In-Home Business Exposures

Aided by technology, many people have started working from home. However, the Homeowner’s policy doesn’t cover business activities, so where can you get coverage? When can an endorsement be made to your Homeowner’s coverage to add the coverage? When can’t coverage be endorsed to your Homeowner’s policy?

In-home businesses are becoming a common occurrence, thanks to technology. With the ability to videoconference with anyone at anytime over the internet, the business world has become a smaller place—and is allowing more people to work from home. Some people can connect to their company's servers and work from home. Others use the new technology to sell their wares online, using their home as there head office and/or warehouse. And still others run non-internet based operations, such as daycares and pet grooming. So when does a home business require an endorsement to the Homeowner's policy, and when does it require a separate commercial policy?

Most Homeowner’s policies do not automatically cover any business property or liability at all. However, most Homeowner’s policies give you the option to endorse your policy to cover an in-home business exposure. Typically, that endorsement will extend coverage from your Homeowner’s policy to cover incidental business liability and cover your business personal property as well. However, this endorsement is typically reserved for in-home offices only. An example would be if you had a company computer at home that could connect to your company’s server and allow you to work from home—making calls, fill out reports, etc. 

Typically, things get more complicated if the entire business is ran in-home. Businesses such as the aforementioned daycare and pet grooming probably wouldn’t be able to be covered by your Homeowner’s policy. This is because the entire operation is based from the home, instead of being an incidental exposure. Also, there are extra coverages that those types of businesses would need (E.g. business income, animal bailee coverage, molestation and misconduct coverage) that are not even offered for homeowners.

In-home businesses are becoming more common, and the risks are becoming more complicated. If you think you may have any in-home business exposure, make sure to contact your insurance agent and have a discussion about the specific risks of your situation and your insurance options!    

Note from the Author (Nov. 14, 2014): After two years of work, we've entirely redesigned our website! Using SquareSpace, we were able to import this blog and we are continuing our blog there. To find the current version of this article and our new articles, click HERE.

Flood, Mudslide, and Earthquake Exclusions—What You Don’t Know Can Hurt You

Why aren't these perils covered in a standard (unendorsed) Homeowner’s/Renter's policy? How can I get these covered? Do I really need to have these perils covered?

Thousands of homeowners are surprised each year by flooding, and some of them are even more surprised when their insurer denies their claim! Similar scenarios happen for both earthquakes and mudslides, too. What many homeowners don’t realize is that their standard Homeowner’s/Renter's policies do not cover these perils!

The reason these perils aren’t covered is because they are typically part of catastrophes, and catastrophes are often hard to cover by a non-government entity. The typical insurer simply doesn’t have the financial capability to insure everyone in a flood zone. That’s why programs such as the National Flood Insurance Program (NFIP) were made. So there are certain parts of the U.S. that are drastically susceptible to floods, mudslides or earthquakes, and those places are where government programs really come in. The rest of the United States is in low to medium risk zones, which can often be insured by private insurers--but only by endorsement! Remember that no standard form of the Homeowner’s or Renter's policies will cover any of these perils!

So if you’ve gone this long without these coverages, do you really need to insure them now? Flood maps and fault maps are available online, and for those in Nebraska, we have a low to moderate risk of flood, mudslide, and earthquakes (the fault that runs through Nebraska hasn’t been disastrously active--yet). Coverage for these perils usually don’t cost too much to cover, and might keep you from having a claim denied some day.

A note about flood insurance: covering your home for the peril of flooding is a broader coverage than you might think. It doesn’t have to be a river, pond, or lake overfilling to cause a flood. Public sewers backing up, water tables rising and causing seepage through your walls, and more are covered by a flood policy—and would otherwise be excluded.

Extras:

• You can find a seismic risk map HERE and other earthquake information. 
• As a FYI, a 2.9 magnitude earthquake just happened back on January 5^th, 2014 from south Lincoln down to Manhattan, Kansas (100 miles west of Kansas City).
• You can find more flood information HERE.

   Note from the Author (Nov. 14, 2014): After two years of work, we've entirely redesigned our website! Using SquareSpace, we were able to import this blog and we are continuing our blog there. To find the current version of this article and our new articles, click HERE.

Introduction to Sump Pumps

Diagram provided by sump-pumps-online.com

What is a Sump Pump? Where can it be found? Do I need a Sump Pump? How do Sump Pumps relate to insurance?

A Sump Pump gets rid of the water that collects around your basement’s walls. It is needed because water pressure on your basement walls can lead to big problems. The water to be Sump-Pumped is collected by perforated piping that runs around the outside edges of your basement. The water is sent to the Sump Pit, which is a basin for the water to accumulate in. The Sump Pump will be found in the Sump Pit, and will most likely be found in the unfinished part of your basement. When the water level in the Sump Pit reaches a certain point, the Sump Pump will automatically turn on and pump the water through another pipe that will displace the water properly.

In Nebraska, not all homes will have the need for a Sump Pump. Those that do, have one for one or a combination of the following reasons:

• The water table below your home is high enough to reach your basement when it rains
• Your home was built in a valley/in a flood-prone area
• The land is improperly graded away from your house
• Your decks, patios, driveway, etc. is improperly graded away from your house
• Your gutters are not adequate/are malfunctioning

These scenarios allow for water accumulation along the sides of your basement, which will eventually lead to seepage, with a possibility of collapsing the basement wall(s) entirely. Seepage alone creates issues of mold and mildew, and will ruin your insulation and drywall.

If your home is built on top of a hill, has properly graded land, pavement, decks, etc. and has properly functioning gutters, you may have no need for a Sump Pump. However, for those who do have one, most insurance companies offer a Sump Pump coverage endorsement that will protect you if your Sump Pump were to fail. Some of these endorsements include coverage for collapse because of a malfunctioning Sump Pump as well. Note that no Homeowner’s insurance policy comes with Sump Pump coverage as a standard coverage.

Note from the Author (Nov. 14, 2014): After two years of work, we've entirely redesigned our website! Using SquareSpace, we were able to import this blog and we are continuing our blog there. To find the current version of this article and our new articles, click HERE.

What Are Professional Liability Policies?

Some risks overreach the boundaries of the General Liability policy. These risks require the use of a specially designed policy, called the Professional Liability policy. Who all needs a Professional Liability policy? Why aren’t these risks covered by the General Liability policy?

When you think of Professional Liability, you think of your doctor, your lawyer, and your accountant. These individuals are recognized professionals, and most certainly require a Professional Liability policy to be properly protected. These individuals need the Professional Liability due to the great financial and/or physical harm they can inflict on their clients if they do not properly perform their work. These professionals are also being held to a higher standard by the certifications and associations they belong to as a doctor, lawyer, accountant, etc., thus they are referred to as a ‘professional’. Being a professional, they assume more risk than what is covered in a General Liability policy, thus the need for the Professional Liability policy.

However, while doctors, lawyers, and accountants are all great examples, they only make-up a portion of all Professional Liability policyholders. The ones you don’t think about are personal trainers, insurance agents, architects, graphic designers, and many more (these examples are often referred to as quasi-professionals). A good rule-of-thumb on determining if someone has the need for a Professional Liability policy is if they have to have a state license to legally work. If a state license is required, they almost certainly will need a Professional Liability Policy. The follow-up rule is that they have any sort of certification needed for their job, they probably need a Professional Liability as well (an exception to this would be a First-Aid certification). While there are plenty of exceptions to these two rules, it will catch most people who need it (Note that some professions require a Bond instead of the Professional Liability policy).

If someone does need Professional Liability, it depends on their situation as to where they can get it. Some individuals must find personal Professional Liability policies on their own, such as the typical CPA. Others may have coverage provided for them from company, which would be the case for most nurses. A Professional Liability policy can be written to cover either situation, but in both situations, the policy will act in a similar way: providing a separate liability limit for claims caused by the errors or omissions of a professional or quasi-professional. 

Note from the Author (Nov. 14, 2014): After two years of work, we've entirely redesigned our website! Using SquareSpace, we were able to import this blog and we are continuing our blog there. To find the current version of this article and our new articles, click HERE.

Those Sneaky Sublimits

The property in your home is insured for a set amount of personal property. However, did you know that just because you have X amount of dollars of insurance on that property, other limits apply in the event of a loss? Find out what sublimits are, and how they can affect your settlement come claim time!

Sublimits are in all standard homeowners' policies, and are applied by category.  These sublimits come into play when there is a loss on personal property. There is a sublimit assigned to different categories of items (see below), and they limit coverage of that category to the amount selected for the sublimit. 

The following is a non-exclusive list containing many of the probable coverages that may be subject to a sublimit:

• Money, Bank Notes, Gold, Silver, Platinum

• Securities, Deeds, Passports, Tickets, Stamps

• Watercraft & Equipment

• Musical Instruments

• Trailers (non-watercraft)

• Jewelry, Watches, and Furs

• Firearms & Equipment

• Silverware & Goldware

• Trees, Shrubs, & Other Plants (subject to a % of Coverage A, and a per-item limit)

• Fire Department Service Charge

• Grave Markers

• Land Stabilization

• Ordinance or Law

• Refrigerated Products

• Electronic Media

• Fire Extinguisher Recharge/Replacement

• Increased Day Care Expense

• Computer Records

• Fungi/Wet Rot/Dry Rot/Bacteria Coverage

• Damage to Property of Others

The total sublimit of each category ranges from insurer to insurer. Some insurers will allow you to change the sublimits, some will not. The typical range of the sublimit is from $500-$5000, but there are exceptions, and ways to increase the amount past that. Depending on the insurer, some of the aforementioned coverages might be simply excluded altogether. 

Example Claim-Scenarios Involving Sublimits

Let's say (tragically) your house and all of your belongings burnt down. Let's also say you had a fine watch collection worth $50K. Almost all policies have a sublimit on jewelry/watches, and your policy (for this example) had a sublimit of $5K. You probably have other jewelry and your spouse or children may have watches and jewelry as well. That's an unpaid loss of over $45K.

Another example (and this one is a more intricate one) is the sublimit for your trees, plants, and shrubs. This coverage has a total limit of (typically) 10% of your Coverage A (the total value of your home). So if you have your home insured for $150K, you have a total coverage of $15K. Another sublimit is typically applied as a per-item limit, so for this example, your per-item limit is $500. Now if a fire engulfs your yard, replacing any of your rare plants/shrubs or re-planting your 20+ year old trees can get expensive, very fast. For example, a four-foot tall blue spruce can cost over $600 a piece! So you're looking at only being able to afford to replant saplings, and only up to the $15K total limit.

How Do I Make Sure I'm Properly Covered?

As I mentioned above, some insurers will allow you to increase the amount of the sublimit. Unless you have a large collection, or one or many high-value pieces, simply increasing the sublimit for that category will adequately cover you. If your insurer won't allow you to increase the sublimit to an adequate level, (which is often the case if you have a sizable amount) you can schedule your property. By scheduling your property, you can individually insure your high-valued items to properly cover them.

Another caveat to being properly covered is knowing whether or not your personal property is insured for Replacement Cost or Actual Cash Value. The difference between Replacement Cost and Actual Cash Value valuations can be the difference of hundreds or thousands of dollars. 

Note from the Author (Nov. 14, 2014): After two years of work, we've entirely redesigned our website! Using SquareSpace, we were able to import this blog and we are continuing our blog there. To find the current version of this article and our new articles, click HERE.

Understanding Uninsured & Underinsured Motorist Coverage

This article will explain the significance of these coverages by discussing their functions, using likely scenarios for examples, and providing possible consequences of having too little coverage. It will discuss minimum state limits and how to avoid being an Underinsured Motorist yourself. It will also discuss what to look for when buying these coverages.

What is the Difference Between an Uninsured Motorist (UM) and an Underinsured Motorist (UIM)?

An Uninsured Motorist is just that: someone with no auto insurance. Statistics show that 1 out of every 7 drivers (14% of drivers) in the US does not have any insurance. That’s over 45 million uninsured drivers. Alarming as this is, your Uninsured Motorist coverage will step in and act like the other party’s insurer in the event of a collision with someone uninsured. So if the other party was at fault, your insurer will pay you, up to your Uninsured Motorist coverage limit, as if they were the other party’s insurer.

An Underinsured Motorist is someone driving with insufficient levels of liability/property coverage. The Underinsured Motorist coverage comes into play when the other party is at-fault for the accident, and their insurance policy limit isn't high enough to cover everything they’re liable for. Like the Uninsured Motorist coverage, Underinsured Motorist coverage then steps in to act like the other party's insurer to pay for the damages that the other party can't cover, up to your Underinsured Motorist coverage limit. 

While an Uninsured Motorist is easily defined, determining whether you are an Underinsured Motorist or not is a hard thing to do until you cause an accident. Determining if you have a sufficient amount of coverage is entirely dependent on the severity of the accident you cause. For example, if you cause a simple fender bender, you might only be liable for a few hundred dollars. That's to fix the bumper and for a chiropractic session for the person you hit. However, a serious accident involving multiple people could easily add up to be hundreds of thousands of dollars!

The Problem with Minimum State Limits

The state of Nebraska has a minimum limit of liability every driver must have to be considered an 'insured driver'. That requirement is a split limit of $25,000 of bodily injury per person, $50,000 total bodily injury, and $25,000 property damage liability (often notated as "25,000/50,000/25,000" or "25/50/25"). While those limits are all you need to be a state-approved 'insured driver', think of the risk you're taking with those low limits:

• You hit a Lexus: luxury cars take luxury parts, along with costly import or dealer service. Even a relatively minor accident might not be covered by the $25,000 for property damage.

• You hit a car with three people in it: Let’s say each one of the other car’s occupants receives $20,000 of medical care. That still leaves you with $10,000 out-of-pocket. ($50K of total body injury insured, with 3 people x $20K = $60K, leaving $10K uncovered) Now imagine a more severe accident with a small sedan that has five people stuffed into it!

• You get in a serious wreck with a sports car with only one person in it: You destroy their new Corvette, which leaves you out-of-pocket roughly $25,000 for the property. Their spinal surgery and physical therapy adds up to $150,000. That’s $125,000 of bodily injury that you’re still liable for. 

What Happens if I Do Not Have Enough Liability?

In the minimum state limit examples, the amounts not covered by your insurance would be completely up to you to cover. In most cases, you can expect a court date to determine negligence and how much you owe the other party. The amount you owe will most likely be taken in the form of garnished wages or other means until things are evened out.

But What If They Have Underinsured Motorist coverage?

If they do, their insurance company is going to step in and take care of all of their immediate bills on your behalf, since you were driving without proper coverage (at least, 'improper' for the accident you caused). The other party's insurance company will come back and sue you for everything you rightfully owe (this is called Subrogation), so refer to the previous section. (Note that in the opposite situation where you're not the one at fault, if your insurer pays you through UM or UIM, your insurer will sue the other party to make them pay for what they owe [Subrogate them])

What Should I Look for When Buying UM/UIM Coverage?

To protect yourself from a hit-and-run or not-at-fault accidents where the other driver doesn't have/doesn't have enough insurance, you'll need UM/UIM coverage. Typically, UM/UIM is sold as a single coverage, however, it often only covers your bodily injury. If you do not have Comprehensive and Collision coverage on your car, make sure UM/UIM for property damage is covered, or see if it can be endorsed to the basic UM/UIM coverage.  

How Do I Avoid Being an Underinsured Driver?

Accidents are accidents; they’re statistically going to happen to everyone. You never know if the accident is going to be a simple scuff in the parking lot, or a catastrophic event. Moreover, there is technically no way to know that you will or won't be an Underinsured Driver. However, you can take a few simple precautions that will severely limit your chances of being Underinsured: through higher limits on your auto policy, safe and defensive driving, and an umbrella policy covering excess damages, you can drive knowing you're protected for almost anything.  

What are These Precautions Going to Cost Me?

Defensive driving is free, saving you from accidents and maybe even traffic tickets along the way. Insurance wise, to bump up the liability limits from minimum level (25/50/25) to $300,000 across the board (300/300/300) is typically not very much, often costing and extra $100 or so per year. Likewise, a $1,000,000 Umbrella policy usually costs around $200 per year, and the Umbrella policy will give you additional liability coverage to your auto policy and your Home/Renter's policy! Excess liability is extremely cheap, especially when you consider what could happen without it!

Note from the Author (Nov. 14, 2014): After two years of work, we've entirely redesigned our website! Using SquareSpace, we were able to import this blog and we are continuing our blog there. To find the current version of this article and our new articles, click HERE.

A Debate: Replacement Cost vs Actual Cash Value

These two loss settlement options are given on almost every property-covering policy you’ll see. What’s the difference between Actual Cash Value and Replacement Cost though? How does it apply to your home or commercial building? How does it apply to your personal property? 

What are Actual Cash Value (ACV) and Replacement Cost (RC)?

There is a huge difference between ACV and RC. Starting with Actual Cash Value, it is commonly defined as the ‘fair market value’ of your property. With ACV, a rough estimate of what you will receive after a claim will be what the property could be sold for at auction/online. However,the actual insurance definition for ACV is: "Replacement Cost minus depreciation of the property." To work with the exact definition, we need to know what Replacement Cost is, and how it works.

Replacement Cost is the full cost to replace your property with like-kind and quality, without any deduction for depreciation. Here’s an example. You have a flat screen TV that you bought for $3,000 in 2010 and a fire completely destroys it. If you had it insured for RC, you would receive a brand new model of the exact same flat screen (if one could be found), or the modern equivalent of it, even if it costs more. If it were ACV insured, you would only get the current market value of the TV, which might be less than $1,000 now.

How Does Replacement Cost & Actual Cash Value Apply to My Home/Buildings?

An example of RC would be if your home was insured for replacement cost and suffered a total loss. For this example, (and for simplicity’s sake), let’s assume your house is worth $100K on the market. However, the cost of rebuilding a home, or any structure, is typically more expensive than the market value of the home (after a building is originally built, its market value and the value of the inputs have all changed. These changes in value are caused by inflation, increased costs of labor, increased costs of materials, different types of materials needed, new technology, shifts in housing market, different laws and ordinances governed on the erection of a building, etc.). So if you had a total loss, replacing the $100K home to its former condition might cost $200K. That’s $200K to rebuild your home in the exact same fashion it was before the loss. In this scenario, you would receive a completely new house, built for $200K, even though it was only worth $100K on the market.

Conversely, let’s say we had the same loss on the same house, but this time, it was insured for ACV. In the ACV example, you would only receive $100K (or $200K minus the depreciation). If you wanted your house repaired to what it formerly was, you would have to come up with $100K on your own, or you could have a smaller/less luxurious house built. 

The difference between ACV and RC is substantial come claim time, but is often overlooked because RC costs more. Make sure to discuss the true value of your home with your agent, and have them help you decide what the best option is for your situation.

Note from the Author (Nov. 14, 2014): After two years of work, we've entirely redesigned our website! Using SquareSpace, we were able to import this blog and we are continuing our blog there. To find the current version of this article and our new articles, click HERE.