurance.

For example, some organizations have USD 10,000,000 worth of assets, but their local policy only provides coverage for USD 2,000,000.  If a company submits a claim for the maximum value of the policy, USD 2,000,000 million in this case, the payout will be only be USD 400,000 because the total payout will be based on the percentage of insured asset. 

Because the policy was only worth USD 2,000,000 for a building valued at USD 10,000,000, only 20% of the asset is insured.  Therefore, only 20% of the claim will be paid out - USD 400,000.

This scenario illustrates the necessity for companies to find insurance that covers the total value of the assets, which is again a challenge with many local policies. 

Look at policy limits – will your policy payout when you need it

An international commercial property insurance policy, such as the one offered by Clements Worldwide, provides vital coverage that a local policy doesn’t. For example, Clements offers worldwide coverage, including in high-risk areas, meaning organizations can protect their property across several locations, which can help improve insurance management and significantly reduce costs. 

Additionally, high value items such as property are not the only coverage needed by international organizations. A proper property policy will provide coverage for items such as contents, stocks or inventory, valuable papers and records, debris removal, accounts receivables as a result of lost records and heavy equipment, including manufacturing equipment but also boilers etc. Your property policy can also include food spoilage which is relevant in many parts of the world where infrastructure affects power reliability and even cash, which is generally not covered by other policies.  Some policies, however, may have such low sub-limits for some of these items, the policy becomes almost useless. Ensuring your policy provides adequate coverage can be a challenge with a long, complicated policy document.  An international insurance broker can help you navigate these complex policy documents to ensure you have the coverage you need. 

Finally, does your policy have sub-limits for catastrophic perils such as floods, earthquakes, typhoons, etc?  These acts of nature affect many businesses in developing markets.  Finding a policy that covers the unique needs of international organizations is critical to sustained operations.  

Political violence policies are a must have in high-risk areas

Nearly all typical property policies exclude political violence including but not limited to terrorism, civil unrest, strikes, political disturbances, riots, malicious damage, sabotage, or war.  Sadly, in many developing markets these events are becoming increasingly commonplace so protection against them is critical.  A political violence policy sits alongside a typical property policy to cover damages as a result of these risks. Clements Worldwide is increasingly encouraging organizations in high-risk markets to look at these additional policies as organizations might be financially ruined in the event of violence of this type.

In conclusion, while most organizations do have a property policy, they often don’t have the best  policy.  When Clements Worldwide consults with clients, we often find clients are severely under-insured because of low overall policy limits, sub-limits that affect payouts for different expenses, and exclusions for political violence.  These policy deficiencies could result in substantial costs and business stoppages for organizations. Let Clements Worldwide review your current property policy and provide a free consultation regarding increasing protection of your assets.  Find out more information on Clements’ International Property insurance for organizations and individuals.

Call us today at +1.202.872.0060 or 800.872.0067 or e-mail request@clements.com to discuss how we can tailor our policy to meet the size and scope of your organization. 

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