Not long ago, the Treasurer on a board of directors called to cancel their recently approved policy because “it included elevator collision coverage and we don’t have an elevator.” She was upset because the 185-page policy contained language that did not apply “at all” to her small community, and she was convinced that they were paying for “all that unnecessary coverage.”

It brings up good questions – why is all that language in there? Are customers actually paying for coverage they don’t need?

Let’s answer the second question first – no, they are not paying for unnecessary coverage. Communities are rated based on the facts of that association including the number of units, number of stories, type of construction, amenities, etc. If they really do have an elevator, the agent would add that information to the application. Underwriters take everything into consideration, rate it, and come up with a premium based on those facts.

So, if the agent and underwriter know that there really is no elevator, how come it is still in the policy language? Admitted carriers, such as Farmers Insurance Group, must submit each of their forms (i.e. policies and endorsements) to the California State Department of Insurance for approval. These forms, including the language and rates, must comply with the requirements for that state. For simplicity and efficiency, carriers create forms which apply to a broad range of customers.

If each carrier had to customize policies for every customer, could you imagine how long it would take for the state to approve each one?

So yes, your insurance policy probably contains language for elevator collisions, but no, you are not paying for it.

Terri Guest, CIRMS, CMCA is the Northern California Sales & Marketing Representative for Berg Insurance Agency and can be reached at Terri@berginsurance.com