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Risk Coach
Living Room
1

Your Personal Property – Payment Valuation Basis

If you have a standard policy, you should be aware that your claims may not be paid on a “replacement cost” basis. For example, your furniture, no matter how good its condition, would be subject to valuation that includes depreciation. When you factor in depreciation and the policy deductible, you may receive a much smaller payment than you had anticipated.

What to Do

Get a policy provision that pays claims based on a “replacement cost” valuation basis. That means the claim is paid based on the amount it would take to replace the property with other property of like kind and quality. Of course, the policy deductible would still apply unless your policy specifically states otherwise.

2

From Beaches to Mountains

A “Dwelling Fire” policy may be a good way to protect a property that you visit only occasionally or rent out. But there are a few things to consider before purchasing one:

  • Dwelling Fire policies do not include liability coverages – so if a visitor to your property is injured, the policy would not cover the related expenses. You may wish to consider adding a liability endorsement.
  • Damage that happens when you are away for an extended period can grow to catastrophic proportions – think frozen and burst pipes pouring out water for days or weeks – and must be factored into your estimate of the coverage amounts you need.
  • Not all Dwelling Fire policies offer coverage for your personal property inside the home. If your place is furnished, or you keep appliances or other property there, you should consider adding an endorsement to cover it.
  • The “DP-3” version of a Dwelling Fire policy provides “Open Perils” coverage – which means it covers you for more causes of loss than some other types of policies. Consider what exposures to loss challenge your home and see if this type of policy may be suitable.

What to Do

Consider a Dwelling Fire policy that will provide you with adequate coverage, and review the endorsements that will tailor the coverage to your needs in a cost-effective manner.

3

Your Children’s Friends

Your kids may be very responsible, but they cannot control their friends’ actions. However, you, as a parent, may be held responsible for the actions of your children’s friends while they are on your property.

  • Poor judgment – If a minor child gains access to your liquor or prescription drugs, you could be held responsible for any injury he or she incurs and/or any damage or injury the child causes as a result.
  • Physical injury – From falling out of a tree to running through a glass door, childhood accidental injuries are very common. As the adult owner of the property or adult supervisor, you could very likely be held responsible for medical treatment costs or more.

What to Do

Consider your circumstances carefully and review your homeowners policy’s liability limits. If your home is the neighborhood “Kid Grand Central Station,” then please consider an excess liability policy.

4

Guaranteed Replacement Cost vs. Your “Coverage A” Limit

A very serious but common error is assuming that your Coverage A limit (which applies to the physical structure of your dwelling: roof, walls, ceilings, floors, stairs, decks, built-in cabinets and book cases, fireplaces, window seats, wainscoting, etc.)will always be sufficient to totally rebuild your home after a total loss when you plan on using materials of like kind and quality as the original. But if any of the following are true, that would likely not be the case.

  • Your Coverage A limit hasn’t changed in years. If so, inflation hasn’t been kind to you. The cost of labor, materials, construction permits, and inspections and other related costs have risen over those years, and your Coverage A amount has not kept pace. A $200,000 limit may have been sufficient 10 years ago, but is not likely to be now.
  • You live in an area prone to hurricanes, tornadoes, or wildfires. After a widespread event, the cost of building supplies, labor, and other items skyrockets, and you end up paying much, much more than you would have under normal circumstances.
  • You have added a room and/or deck or have done a major renovation to your home. Wow. You really increased the value of your home – and it likely went way beyond your current Coverage A amount.
  • Your house is made with excellent quality materials and/or architectural features that require considerable craftsmanship to create: i.e., custom fire places, art tiles, built-in hardwood bookcases and cabinets, window seats, etc. These types of items and the skill it takes to create them generally become more expensive over time.

What to Do

Guaranteed Replacement Cost coverage is a very rare but very worthwhile coverage. Look for an insurance company that offers it. Purchase it either as part of an endorsement package (which is usually very cost-effective) or as a stand-alone endorsement.

Dining Room
1

Your Fine Arts and Collectibles

A standard insurance policy simply does not provide adequate coverage or an uncomplicated claims process for fine arts and many types of collectibles.

  • Settling claims for high-value items can be a lengthy process if the value of the items has not been established before the loss.
  • Scheduling your items can allow you to establish a mutually agreed-upon value with your insurance carrier – before a loss.
  • Loss to a pair or set is not always covered, so losing an earring can be an expensive inconvenience.
  • Most policies do not cover breakage – such as that caused by a painting falling off a wall or a case of porcelains collapsing.

Other Advantages

The policy deductible does not apply to items you cover under a scheduled items endorsement. In addition, a schedule covers you against more causes of loss than a standard homeowners policy, including for losses due to mysterious disappearance. So if you discover that a valuable item is no longer in your possession, but you do not know how or when it disappeared, you would be covered.

What to Do

Get additional coverage by “scheduling” your fine arts and collectibles. A scheduled endorsement lets you cover your items as a group, individually for an agreed amount, or individually for actual cash value. So if your valuable items are stolen or destroyed, you would receive payment based on the type of coverage and amount you selected – without the application of a deductible.

2

The Family Silver

Is your heirloom, wedding, or collectible silver your pride and joy? If so, you should know that it may not be well protected. The average homeowners policy covers your silver only for loss by theft (so if it’s destroyed by a fire or accidentally discarded or damaged, you’re not covered). And it only covers loss up to $2,500.

What to Do

If your silver is worth more than $2,500, consider scheduling it. You can get an endorsement that would pay a blanket amount, an actual cash value amount, or an agreed amount in case of loss – without the application of a deductible. You’d also be covered for more causes of loss than simple theft.

3

Your Personal Property – Avoid a Nasty Surprise

Did you know that many homeowners insurance policies don’t cover the contents of your house for more than 16 or so very specific causes of loss? For example, loss due to breakage isn’t covered by a standard policy. That means if your expensive chandelier or lamp, your family’s antique vase, or a good porcelain dinner service is accidentally broken, you wouldn’t be covered.

What to Do

Get a policy that covers you for “Open Perils.” This kind of policy will cover you for all causes of loss except those that are specifically excluded by the policy.

4

Chore Services

If you hire someone – even through a professional service – to clean your home, babysit your children, mow your grass, clean your pool, trim your hedges, or do any number of basic chores, you might be held legally responsible if they are injured while on your property. From slips, trips, and falls to hornet stings and dog bites, incurred injuries can be the basis of a claim against you.

What to Do

An excess liability policy helps protect you from injury-related suits against you. Carefully consider your exposure to this type of loss and discuss it with an insurance professional.

Master Bedroom
1

From Bali to Bangkok and Beyond

If you travel outside of United States territories regularly or for extended periods, you’ll have a lot of the same exposures to claims against you as you do at home in the United States. The risks are even higher in some countries due to unfamiliar terrain, customs, and infrastructure. For example, it’s very easy to drive on the “wrong” side of the road when you’re in an unfamiliar country, it’s dark, and you’re tired – and an accident can easily ensue.

What to Do

An excess liability policy covers you for claims or suits against you that take place anywhere in the world. Frequent travelers and temporary ex-pats need this coverage. If you’re one of them, make sure you have it.

2

Your Fine Arts and Collectibles

A standard insurance policy simply does not provide adequate coverage or an uncomplicated claims process for fine arts and many types of collectibles.

  • Settling claims for high-value items can be a lengthy process if the value of the items has not been established before the loss.
  • Scheduling your items can allow you to establish a mutually agreed-upon value with your insurance carrier – before a loss.
  • Loss to a pair or set is not always covered, so losing an earring can be an expensive inconvenience.
  • Most policies do not cover breakage – such as that caused by a painting falling off a wall or a case of porcelains collapsing.

Other Advantages

The policy deductible does not apply to items you cover under a scheduled items endorsement. In addition, a schedule covers you against more causes of loss than a standard homeowners policy, including for losses due to mysterious disappearance. So if you discover that a valuable item is no longer in your possession, but you do not know how or when it disappeared, you would be covered.

What to Do

Get additional coverage by “scheduling” your fine arts and collectibles. A scheduled endorsement lets you cover your items as a group, individually for an agreed amount, or individually for actual cash value. So if your valuable items are stolen or destroyed, you would receive payment based on the type of coverage and amount you selected – without the application of a deductible.

3

Your Personal Property – Avoid a Nasty Surprise

Did you know that many homeowners insurance policies don’t cover the contents of your house for more than 16 or so very specific causes of loss? For example, loss due to breakage isn’t covered by a standard policy. That means if your expensive chandelier or lamp, your family’s antique vase, or a good porcelain dinner service is accidentally broken, you wouldn’t be covered.

What to Do

Get a policy that covers you for “Open Perils.” This kind of policy will cover you for all causes of loss except those that are specifically excluded by the policy.

4

Your Engagement Ring and Wedding Bands

If you have a standard homeowners policy, your wedding jewelry is subject to some major coverage limitations:

  • The payment limit is usually about $1,500. Most engagement rings are worth more than $5,000. That’s a big gap.
  • The policy likely only covers loss by theft – not accidental loss of stones.
  • Damage done by fire or other causes of loss would not be covered.
  • “Mysterious disappearances” – such as when you take it off while cleaning and can’t find it later – would not be covered.

What to Do

Get additional coverage by “scheduling” your engagement ring and wedding bands. This endorsement can cover your items for a wide range of causes of loss as a group, individually for an agreed amount, or individually for actual cash value. So if your wedding jewelry were to be lost or destroyed by a covered cause of loss, you would receive payment based on the type of coverage and amount you selected – without the application of a deductible.

5

Your Jewelry, Watches, and Furs

Your homeowners policy can hold a few surprises. If you have a standard policy, one of them may be a $1,500 maximum payment for loss by theft of jewelry, watches, and furs.

  • If your jewelry is stolen, you’d only get $1,500 – minus the policy deductible. So, even if you just have an engagement ring or wedding band(s), you’d likely be out several thousand dollars.
  • If you lose your ring (down the sink or in a restroom when you wash your hands), a standard policy wouldn’t cover it.
  • If you lose the stone from your ring at the beach, your policy wouldn’t cover it.
  • If you accidentally leave your fur coat in a livery service vehicle and it cannot be recovered, your policy would not cover it.
  • If your good watch is damaged when you accidentally drop and step on it, your policy wouldn’t cover it.

What to Do

Get additional coverage by “scheduling” your jewelry, watches, and furs. A scheduled endorsement lets you cover your items as a group, individually for an agreed amount, or individually for actual cash value. So if your scheduled jewelry, watches, or furs were to be lost or destroyed by a covered cause of loss, you would receive payment based on the type of coverage and amount you selected – without the application of a deductible.

Bedroom/Dorm Room
1

Social Media Slip-Ups

Social media is growing and evolving – and it’s the new frontier of lawsuits. The Internet is a great way to share information, which also makes it a major facilitator of defamation – intentional or not. The ability to instantly make a hilarious (to you) comment, a snappy comeback, or an angry accusation often means you don’t have time to fully reflect on the possible consequences.

Your comments aren’t the only things that can be the source of a defamation suit against you. Edited photos (such as superimposing one person’s head on another person’s body) can also land you in a lot of hot water. A standard homeowners policy does not cover claims for “Personal Injury” (which includes invasion of privacy and libel).

What to Do

If you, your spouse, or your children have a blog, participate on social media sites, use instant publishing services, or even use email, you should consider an excess liability policy.

2

College Students

Living on Campus

Your college student living away from home may be covered by your homeowners insurance if he or she is under age 26, enrolled in classes, and living in college housing. But keep in mind that dorms are prime targets for thieves. Small portable properties such as electronics, jewelry, cash, and credit cards are easily stolen. Unfortunately, most homeowners insurance policies offer limited coverage for theft of these items. For example, cash is often only covered up to $200, credit and debit cards up to $500, and jewelry and watches up to $1,500. It’s important to remember that those limits have to cover theft from your household as well as the dorm.

Don’t forget to consider the computer and its peripheral equipment. Most homeowners policies are paid on the basis of the actual cash value of the item (which means the equipment is subject to depreciation), and the policy deductible applies. That means that if the computer, printer, and other equipment are even a few years old, the payment would fall short of the amount needed to replace them.

What to Do

Investigate adding endorsements to your policy that provide coverage amounts more suited to your situation. Pay particular attention to the value of small valuables and portable items.

Living Off Campus

While full-time students who rent an apartment off campus are often covered by their parents’ homeowners insurance, there are exceptions. Check your policy’s definition of “insured” if your student is not a full-time student or is over age 24. Other restrictions may apply, so review your policy carefully.

If your student is not covered by your policy, it means there is no coverage for property theft or damage or for liability suits. And let’s face it: college students aren’t known for their good judgment. Even if your student is generally responsible, roommates, guests, and neighbors may not be. Parties and a casual, drop-in atmosphere create the perfect environment for accidental property damage and injuries.

What to Do

Renters insurance is inexpensive – often less than $125 per policy term. If you think your student may not be covered by your homeowners policy, please investigate this very worthwhile coverage.

3

Your Child Away at College

Your adult child should be covered by an auto policy – even if he or she does not have a vehicle while at school.

  • It’s likely students will still be driving, even if intermittently. They may:
  • Use a car on weekends and vacations
  • Borrow a friend’s car
  • Drive another person’s vehicle on a road trip
  • While coverage provisions vary by state, auto policies with the appropriate coverage can cover injuries they sustain from being hit by a car when walking or bicycling, or when riding as a passenger in a car and the at-fault party is either uninsured or underinsured.
  • If the student owns the vehicle and the title is in his or her name, an individual policy is required.

Consider Appropriate Limits

If you plan to keep your child on your policy while he or she is away at school with a car, consider your coverage limits very carefully, because the probability of loss will change.

  • Students who have a car often act as the dorm chauffeur – which is a major liability risk.
  • Students may lend their car to friends – who may or may not be responsible drivers and who are almost certainly in the high-risk age group.

Ways to Lower Your Premium

  • Ask your insurance company if you can designate your child who is away at college as an “Occasional Driver.”
  • If your child is many miles away (the distance criteria varies by insurance company), you may qualify for a “student away at college” discount.

Lessons Learned: Unless you know that your child will not be driving a vehicle – even infrequently – keep him or her on your auto policy. You may qualify for a “student away at college” discount if your student does not have a vehicle on campus.

Office/Basement
1

More Than 50% of All Homeowners Make This Mistake

They don’t make an inventory of their personal property. Shock and stress make it difficult to create a comprehensive list of all your possessions after a major loss. Because people forget what they have and cannot gather proof of ownership of what they remember, they may not be entirely compensated for losses because they can’t provide the insurer with all the details of their property. If you have a loss and can provide your insurer with an up-to-date inventory of your property, you will receive a much more accurate settlement more quickly.

What to Do

  • Use your camera, video camera, or cell phone to record the contents of each room. Don’t forget to open cabinets and closets.
  • Keep your invoices, and take a photo of them too (in case they are damaged in the loss event or the ink fades over time).
  • Remember to include your garage, shed, pool house, attic, and other structures.

Download and use a home inventory app. The “Know Your Stuff” app from the Insurance Information Institute is free.

2

Volunteering

Volunteers are the backbone of charitable institutions – if you’re a volunteer, we thank you. Please keep in mind that while the Volunteer Protection Act of 1997 provides some protection for volunteers for liability suits against them, it also has some major loopholes. For example, suits related to the use of a motor vehicle aren’t covered (think carpooling or hauling equipment for an event). Coverage also varies by state – in some states only officers and directors of a nonprofit organization are covered.

What to Do

If you are a regular volunteer, please consider an inexpensive Volunteer Wrongful Acts endorsement. Most provide coverage for work or services you perform for an organized charitable, religious, or community group.

3

Social Media Slip-Ups

Social media is growing and evolving – and it’s the new frontier of lawsuits. The Internet is a great way to share information, which also makes it a major facilitator of defamation – intentional or not. The ability to instantly make a hilarious (to you) comment, a snappy comeback, or an angry accusation often means you don’t have time to fully reflect on the possible consequences.

Your comments aren’t the only things that can be the source of a defamation suit against you. Edited photos (such as superimposing one person’s head on another person’s body) can also land you in a lot of hot water. A standard homeowners policy does not cover claims for “Personal Injury” (which includes invasion of privacy and libel).

What to Do

If you, your spouse, or your children have a blog, participate on social media sites, use instant publishing services, or even use email, you should consider an excess liability policy.

4

Remodeling, Renovations and Additions

A new kitchen, bath or addition can add tremendous value to your home. Just make sure you insure your property to its new value. For example, if you remodel your kitchen with new cabinets, flooring, granite countertops and backsplash, it could easily cost you $50,000–$75,000. Let your insurance company know that you have made the change, and request a new “Coverage A” value on your policy. (Coverage A applies to the structure of your house and to the types of features listed above.)

Why?

If your home’s Coverage A amount was $350,000 before you made the renovations, your property will be covered only up to that amount. Since the replacement value of your home is likely now tens of thousands of dollars more, the amount of a claim payment for a covered loss may not fully bring you back to your pre-loss financial condition, potentially resulting in a loss of your significant investment in the home improvements you made.

What to Do

Always, always let your insurance company know when you make a structural change to your home that increases its value. By insuring your home to its full new value, you help ensure that your investment is protected in case of loss.

5

Be a Good (Smart) Sport

About 2.6 million children are treated each year for accidental sports-related injuries that include concussions and traumatic brain injury, broken bones, injured joints, spinal injuries, lacerations, eye injuries, and dental injury. Such injuries are costly – about $11 billion annually. Parents of injured children often feel they have no choice but to attempt to recover medical costs though claims against the parents or guardians of the child who contributed to the injury. Adults are also frequently injured while participating in athletics – and injuries from golf balls, baseballs, and other forms of sport can be incapacitating and expensive.

What to Do

An excess liability policy is a very good idea if you or anyone in your household is active in sports. Injuries – and related lawsuits, are very common.

6

Your Sports Equipment

Good-quality golf clubs, bikes, and other sports equipment are expensive – and at high risk of loss by theft, breakage due to accident, or “mysterious disappearance” (such as when you forget a club in the cart and it’s not there when you go back for it).

  • While your homeowners insurance would apply to loss by theft, it may only be for actual cash value of the item, and depreciation applies.
  • Your settlement amount would be further lowered by application of your policy deductible.
  • Most homeowners policies don’t cover loss caused by breakage or mysterious disappearance.

What to Do

Get additional coverage by “scheduling” your high-value sports equipment. A scheduled endorsement lets you cover your items as a group, individually for an agreed amount, or individually for actual cash value. So if your valuable items are stolen or destroyed, you would receive payment based on the type of coverage and amount you selected – without the application of a deductible.

7

The #1 Threat to Your Basement

Water and sewage backing up through pipes can cause major damage not covered by a standard homeowners policy. The noxious fluids flooding your home can damage or destroy flooring, walls, shelving, appliances, and stored items. Cleanup and decontamination can be a major effort and may involve city ordinances for disposal of toxic materials.

Ineffective treatment can lead to mold under floors and behind walls – something a standard homeowners policy doesn’t cover. Costly professional remediation may be needed.

What to Do

Get an endorsement that includes coverage for water and sewer backups and sump pump breakdowns. Consider what it would cost to professionally clean, decontaminate, and dry the area and to replace or repair any damaged materials or possessions. Then select your coverage limits accordingly.

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