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.
What’s the Solution?
The best solution to this potentially large gap in coverage is to call your insurance professional. 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.
With spring cleaning far behind, and summer fun all but over, it’s time to start fall home maintenance. Fall is the perfect time to perform important maintenance to your home so you’re not caught in the middle of winter with a drafty house or a malfunctioning heater. We’ve compiled the top eight fall home maintenance tips, along with what you can do to ensure your home stays warm and comfortable this winter.
1. Heating System
It’s important to inspect your heating to ensure it functions all winter long.
For conventional heating systems, you may already have a contract with the installation company. Many HVAC companies offer a fall/spring maintenance program. If not, start with your water heater. Ensure that your water heater is protected from the elements. The most favorable locations for your water heater to be is the attic, basement, or garage, where it can be safely insulated. For your heating unit, check the filters, gas lines, and flame. Make sure that you have a proper flame and oxygen flow. There should be no cracks, kinks, or holes in gas lines.
For wood stoves, check and make sure that all stove pipes are clean. Take a wire brush and scrape to remove any buildup. Inspect your catalytic combustor, which is located between the fire and stovepipes. Use a small wire brush to clean out any ash buildup. Make sure you have removed all ash from the stove before lighting a fire. Inspect the outside of the stovepipe and stove, being sure to remove any debris. Be on the lookout for creosote, which is a yellow, oily matter that should be removed.
2. Chimney and Fireplace
Chimneys and fireplaces cause some of the most expensive damage to homes. Build-up from creosote can easily ignite, causing a devastating fire. If you are unfamiliar with inspecting a chimney, it may be worth calling in a chimney sweep, which is usually quite affordable. Make sure to leave your flu closed when not in use, and always have a fireplace screen in front of open flames to protect your home from wayward sparks.
Windows may be a continual source of frustration for homeowners. There are many seal repair kits available at local hardware stores. Walk around the interior windows, placing your hand near the seal. Check for any breezes flowing through. Do the same process for doors. When you find one, mark it with a sticker or other indicator so you can tally how many repair kits you need. If a window is improperly sized, cracked, or broken, it needs to be replaced.
For doors, you can purchase draft preventers and other seal kits to improve the seal. Every 1/8 of an inch can lower a room a whole degree, so it can really pay off to have updated, well-sealed doors and windows.
4. Smoke Detectors, Fire Extinguishers, and First Aid Kits
Every six months, replace batteries in all the detectors in your home. Check the expiration dates on your first aid kit and fire extinguisher, and that each is up to date and in a convenient place. If you don’t have a fire escape route, this is a good time to draft one.
5. Indoor Pipes
Winterizing pipes is one of the easiest, most valuable ways to protect your home over the winter. Most home repair stores carry fitted insulation that can easily wrap around any size pipe. If you can’t afford to do every pipe in your home, give priority to the pipes that are closest to the outdoors, or most likely to freeze. It’s also a good idea to shut off water to any area that won’t be used, and to check pipes for leaks or cracks that may grow larger with the varying temperatures of fall.
6. Yard Maintenance
Fall leaves may be beautiful, but these can slowly rot, causing huge backup and damage in gutters. This backup will cause water to spill over the gutter and into your yard and walking areas, which can cause damage to your home and make walking conditions dangerous. Disconnect all garden hoses, and store them coiled and flat in a cool, dry place. If possible, turn of water to all outside faucets and drain them to protect the outside pipes from damage. Also, store any outdoor furniture that may become damaged from snow or ice.
7. Roof Inspection
A roof inspection may seem overkill, but harsh winter winds and heavy snow can take a toll on your home. It may be a good idea go up to your rooftop to check for any broken tiles or cracks. It’s important to take care of any damage now to avoid repairs during the cold winter months.
8. Stock Up on Winter Supplies for Your Home
Before prices on winter gear soars, stock up on winter items such as snow shovels, firewood, or sidewalk salt. It’s better to have the supplies now than to have to run to the store during a snowstorm!
These fall home maintenance tips are quick, easy, and affordable. It might be a good idea to brush up on home repair insurance coverage as you’re making improvements and renovations. As the adage says, an ounce of prevention is worth a pound of cure – especially when it comes to home repairs.
Pop Quiz: When preparing to send you child to college be sure to review:
1. Their college essay
2. Your bank account
3. The film “Animal House”
4. Their insurance coverage
If you selected insurance, you go to the head of the class. When your child moves from home to college there are a number of insurance questions to consider, especially if he or she is planning to live off–campus. Remember, not all insurance polices have the same terms and conditions. Consult your insurance professional to determine the limits and types of coverage that apply to your family’s lifestyle.
Home sweet dorm
Insurance companies consider college students to be residents of their parents’ home, temporarily residing elsewhere. They also consider your dorm-room contents to be “personal property, located off premises”.
Most homeowners/renters policies limit coverage up to 10 percent of personal property, off premises. If you have $75,000 of contents coverage at home, you will have $7,500 for an off premises dorm room. You will need to decide if that’s enough to repair or replace all electronics and other items likely to fill your trunk, back seat, and roof rack in the fall. If it’s not, you might consider purchasing a separate renters policy or property policy for the dorm room.
Moving on up
Nearly one-fifth of college students rent off-campus apartments. Most insurance companies consider these apartments to be a permanent residence. Therefore, the apartment will not be covered under the parents’ homeowners/renters policy for contents or liability.
Generally, the person who signs the lease is held liable (and may be sued) if someone is injured on their leased premises or by their property. A roommate or parent may also be sued, whether they’ve signed the lease or not, if the injured party thinks the roommate or parents might be responsible for the claim.
Regardless of who signed the lease, when your child is living off-campus they should obtain their own renters policy. Many insurance companies will not insure multiple names, or unrelated names, on a single policy. However, if you, as a parent signed the lease, you and the student should be named as insureds on the policy.
The annual premium for renters insurance is very reasonable, usually less than $250 a year for about $15,000 worth of contents.
Up and away
Studying abroad can provide a host of insurance issues. For example, an insurance company can suspend theft insurance at a student’s domestic residence if he/she has been studying abroad for more than 45 days. Consult your broker to make sure your child is covered in at least the following major areas:
- Theft of personal property
- Trip cancellation/interruption
- Emergency medical evacuation and/or repatriation coverage
- Health and/or hospitalization
Few colleges allow freshman living on campus to bring their cars. But 70 percent of the rest of the students have them. Things to consider if you child has a car:
- Leave the car at home: You might be eligible for a reduced rate if the car is titled in the student’s name, no one else will be driving it, and the student will reside more than 100 miles away from the car.
- Take the car to college and:
- Notify your insurance company that the car will be garaged in another location. Premiums can be affected positively or adversely by a location change.
- State laws vary. For instance if your child goes from a “straight-liability” to a “no-fault” state, their liability coverage may not be adequate. Increasing or decreasing policy coverages will impact their premium accordingly.
- Consider letting your child assume the title to the car if they are 18 years or older. As the titleholder they must get their own auto policy. This will decrease your liability exposure.
- Discourage your child from allowing others to drive the car. Regardless of who may be using the car and for what purpose, your child is still responsible for the car and what is done with it.
Insuring your legacy
Experts recommend obtaining or increasing your existing life insurance to cover the total cost of your child’s tuition. When figuring that cost you will want to include: tuition, room and board, transportation, books, and supplies. Whether you have a college fund prepared for your child or are paying as they go, life insurance is a secure method to safeguard your child’s education.