At the suggestion of April Sedall from Personal Office Management POM (see “Someone you should know” on our blog) here is a list of some of the additional insurance coverages that should be considered for your personal property and casualty program.
This Bulletin is intended as a reminder and explanation of the availability of these coverages for anyone who needs to understand more about personal property and casualty insurance.
1. Excess Liability
Also known as Umbrella Liability, this coverage provides an additional layer of liability insurance above that offered by your separate “primary” policies, generally including policies issued for your homes, automobiles, boats, and recreational vehicles. Most policyholders would be well advised to consider an umbrella policy, but for high net worth policyholders, this additional protection is critical. Not all umbrella policies are equal: the better ones provide defense costs in addition to the policy limits, which can be an important benefit.
2. Excess Uninsured / Underinsured Motorist Liability (UM / UIM)
If a policyholder is involved in an accident with another motorist who is at fault, and has either no insurance (uninsured) or insufficient insurance (underinsured), the UM / UIM extension to the automobile policy is intended to reimburse the policyholder for an amount that would have been collected from the other motorist’s insurance. While this extension is available under most primary automobile insurance policies, it is generally not available on all excess liability (umbrella) insurance policies. However, if your umbrella insurer does offer this coverage, it is certainly worth considering. Limits of up to $10 million may be available and in our opinion, everyone should have at least $1 million.
3. Uninsured / Underinsured Liability (Third Party Liability)
Provides coverage for bodily injury, property damage, and personal injury that results from accidents and occurrences not involving an automobile (see 2 above, Excess Uninsured / Underinsured Motorist Liability UM / UIM), and for which a third party is at fault but uninsured or underinsured. An example might be if you are injured from falling on the steps of someone’s home, and the property owner has inadequate limits of liability to cover your medical bills and lost income. This coverage extension is attached to the excess liability (umbrella) policy, and will usually reimburse the policyholder for an amount that would have been collected from the property owner’s insurance. This provision is currently only available from a limited number of umbrella insurers.
4. Domestic workers compensation insurance
Workers Compensation provides no-fault compensation for injuries sustained at work in the form of scheduled benefits including lost wages and medical expenses, depending on the nature of the accident. Policyholders who have full-time employees should have this coverage. This is separate from health insurance, which typically excludes coverage for workplace injuries.
5. Employment Practices Liability (EPLI)
For policyholders with household employees, EPLI provides defense, and if necessary damages, against employee allegations claims such as sexual harassment, wrongful termination, and discrimination. You may think of your household employees as part of your extended family who would never dream of suing you, but to them you may be seen as just another employer.
In insurance, flood is always water damage, but not all water damage is flood. It is an excess of water (or mud) on land that is normally dry, typically resulting from rising water from outside the house: “flood” is usually excluded by name from most homeowners policies. It is not the same as Backup of Sewer and Drain (see 7. below), which can generally be covered. Flood insurance is primarily available from a federal agency, the National Flood Insurance Program (NFIP), although flood is now being offered by some private insurers on a limited basis and often with broadened coverages.
7. Backup of Sewer and Drain coverage
Distinct from flood, which is generally water entering the house from outside, this covers damage arising from the backing up or overflow of the sewer or drain, and discharging inside the dwelling. It is typically the result of pressure on the sewer and drain systems during heavy rains. If the discharge or leakage occurs outside the dwelling, and then enters the home through window wells, door openings, or the foundation, it is usually deemed to be flood, and not covered. Many policies cover backup of sewer and drain – but not all of them: It is important coverage to have, particularly as changing weather patterns indicate a greater frequency of exceptionally heavy rainfall.
In those parts of the U.S. where earthquake is a risk, earthquake coverage is generally available by endorsement to the homeowners policy, or through a separate policy. There will almost certainly be a cost to add this coverage, which may include separate deductibles for damage to the building, and to the contents. Landslide coverage is rarely included as part of earthquake coverage; where available, landslide is usually written as a separate policy. In areas of the country where earthquake is not a significant risk, earthquake coverage may sometimes be provided for the contents in both homeowners and condominium policies at no charge.
9. Equipment Breakdown
This extension to the homeowners policy provides coverage for mechanical failure, electrical breakdown, and pressure systems breakdown, of complex multi-zone heating and air conditioning systems, home security systems, and home theater systems. Such sophisticated systems are increasingly common in modern homes, and breakdown is generally not covered by standard homeowners polices.
10. Blanket Jewelry and Fine Art Coverage
”Blanket” coverage is an alternative to listing items of jewelry and fine art on a schedule. A coverage amount is elected and there is a maximum available per item, known as the “per item limit.” This approach will typically be less expensive than scheduling each item, and is a good option if you do not necessarily wish to insure every item or obtain appraisals to insure every item. Many high net worth carriers now offer increased per-item blanket limits of $10,000, $25,000 and more. Keeping an up-to-date inventory is imperative to facilitate claim handling. Unlike itemizing valuable articles, the value is not agreed in advance and the insurer will need an estimate of the cost to replace the item, a bill of sale or an appraisal and the inventory avoids the difficult process of figuring out the description of those nice earrings were that you lost.
11. Agreed Value on Vehicles
Most automobile policies that include physical damage (comprehensive and collision) coverage will pay the policyholder the current market value (Actual Cash Value), including depreciation, in the event the vehicle is a total loss. Sometimes an insurer will pre-agree the amount to be paid in the event of a total loss, known as agreed value, which means there is no dispute over the settlement amount. Recently, several insurers have introduced replacement cost coverage which will replace the total loss vehicle with a new model year of the same make.
12. Cash Settlement
This allows an insured the option to accept a cash settlement equivalent to the policy limits in the event of a total loss on the home, rather than having to rebuild. Broader insurance policies offer this flexibility while other insurers will only pay claims as reimbursement for rebuilding following a loss.
13. Worldwide Protection
Not all insurers offer worldwide protection for liability, contents, jewelry and fine art. This is important coverage for travelers, especially when renting a car. Check your policy language to see if your coverage extends only to the US and Canada and to see if there are countries that are excluded.
Chartwell Bulletins are produced by Chartwell Insurance Services, Inc., an independent insurance broker specializing in the personal asset protection of high net worth individuals. Chartwell Bulletins address issues of general interest and since coverages vary by company and by state should not be taken as an interpretation of a particular policy or advice on any individual situation.
A representative of Chartwell Insurance Services will be pleased to discuss all aspects of your personal insurance. Contact: Rebecca Korach Woan 312-645-1200 or firstname.lastname@example.org