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Advocate Claim Service, Inc
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Advocate Claim Service Newsletter June 2007
Volume 3 Issue 1
It is with great satisfaction that we bring this newsletter to
you. In this issue and in coming months, we will discuss pertinent
insurance topics which may affect you. We sincerely hope that
you will find this newsletter informative and please do
not hesitate to contact us should you have any questions or needs.
This months topics:
Three Questions to Determine Whether Your Home
Is Properly Insured
 Homeowners are always being advised to update
their property insurance annually because any home
alteration or lifestyle change, such as marriage or divorce,
can affect the amount of coverage needed. While it is
important to complete that yearly review, it is equally
important to know what questions you should ask your
agent to ensure you have the right coverage for your
circumstances.
According to the Insurance Information Institute
(I.I.I.), there are three key questions you should always
ask:
1. Do I have enough insurance to rebuild my home?
- Buying just enough insurance to meet your mortgage
lender’s requirements could mean that you are
inadequately covered should you need to rebuild
your home at current prices. To have real protection,
you need to consider the following types of coverage:
• Replacement Cost Policy - A replacement cost
policy pays for the repair or replacement of damaged
property with materials of similar kind and
quality.
• Extended Replacement Cost Policy - This extends
your coverage another 20 percent or more above
your stated policy limits. This additional insurance
can be extremely important if your home
is one of many damaged in a disaster, because a
widespread disaster can result in increased costs
for building materials and labor.
• Inflation Guard - This coverage automatically
adjusts the policy limits for rebuilding costs as
construction costs rise.
• Ordinance or Law coverage - If your home is
badly damaged and requires rebuilding under
new building codes, ordinance or law coverage
will pay a specific amount toward any additional
costs involved in meeting the new code requirements.
• Water Backup - This coverage insures your property
for damage from sewer or drain backup.
• Flood Insurance - Standard home insurance policies
do not include coverage for flooding. Flood
insurance is available through the federal government’s
National Flood Insurance Program (www.floodsmart.gov), but can be purchased from
the same agent who provides your homeowner’s
insurance. Make sure to purchase flood insurance
for the structure of your house, as well as for the
contents.
2. Do I have enough insurance to replace my possessions?
- Most insurers provide coverage for personal
possessions equal to 50 percent to 70 percent of the
amount of insurance on the dwelling. The best way
to determine if this is enough coverage is to conduct
a home inventory. A home inventory is a list of
everything you own and the estimated cost to replace
these items if they were stolen or destroyed.
You can insure your possessions in one of two ways:
a. Cash Value Policy - This coverage pays the cost to
replace your belongings minus depreciation.
b. Replacement Cost Policy - This coverage pays the
full cost of replacing your belongings at current
prices.
3. Do I have enough insurance to protect my assets?
- Homeowner’s insurance provides you with
basic liability coverage. This protects you against
lawsuits for bodily injury or property damage that
you, your family, or your pets may cause to other
people. Liability insurance pays for the cost of your
legal defense and for any damages a court rules
you must pay, up to the stated limits of your policy.
Most homeowner’s insurance policies provide a
minimum of $100,000 worth of liability insurance.
If the standard liability coverage isn’t sufficient, you
may need an excess liability policy, which provides
additional coverage over and above what is covered
by your homeowner’s insurance policy.
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Tips for Buying Homeowner’s Insurance
Considering that for most people a home is their largest
asset, they understand the importance of protecting
their investment with homeowner’s insurance. What they
may not know, however, is that insurers offer numerous
discounts based on various factors ranging from the type
of building material used to your home’s proximity to a
fire station. Keep in mind that while multiple opportunities
exist for premium discounts, not every discount is
available in every state or with every insurance company.
When shopping for homeowner’s insurance, you
should follow these tips:
• Accept a higher deductible – When you file a claim,
the deductible is the amount you pay personally
toward the loss before the insurer pays the balance of
the claim. Deductibles on most homeowner’s policies
start at $250. If you raise your deductible, your
premiums will be lower. However, before you accept
a higher deductible, be sure you can afford the additional
out of pocket.
• Use one insurer for both your homeowner’s and auto
policies - Most insurance companies offer multi-policy
discounts.
• Consider the cost of insuring any home before purchasing – The geographic location of your home has
a significant impact on the amount you pay in premiums,
especially if your home is located in an area
frequently hit by natural events that cause large scale
damage. The age of the house will also play an important
role, as does the age of the electrical, heating
and plumbing systems. Older structures, pipes and
electrical wiring pose a greater risk.
• Buy insurance coverage for your home, not the land
it sits on - Never include the land value when you
calculate how much insurance you need.
• Be sure your home is safe and secure – Dead bolt
locks, burglar alarms, and smoke detectors generally
qualify you for premium discounts. Your insurance
company may also offer an even larger discount if
you install a home-security system. Check with your
insurer to see which systems entitle you to a discount
before proceeding.
• Stop Smoking – Smoking increases risk of fires. Some
insurers offer discounts if your family is tobacco free.
• Ask about discounts for seniors – Retired people
stay at home more, so they can spot fires sooner.
Older people also spend more time maintaining their
homes.
• Review your policy each year – Any improvements
you have made to your home should be reflected in
your coverage. Talk to your agent about increasing
your coverage as necessary.
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Don’t Wait Until It’s Too Late to Dust Off Your
Homeowner’s Policy
 If you’ve never thoroughly reviewed your homeowner’s
policy, you could find yourself out of luck at your time
of need. When you bought your policy, you assumed it
would provide the necessary funds needed to recover
from a disaster. However, if you are unfamiliar with your
policy’s terms and conditions, you may not have as much
protection as you think.
The standard homeowner’s insurance policy includes
four basic types of coverage:
• Coverage for the structure of your home - If your
home is damaged or destroyed by fire, lightning,
windstorm, or other peril listed in your policy, your
insurer will pay to repair or rebuild your home subject
to the terms of your coverage. However, if the
damage is caused by a flood, earthquake or mudslide,
there would no coverage unless you had purchased a
separate policy for these risks.
Most standard policies also cover detached structures
such as a garage. Coverage for these structures is automatically
provided at 10% of the amount of insurance you
have on the structure of your home. You can purchase
additional coverage if necessary.
Do you know if your policy would provide enough
coverage to rebuild your home?
• Coverage for your personal belongings - Furniture,
clothes, and other personal items are covered if
stolen or destroyed by fire, wind or other insured
disaster. Most companies provide personal belongings
coverage equal to 50 to 70 percent of the amount of
insurance you have on the structure of your home.
High-ticket items like jewelry are covered, but only
at minimal dollar limits if stolen. To insure each of these
items for their full value, you would need to add a special
personal property endorsement to your basic policy.
Trees, plants and shrubs are also covered under
standard homeowner’s insurance for theft, fire, lightning,
explosion, vandalism, and riot. They are not covered for
damage by wind or disease. Limits are usually $500 per
item.
• Liability protection – This protects you against lawsuits
for bodily injury or property damage that you or
your family members cause to others. Liability coverage
also pays for damage caused by your pets. Your
insurer pays the cost of defending you in court and
any court awards, up to the policy limit. You are also
covered not just in your home, but anywhere in the
world.
Liability limits start at about $100,000, but you should
purchase more coverage. You can also purchase an umbrella
or excess liability policy, which provides broader
coverage, including claims against you for libel and slander.
Your policy also provides no-fault medical coverage if
a friend or neighbor is injured in your home. Your insurer
pays the individual’s medical expenses without a liability
claim being filed against you. You can generally obtain
$1,000 to $5,000 worth of this coverage.
• Additional living expenses – This pays for any additional
costs in the event you are temporarily unable
to live in your home because of a fire or other
insured disaster. Many policies provide coverage for
about 20% of the insurance carried on the structure
of your home.
In addition to reviewing your homeowner’s coverage,
you should keep updated records of your property in a
safe location that is easily accessible. The Insurance Information
Institute offers free software you can download to
create a home inventory. Log on to www.knowyourstuff.
org.
Finally, try to review your homeowner’s policy with
your insurance agent annually. Your agent can help you
determine if your coverage is still adequate for your
needs.
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Toxic Mold - A Puzzling Problem for the Insurance Industry
| Watch out. Mold is lurking in your homes, in offices,
in plants and factories. Increasingly, it can be found in
courtrooms too, as a wave of litigation spreads like wildfire
across the country.
Mold comes in many forms, some harmless to humans
and others harmful, though to what degree remains,
in some cases, a source of controversy. To many,
it would seem as though mold was an invention of the
21st century. |
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Rather, it is the contagion of mold-related
property and casualty claims and lawsuits that has spread
across the US much more rapidly than the mold itself,
making for a costly epidemic for the insurance industry
and for you.
For the uninitiated, here’s a mold primer...
Mold requires three basic conditions to thrive
1.
Warmth (typically above 70 degrees fahrenheit)
2. A
host environment (vinyl covered wallpaper, for example)
3. Moisture
As might be expected, mold litigation
similarly thrives in environments where higher temperatures
are prevalent. Texas has produced the largest single
verdict to date ($32 million reduced to $4 million on
appeal), and more lawsuits than any other state. Predictably,
states like Florida, California, Hawaii and Louisiana
are not far behind. However, warm climates are not the
only culprits and even cold weather states are not immune
to outbreaks. Roy Harris, in a recent article in CFO
magazine cites so-called “tight buildings,” in vogue since
the energy crisis of the 1970’s as a source of the problem
because their restricted air flow, while preventing mold
intrusion from the outside, also prevents moisture release.
The spread of toxic mold litigation, and the observations
of insurance industry pundits hailing mold as“the next asbestos” have inspired insurers to try to get a
handle on the toxic mold issue. Unfortunately, for clients
seeking coverage for mold-related claims right now,
the news is not that good. Insurers have filed exclusions
for many homeowners’ and commercial policies
to eliminate or drastically reduce the amount of coverage
available for the exposure. On the more promising
side, insurers are slowly coming to grips with the
coverage and if history is any indication, once there is a
belief that the exposures can be adequately quantified,
assessed and contained, coverage should broaden and
prices will rise or sink to appropriate levels. Naturally,
the situation will vary from state to state and the
coverage line, but if you are looking for coverage for
mold right now, be prepared for expensive, but limited
coverage.
What may delay the industry from fully assessing
the exposure is the lack of cohesive data around
mold as a source of claims activity. Mold cuts across
so many different insurance product lines, from workers’
compensation to professional liability, and insurer
data doesn’t track the cause of claims across all these
product lines. The result is a bit of a black hole for
underwriters and actuaries.
While claims against homeowners’ policies and
commercial packages have been at the forefront, the
issue affects realtors, property inspectors, appraisers,
product manufacturers, architects and engineers, contractors,
landlords, and a myriad of other types of businesses
drawn in to the flood of litigation by plaintiffs.
It may take years to track the claims data in a
meaningful fashion, and by then, the next “flavor of the
month” in litigation may hit, and toxic mold fears may
gradually or abruptly fade away. In the mean time,
risk management is the key, particularly in environments
where mold flourishes.
Whether you are a
homeowner, business owner, or both, it makes sense to
monitor HVAC systems, including home air conditioning
units, for sources of moisture, invest in a dehumidifier
if conditions warrant it, and take care to investigate
and remediate any water damage quickly and thoroughly.
If it means ripping up carpets or replacing old,
rusty pipes - do it. It will be well worth the investment.
And last but not least, check with your agent
to see what insurance options there are for your home
and business.
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Disclaimer
Information contained
in this newsletter about product offerings, services, or benefits
is illustrative and general in description, and is not intended
to be relied on as complete information. While every attempt
is made to ensure the accuracy of the information provided, we
do not warranty the accuracy of the information. Therefore, information
should be relied upon only when coordinated with professional
tax and legal advice.
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