Times Have Changed!

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Loss Assessments: Home or Condo

If you live in a home in a developed area or subdivision, there’s a reasonable chance that you are a member of a homeowner’s association. The same is true if your pad is a condominium.

Association membership has its benefits. In return, members of the association are sometimes asked to contribute funds to help maintain the integrity/value of the common elements. Those common elements—a garage or clubhouse, for example—are those items of property commonly owned by all members. “Asked” may be too soft a word—such contributions usually are collected through mandatory assessments.

What are some things for which you as an association member can receive an assessment? Good question. The answer is typically found in association bylaws. In some states, laws will have something to say about the extent an assessment can be charged and for what it can be charged. However, such statutes do not exist everywhere.

Here’s another question: If you receive an assessment from your home or condo association, will your home or condo insurance policy help you pay for it?

The answer, well, depends.

Most home and condo insurance policies have very similar language in how they address coverage for loss assessment. There are a few things you will need to know before coverage can be determined.

What Caused the Assessment?
The home or condo policy only will kick in to pay an assessment that is charged to you for a reason that would be covered by your insurance. For example, if the assessment were charged to help cover the cost of damage to the clubhouse caused by a fire, your policy would pay due to the fact that fire is a covered loss under your policy. However, if earth movement damaged the same building, your policy would not pay if earth movement is not a covered loss under your policy.

If an assessment is charged to cover the cost of painting the exterior of the clubhouse simply because the association decided it was time to paint, your coverage would not kick in due to the fact that there has been no covered loss.

Assessments are not only charged to cover claims of damage to common elements. Members also may be assessed for claims of bodily injury or property damage against the association’s master policy. For example:

A guest suffers a permanent head injury after slipping on a damaged walkway. The bodily injury claim against the association is $1.5 million. The association’s policy will cover the injury up to its policy limit of $1 million. The association assesses its members to cover the remaining $500,000.

In this example, your insurance policy would kick in to help pay the assessment. Why?  Bodily injury is covered by your policy.

Which Policy Covers the Assessment?
Your home/condo policy says that it will only pay the cost of assessments that are charged during the policy period. This is important to note because it’s possible that the actual assessment may not be charged until months after the loss causing the damage occurred. For example, say the hurricane happens in August, when Company X insures you. In September, you switch your coverage to Company Y. The assessment for the portion of the hurricane damage that isn’t covered by the association’s master policy arrives in October. Company Y’s policy would kick in as it was in effect when the assessment was charged.

How Much Will My Home or Condo Policy Pay?
Most policies are issued with a limit of $1,000 to cover loss assessments. This limit is the most your policy will pay for a single loss, regardless of how many assessments are charged for it. For example, if the clubhouse is damaged by a hurricane, it’s possible that members may be assessed first to cover the cost of the association master policy’s deductible—and again to cover the cost of the repair that exceeds that policy’s limit of insurance. Since both assessments are charged due to the same hurricane, the total paid by your insurance would not exceed $1,000.

That $1,000 Seems Too Low. Can I Increase My Assessment Coverage?
Yes. Most home and condo insurance companies offer you the opportunity to add more coverage for loss assessments. It’s important to know that while the dollar amount may be increased, the terms of the policy still apply (i.e. you will still need the assessment to be charged due to a covered loss).

If you choose to purchase additional assessment coverage, proceed with caution. Most loss assessment endorsements will still only allow you a maximum limit of $1,000 if the purpose of the assessment is to cover the master policy’s deductible.

Final Note
Loss assessments can be expensive. Having the right home or condo insurance policy to help cover some of the cost could save you big bucks.

 

From Trusted Choice http://www.trustedchoice.com/

Cleaning up the Mess

It’s after the wind blows or the fire burns. The insured is sifting through the rubble of what used to be his commercial building, looking for any savable scraps of what used to be.

The good news is that the loss is covered and the insured will be getting a check for the cost to replace the building. The better news is that the policy limit was adequate and the insured will not suffer the consequence of coinsurance. But it’s not over.

The insured discovers that, due to increased demand resulting from widespread damage, hiring a contractor to remove the debris will be more expensive than anticipated. But that shouldn’t be a problem because the policy limit is adequate…right?

Most commercial property policies will cover the cost to remove debris resulting from a covered cause of loss. However, coverage may be limited or excluded depending on a few important factors addressed in the policy.

Factor #1 – How much is enough?

First, consider that it is not cheap to remove certain types of debris. For example, removing debris of an old frame building may be less labor-intensive than debris of a building with substantial masonry or steel. Removing such items will likely require the use of a contractor and heavy equipment. Also consider that high demand brought on by widespread damage will likely increase the contractor’s fee for service.

Second, consider how the policy calculates coverage to remove debris. Most policies say that the insured will have access to a stated amount—typically $10,000—plus the lesser of:

• 25% of the paid loss plus the deductible, or
• The remainder of the policy limit minus the paid loss.

For example, consider a loss to a building valued at $1 million. If the loss amount is $100,000 and the deductible is $5,000, coverage would be determined as follows:

• 25% times the paid loss ($95,000) plus the deductible ($5,000) = $25,000, or
• The remainder of the policy limit ($1 million minus $95,000) = $905,000.

In this claim, the insured has access to $25,000 plus the stated amount of $10,000 to clean up the mess.

Now consider the same building, only this time it is a much greater loss of $900,000. Coverage would be determined as follows:

• 25% times the paid loss ($895,000) plus the deductible ($5,000) = $225,000, or
• The remainder of the policy limit ($1 million minus $895,000) = $105,000.

In this claim, the insured has access to $105,000 plus the stated amount of $10,000 to clean up the mess. In the event of a total loss, it’s likely the policy won’t pay more than the stated amount of $10,000. The purpose of these examples is to show that the more severe the loss, the less money the policy includes for cleanup.

Factor #2 – What is ‘covered property’?

Most commercial property policies will pay only the cost to remove debris of “covered property.” This definition includes items specifically listed as such in the policy. The policy also lists items that are defined as “property not covered.” Items meeting this definition may also require cleanup, and the cost associated will not be paid by the insurance company. Examples of these items include pieces of the parking lot, building foundation, landscaping, and items that end up on your property from somewhere else.

Factor #3 – Pollutants

If a building is damaged and the site must be cleared, items defined in the policy as “pollutants” may require special care. For example, consider a print shop that catches fire, releasing highly toxic inks and dyes into the ground. Local engineers may require you to extract those pollutants from the site. If so, the cost may be substantial and is typically not covered by a commercial property policy or is limited to a specified dollar amount that may not be enough, such as $10,000

Solution

We can help you amend your existing policy to offer more coverage for the cost to clean up debris. We can also help you minimize your exposure by amending the policy to cover items that are currently excluded, such as those examples listed above. Further, we can help you understand the meaning of “pollutants” in your policy and determine if your property contains items that may require special care to remove

 

From Trusted Choice http://www.trustedchoice.com/

Times Have Changed!

Flood Insurance: What It’s All About

Not so long ago, Hurricane Katrina pounded the Gulf coast of the United States, wiping out more than 250,000 homes.

That massive storm painfully brought to public awareness the fact that flood damage is not covered by homeowners insurance. 

Many consumers were unaware that, even though their homes were ruined in the hurricane, they were not insured since they lacked flood insurance. Insurance against flooding (rising water) is different from insurance against driven rain or leakage, which often are covered. Since that time, tens of thousands of Americans have purchased flood insurance for the first time.

Three perils—fire, lightning and windstorm—are traditionally covered by homeowners property insurance. Flooding is excluded from homeowners coverage, as floods tend to be catastrophic in nature causing widespread damage in a geographic area. Private insurers are not able to absorb all that risk.

Hurricanes get a lot of attention, but big storms are not the only cause of floods, nor are floods limited to coastlines. In fact, flooding is the nation’s most common and frequent natural disaster, according to federal officials.

Flood insurance first came about after the federal government was called upon to bail out communities. As the nation grew after World War II, flood-damaged communities turned to the federal government for disaster relief and rebuilding assistance. In the 1960s, Congress sought a more proactive system, and in 1968 created the National Flood Insurance Program (NFIP).

This community-based insurance mechanism requires municipalities to adopt and enforce flood-abatement measures. In order to join the NFIP, it must adopt a program of corrective and preventive measures for reducing future flood damage (including zoning and building requirements). Flood insurance is available only to consumers in communities that have joined the NFIP.

The National Flood Insurance Program (NFIP) is part of the Federal Emergency Management Agency (FEMA). It provides flood coverage to homeowners and renters as well as commercial building owners. Coverage is provided through Trusted Choice^® insurance professionals as well as through other insurance agents.

Flood insurance may not just be desirable for homeowners, it may be required. For example, mortgage lenders are legally bound to require consumers buying a house in a high-risk flood zone to have flood insurance.

Consumers owning or renting property in low- or moderate-risk flood areas can buy flood insurance, and may be eligible for a lower-cost preferred risk flood policy.

Flood insurance protects against losses to buildings and contents (not the property on which they sit). Coverage is in effect whether flooding results from heavy rains, storm surge on the coast, melting of snow, blocked storm drainage systems, levee or dam failure, or other causes. Waters must cover at least two acres or affect at least two properties to be considered a flood for insurance purposes.

Residential flood insurance provides as much as $250,000 of coverage for dwellings for 1-4 families, and as much as $100,000 for contents. Commercial property owners can get up to $500,000 of insurance for the building and the same amount for contents. Condominiums also can be insured.

Unlike homeowners insurance, flood insurance has a waiting period. The NFIP sets a standard 30-day waiting period before flood coverage goes into effect (except for lender-required flood insurance, if more insurance is required because of a flood map revision, or if existing coverage is being increased upon renewal).

 

From Trusted Choice http://www.trustedchoice.com/

Auto and Home Insurance for Unmarried Couples

 

 Sixty years ago, when the 1950 census data was released, it showed that eight in 10 households were occupied by married couples. Fifty years later, the 2000 census data showed that number had declined to just over 50%, signifying a sea change in the typical American household. Almost half of households were occupied by a single individual, roommates or unmarried couples (the 2010 census data is still in the process of being made public).

If you are in the “living together but not married” category, you should pay close attention to the language in your home and auto insurance policies that specifies which individuals are covered—in insurance terms, the “insureds.”

HOME INSURANCE
Most standard home insurance policies restrict coverage to a “named insured”—the individual person(s) named on the policy and his or her resident spouse. The policy then extends coverage to “resident relatives,” a term referring to individuals related to the named insured by blood, marriage or adoption (or someone under 21 in your care, such as a foster child) who are residents of the named insured’s household.

This means that a home insurance company has no obligation to cover a non-insured’s liability or to defend that person in a lawsuit alleging liability.

Consider this scenario: A girlfriend and her teenage son move in with the woman’s boyfriend. The son seriously injures another child in a tackle football game at the park down the street. That child’s parents file a suit against the mother/girlfriend.

Unless she has her own separate insurance policy (such as a “renters” insurance policy) or has been added as a named insured on the home insurance policy (which most insurance companies won’t do if she isn’t a relative), she has no coverage. 

The problem doesn’t stop with liability. Chances are the girlfriend and her son will also move some of their personal property in with them, but clothes, electronics, school supplies and whatever else belongs to them may not be covered by the homeowner’s insurance policy either. Most policies exclude coverage for personal property that is owned by roomers, boarders or tenants. This personal property exclusion is another reason why a renters insurance policy is essential for non-insured roommates.

AUTO INSURANCE
The auto policy also has a “named insured” which includes the individual listed on the policy and his or her spouse. The insured on an auto policy varies depending on the coverage. For example, liability, medical payments, and uninsured motorist coverage each have their own definitions of “insured.”

Say an adult boyfriend and girlfriend each have a car and their own personal auto insurance policies. One has high limits of liability on their policy, maybe $100,000, and the other has lower limits, like $25,000.

Let’s look at liability coverage in this scenario. This section of the policy covers the “named insured” and “family members” for liability arising out of the use of any auto. It also considers any other person an “insured” while that person is occupying a car (with permission) that is insured under your policy.

Dig deeper, however, and you’ll see that the policy excludes coverage while the “named insured” or “family member” is operating a vehicle that is furnished or available for regular use.

If the girlfriend is driving the boyfriend’s car and gets into an accident causing injuries, his auto insurer would pay up to the policy limits—in this case, $25,000. Unfortunately this may not be enough money to cover the full liability if the injuries are severe, and the liability policy with $100,000 limit might not be available as a fallback, even though it covers the driver for the use of any auto. That’s because the driver’s insurer can argue that this car is available for the driver’s regular use since the car owner and driver live together and that, under that circumstance, coverage is excluded by the policy language

 

From Trusted Choice  http://www.trustedchoice.com/