Insureds often believe their policies provide them with all around protection. However, standard policies were not designed to cover every eventuality. Rather they were designed to cover common exposures. Meaningful coverage gaps exist in most policies. They aren’t apparent until you experience a loss. Protect yourself by learning about these coverage gaps and how to close them.
Let Bowthorpe & Associates Insurance Producers help you find the coverage you may be missing.
Why Do Coverage Gaps Exist?
Insurance policies are not designed to protect you from every conceivable loss. Many common losses are excluded entirely or otherwise subject to maximum limits unless you purchase additional endorsements. Sewer backups, mechanical breakdown, identity theft and liability claims above your standard policy limits are a few common examples.
Coverage gaps also increase as your life changes but your policies do not. Adding a pool, upgrading your kitchen, working from home, renting a room, or simply acquiring more things you care about can all increase your exposure.
Let’s Review Some Common Options You May Be Missing
Umbrella Liability Coverage – This is one of the most valuable and easiest pieces of coverage to overlook. Umbrella liability extends liability limits above your auto, homeowners, or renters policy. You can be sued for auto accidents, injuries to guests on your property, or simply for something you’re found liable for. It only takes one lawsuit to exceed your coverage limits.
Umbrella policies start at one million dollars of coverage and are often much cheaper than you might think. Umbrella also covers certain types of personal injury claims that may not be fully covered by underlying policies. Claims like defamation, invasion of privacy, or false arrest can be brought against you.
Sewer and Water Backup – Standard homeowners policies do not cover water damage caused by sewer or drain backup. Yet water can come up through a drain or your sump pump can fail at any time. Water damage from a single sewage overflow can destroy flooring, drywall, and personal property in a finished basement.
For a relatively inexpensive addition to your policy you can add sewer or water backup endorsement that will cover this damage.
Equipment Breakdown – Equipment breakdown covers the sudden mechanical or electrical breakdown of many home systems and appliances. Think of the cost to repair or replace your heating and cooling systems, hot water heater, electrical panel or built in appliances.
While your homeowners policy would likely cover damage caused by an external event impacting your home, it will typically not cover damages caused by breakdown of the items mentioned above. Equipment breakdown coverage can help cover repair or replacement costs as well as other related costs like food loss or even temporary housing.
Identity Theft – Identity theft can provide financial reimbursement as well as access to professionals that can help you after the fact. Identity theft can be devastating and take weeks or months to restore. Reimbursement can help cover everything from legal fees, to lost wages while you sort things out, to replacing important documents.
Many insurance carriers offer identity theft endorsements that come with identity theft restoration services. Identity theft protection can speed up the process of restoring your identity while also lightening the administrative burden.
Scheduled Personal Property – If you own jewelry, fine art, musical instruments, firearms, collectables, or other high value items you likely carry standard sublimits on these categories. Few people schedule these items with their carrier. That means if you file a claim your reimbursement may only be a fraction of what these items are worth or would cost to replace.
Scheduled personal property allows you to list these high value items individually on your policy. Values should be agreed to by you and your carrier based on appraisal or purchase receipts.
Loss of Use – Also known as Additional Living Expenses. If your home is damaged and unable to be lived in while repairs are made loss of use will pay for your hotel costs and other reasonable expenses. Eating out every meal, storage fees, and hotel costs can become expensive.
Loss of use can often be increased if your current limits do not meet your needs or reflect local housing costs. Taking a vacation while your house is being repaired is never a good idea, but it can be financially stressful if you’re forced to do so.
Closing the Gap
Closing coverage gaps starts with an annual policy review. Review your policies annually and update coverage after major life changes, renovations, or purchases. Once you know what you have protection against and what you don’t you can begin closing gaps.
Premium cost compared to potential loss will also become more apparent. You may be surprised how little of an increase in premium it takes to protect yourself from catastrophic loss.
Reviewing your policies regularly will also ensure you have adequate inventories, recent appraisals, and updated information. This can help speed up the claims process when time is already against you.
Bottom line. Coverage you don’t know you’re missing can end up costing you the most. Umbrella liability, sewer backup, equipment breakdown, identity theft, scheduled property and accurate loss of use coverage can all mitigate the gaps in your standard policies.
Contact Bowthorpe & Associates Insurance Producers today to discuss any of these options and learn how you can close gaps in your coverage before disaster strikes.
FAQ’s
Q1: What is umbrella insurance and why do I need it?
A: Umbrella insurance provides higher liability protection levels when claims exceed the limits of your underlying policies. It can help protect your assets as well as your future income should the worst happen.
Q2: Is sewer backup covered under homeowners insurance?
A: Most standard homeowners insurance policies do not cover sewer or water backup. You will need to add a sewer backup endorsement
Q3: What does equipment breakdown insurance cover?
A: Equipment breakdown covers sudden mechanical or electrical failure of many home systems and appliances.
Q4: How does scheduled personal property work?
A: Scheduled personal property allows you to list qualifying items individually on your policy along with an agreed value.
Q5: When should I review additional coverage options?
A: Review your policies annually and after any major life changes or asset accumulations.