Promises, promises: take better look at your protection warranty

Entrepreneur, June, 2003 by Jacquelyn Lynn

If you have a burglar alarm, fire sprinklers or other risk-reducing feature that falls under the category of a "protection warranty" (meaning you guarantee your property has a protective system), you may qualify for a rate reduction on your insurance premiums.

But don't just take the money and run. If your coverage is based on one or more protection warranties, you're responsible for keeping that protection operational. If you don't, the insurer can deny a claim, says David Ezra, attorney and partner with law firm Berger. Kahn APLC in Irvine, California. For example, if you're remodeling and your sprinklers are disconnected, you may not be covered for a fire during that time.

If your protective system is not working for a period of time, notify your agent in advance, says Ezra, and make sure you're covered during that time. He also suggests weighing the costs and benefits of protection warranty discounts. "Think about how much you're saving [in premiums] and what it's going to cost to keep that system in place all the time," he says. Ezra also warns a warranty maybe a problem. If you fail to keep your end of the deal on a warranty discount, your claim may not be paid.

As always, read the policy and be sure you understand what you're promising to do for the premium reduction, as well as what the consequences are if you fail to meet the terms of the coverage.

JACQUELYN LYNN is a freelance business writer in Orlando, Florida.