Do you pay too much for insurance? If you’re like most of the people I come across, the answer is probably yes. I consistently find that most people are under the impression they are paying too much for their insurance. But if everyone is paying “too much” then is it the industry causing this, or is there something else at play? I would argue that this perception exists for a few reasons. First, we live in Southeast Florida where rates are vastly higher than other parts of the country. Second, is that the average insurance consumer does not have a deep understanding about the insurance they buy. This leads to the perception that “I am paying too much” when in reality, that may not be the case.
In order to help change this perception as it relates to property insurance, I want to help you understand how an insurance company comes up with the premium they end up charging you. There is a simple acronym to remember – COPE. COPE stands for construction, occupancy, protection and exposure. Once a company can properly classify your needs through the COPE method, they develop the bottom line premium. Here is a more detailed explanation of COPE:
- Construction means the type of building material used in the space you occupy. For example, is your building frame, masonry, a combination of the two, etc.?
- Occupancy addresses how the property/space is being used and if it is tenant occupied, owner occupied, or some form of the two. A commercial buildings rate can vary greatly depending on those they allow to occupy their space.
- Protection speaks to how close your property is to the necessary tools in the event the fire department needs to respond to a loss. How close is the fire station? Is there a fire hydrant nearby? Etc.?
- Exposure takes into consideration the risk of loss due to neighboring property. For example, a company may choose to not insure a commercial building that is geographically close to a fireworks factory even if that commercial building is being used in a less risky manner.
If you have any other questions or would like to discuss this topic further, please don’t hesitate to contact me directly. Thank you for reading!
Written by Robbie Korth
If you have any questions, please feel free to contact Robbie Korth at firstname.lastname@example.org.