Scary - Looking for Input

A friend of ours recently lost his shop to a fire. That in itself was a tragedy, but fortunately he had decent insurance, or so it seemed. As I hear it because his bank is the mortgage holder on his property, they called in the mortgage loan and took all of the insurance proceeds leaving him with no collateral, no loan and no financing for rebuilding. I have put in a call to our agent to see to whom the proceeds are payable and if we have enough insurance for a situation like this. It seems banks are not only cutting credit lines but are making financing difficult if not impossible. Those questions have not yet been answered but off the top of her head, she thought an insurer would not insure for more than the estimated cost to rebuild the building. Will let all of you know when I hear back.

Second thing is offsite backup. If your equipment burns up and your backup is on the property, that in itself could put you out of business even if you can rebuild. Do any of you use offisite data storage?

Shops, insurers, computer guys any input here?

Tags: backup, computer, fire, insurance, liability

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Comment by Jeanne Silver on April 26, 2010 at 6:41pm: Thanks to all of you for the great advice. Keep it coming. I did hear from my agent and this is what she wrote:

1. In the event of a total loss, (name deleted) would make the check payable to the mortgagee and the insured - (which is why the mortgage requires being listed on the policy, so they have protection that their loan will be paid).

2. Was insured insuring the building for replacement cost, or just the amount of the mortgage, as usually the replacement cost is much higher, so even if bank called in the loan, insured would get something.

2. The only time (name deleted) has seen the mortgage company call in the loan, is if the borrower was in default. (I hear this was not the case here.) This wording would be in the contract between borrower and lender. If the loan is current and paid on time, then "usually" the borrower signs the check and gives insured to rebuild, and stays on the loan. Again, it is based on the loan agreement as well.

3. I also confirmed that the building cannot be insured for more than it's replacement value - as that is all the insurance contract is required to pay.

I know this is probably not what you wanted to hear, but that is how it is on all loans, including home loans too. It is very important to read the contract, and to try and stay out of default or behind on your loan payments.

So there you have it from underwriting.

Comment by Christopher Sheehy on April 26, 2010 at 1:54pm: Terribly sad story indeed... my heart goes out to them.

As for the back-up thing... I recently subscribed to Carbonite to handle my back up needs. I already have a hard-drive back up in place, so adding this makes it a redundant system. Overkill? Quite possibly, but I know I'm covered. I liked the more business-like features of Carbonite over the other popular back up offering, Mozy. Carbonite also lets me access files remotely, a nice feature.

Hopefully - I won’t ever have to find out whether I made a good decision.

Costs:
External 2TB drive by Seagate: $150
Carbonite annual subscription: $55

All-in-all, pretty cheap data loss/recovery insurance...

Comment by Michel Malik on April 26, 2010 at 3:03am: Any business should have its data backed up off site.
At BodyShop News, we back up everything on and off-site.

Good luck to your friend, his insurance should have been enough to cover a rebuild, thus more than any mortgage would be.
In Australia a mortgage cannot be larger than the value of the property (at least on business properties).
Regards
Michel (in Sydney)

Comment by John Norris on April 25, 2010 at 4:09pm: Sad commentary Jeanne. Our member shops are offered commercial (incl. fire) coverage with our insurance vendor. Normally it is current replacement value and works out to about 150% of actual market value, so I do not know of a similar instance. As well, shops can have their equipment and building covered by an Industry Canada loan at prime plus 2% and a small fee, which guarantees any potential loss to the bank. For backup, we use a portable hard-drive once a week and stored offsite and the Bell Vault, which is a phone-company offered complete off-site backup that occurs automatically twice a day. Cost is just over $10 per month. Enjoy your posts. Best wishes, John Norris