An Umbrella Liability insurance policy is an inexpensive policy designed to provide additional liability coverage, starting with $1 Million in coverage, in excess of your current “underlying” policies such as your auto, home, boat, motorcycle etc.  The underlying policies are required to hold a certain amount of liability in order the have the umbrella but as long as those requirements are met the underlying policies will react to a covered claim first and once the limits on the policy are used up, the umbrella will take over for the remaining amount of coverage.  A true umbrella policy will also fill in some coverage gaps from the underlying policies. 

Umbrella Liability Policies are liability only. By liability we mean the following: “we agree to pay on behalf of the insured the ultimate net loss which the insured becomes legally obligated to pay because of personal injury or property damage”.  So lets define exactly what personal injury and property damage are.

Personal Injury – Bodily Injury: sickness, disease, mental anguish, etc.  Libel; slander; false arrest; invasion of privacy; wrongful eviction; assault or battery if committed to protect persons or property.

Property Damage – There are a few different definitions of this but basically all consisting of the direct              physical damage to tangible property as well as the loss of use of that property.

**Not all umbrella liability policies are the same and there are exclusions that will apply.

Who is covered on the Umbrella Liability policy?  Well, you the named insured!  A Family Member or relative meaning a person who lives in your household and is either related to you or a depended person under the age of 21 and in your care.  Any person using an auto, recreational vehicle or watercraft which is owned by you and covered under the policy.

The one thing that you need to remember is that an Umbrella Liability policy is not for just wealthy people.  In today’s economy everyone should be covered and an umbrella liability policy is the best way to do that.  While I might not have a house, I may have lots of savings.  I may not have savings or a house but I do get a paycheck every month and if I find myself being sued, I could see a finding attached to my weekly pay.  I will give you an example of how an umbrella liability policy works.

You strike a pedestrian or bicyclist and a settlement is made of $500,000.  Your auto policy holds the minimum liability requirments of $250,000 per person/$500,000 per accident and will respond first.  You have a $1 million umbrella liability policy.

   Auto Policy minimum requirement: $250/$500
   Auto Policy limits carried: $250/$500
   Umbrella policy limit: $1,000,000
   Amount owed on the Settlement $500,000

    Auto carrier pays $250,000
    Umrella policy pays $250,000
    YOU, the insured pays $0

I hope your find this information helpful and that you go and purchase an Umbrella Liability policy!

First Question…If my power is out and I need to rent a hotel room to stay, will my homeowners insurance policy Coverage D, Loss of Use, cover the bill?

The answer to that is no, power outtage without any damage done to your house is not a claim and Loss of Use is only activated with there is a COVERED LOSS to the home you occupy.  No power doesn’t damage anything, it just turns everything off.  Many people make a choice to stay at a hotel to have running water and stay warm but the reality is that they have done that by choice because while not pleasant, cold is still liveable and therefor not covered under loss of use.

The policy specifically states the following to power failure: “Power failure means the failure of power or other utility service if the failure takes place off the residence premises” So if the power lines go down in the town, that is off premises and excluded.  The policy goes on to say that “BUT if the failure results in a loss, from a PERIL INSURED AGAINST on the residence premises, we will pay for the loss caused by that peril.”  If the power outtage, for example, causes pipes to freeze then burst the policy will respond to the water damage done.  Only THEN will loss of use come in to play if the damage is so extensive you cannot live in the house anymore.

Second Question…Do I have coverage for my refridgerated items that have gone bad because I have no power to keep them cold? 

This is very common especially to homes that have multiple refridgerators or freezers.  There is not coverage for this on a regular homeowners insurance policy but can be added for an additional cost or sometimes comes included in an enhancement package that companies offer.  Check your policy to see if you have it or speak with your agent.

Homeowners policies are written for 1, 2, 3 and 4 family homes that are lived in by the owner, hence the word “Home”.  As long as one of the units is occupied by the property owner, this home is insured on a homeowners insurance policy.

A Dwelling Fire property insurance policy is the type of policy that a rental property would go on.  If you own a 1, 2, 3 or 4 family house that you have completely rented out to tenants, you need a Dwelling fire policy.

It is very important that each property is insured correctly because a rental property that is insured as a homeowner and vice versa will have coverage issues at the time of a loss or will be cancelled by the company.

There are differences in coverage for each type of property insurance policies.  I have gone over the homeowner policy in previous blogs so I will just focus on the Dwelling Fire in this one.

The dwelling fire property insurance policy consists of 5 different coverages:

 Coverage A – Dwelling:  This covers the materials and supplies used to construct, alter or repair the  dwelling.

 Coverage B – Other Structures:  Coverage for other structures on the premises that are not attached to the main house

 Coverage C – Personal Property: This is optional coverage for personal property that you may have in the dwelling as the landlord.

 Coverage D – Fair Rental Value: Optional coverage, coverage for loss of rent if your tenants are not able       to live in the apartment.

 Coverage E – Additional Living Expense: Optional Coverage, coverage for any additional expense due to coverage claim

Tenant Relocation is automatically added to each policy.  In the event of a covered loss each tenant has $750 of coverage to relocate if the apartment is not fit to live.  This is the ONLY coverage for tenants available on the Dwelling Fire property insurance policy.  We highly recommend that lardlords require each tenant purchase his/her own renters insurance policy.

Most companies do offer liability but that isnt always the case.  Be sure to check your policy to see if you have liability coverage and if not, make sure you have it added.

So now that you are well educated on the difference, go and make sure that all your homes are insured correctly!

Lets start with your Personal Property that you take with you.  Personal Property owned by an insured is covered anywhere in the world at the Coverage C amount listed on your Homeowners insurance, Condo or Renters policy or $1,000, whichever of the two is greater.  There are certain limits for specified property that are also listed out in your policy which I will not get into but can be reviewed on your policy.  This coverage is especially important because it can cover your baggage at the baggage claim.  If the fault is of the airline, your Homeowners insurance, Condo or Renters policy will apply in excess.  Some exclusions apply.

What about liability coverage on the homeowners insurance policy?  You all know how much we encourage you to have high liability and even to purchase Umbrella policies and this is a big reason why…  Lets say that while on my vacation at the beach, I borrowed the boat of a good friend of mine that rents the same time every year right down the street.  I have two of my close friends visiting from out of state and I want to make sure they have a great time at the beach.  While I am driving the boat, I go over a huge wave and fail to reduce the speed.  My two friends aren’t holding on and fly in the air so high, when they land the man breaks his leg and the woman suffers major back pain that takes her out of her job as a coach for 6 months.  Thank goodness, my liability coverage will apply even though I am away from home.  Some exclusions do apply so before you go away, sit down with us so we can go over any areas that you might not be covered so we can plan accordingly.

And the last big coverage that will follow you on vacation is other people’s property.  Whether you are renting the house on the beach, borrowing a friends house, or camping out most of the big things that can happen to real property are not within your control.  Lighting, windstorms and other natural events would occur no matter who is occupying the building and in most cases the homeowners insurance or commercial property policy of the building owner would cover that.  Your homeowners insurance policy has an exclusion for “property damage” done by an insured to a property rented to, occupied or used by, or in the care of an insured.  However, there is up to $500 replacement cost coverage for damage done to property of others (some exclusions apply).

Happy traveling this summer and be safe.  Be sure to contact us before you go with any coverage questions and so we can review your current homeowners insurance policy!

Many auto insurance clients of mine ask me “how does gap insurance work” whenever I ask them if they would like to add the Auto Loan/Lease Gap Coverage endorsement onto their Safety Insurance Atuo Policy.  Well Basically, gap insurance is coverage for the gap of money between the amount you are paid on a total loss and the amount you still have left on your loan.  For example:

• You have a Loan out for $20,000 left on your vehicle.
•  You have an accident and your car is found to be a total loss but the book value of your car is only worth   $18,000 now and that is what the insurance company is offering to pay you.
    20,000 – 18,000 = 2,000
•  That leaves a $2,000 difference between what you are getting and what you owe. 

Without Gap Insurance, you would be responsible to pay that $2,000 back to the bank.  Dealers offer this coverage when you purchase your new car but it is expensive ranging anywhere from $500-$800.  Safety Insurance Company offers it for $25/year on newly purchased vehicles that are 5 years old or less.

There are a few charges that will not be covered under your Gap Insurance that you should be aware of: 

• Any overdue payments, penalties, taxes, interest or charges resulting from overdue payments at the time of  the loss.  So you will want to keep making payments at the time of a loss until you are sure that you will  be reimbursed or that the car actually is a total loss.
•  Financial Penalties under a lease for any excessive use, abnormal wear and tear or high mileage.
• Security deposits not returned on a lease by the lessor
•  Costs for extended warranties, Credit life insurance, health, accident or disability insurance purchased  with the loan or lease
•  Carry over balances from previous loans or leases

Hopefully I have answered the question of “how does gap insurance work” well for you and that I have piqued your interest in Safety Insurance Company.

When I say Third Party Insurance Claims, basically what I mean is that you do not carry collision coverage on your auto insurance policy but you have been hit by another person whose fault the accident was.  When this occurs, we report the claim to the other party’s carrier who should be paying for the damage done to your vehicle since the accident was not your fault.

I will give you two recent examples of Third Party Insurance Claims:

One of our clients, who recently had a third party insurance claim, was driving straight on a busy road, he had no signals or signs he had to abide by giving him the right of way.  Another vehicle ran a stop sign from a side street in front of our client which resulted in our client hitting the other vehicle.  The other vehicle was issued a citation and there was a police report done.  Our client only held basic liability coverage on his vehicle so we reported the claim to the other company.  The other company is refusing to pay our client 100% and would only offer our client 80%. 

A few months ago, our client was stopped at a light in the left hand lane of a two lane left turn light.  At the light, the car to our client’s right turned into her vehicle instead of staying him his/her lane.  Out client only carried basic liability coverage so we reported the third party insurance claim to the other company.  The other company refused to pay our client a dime because the other party denied everything. 

Both of these cases were with the same company but it has been the case with most third party insurance claims we have seen lately.  We know Collision is a pretty expensive coverage to carry but if you cant afford it or if your vehicle is older and you dont feel its worth it, there is another option for you to avoid having to go through third party insurance claims.  Limited Collision is a form of collision that could cover you in these cases.  Limited Collision will pay in some situations for “direct and accidental damage to your auto caused by a collision”.  As long as you are NO MORE THAN 50% at Fault and know who it was that that hit you, there will be coverage and you can let the two insurance companies fight instead of you fighting the other person’s company yourself.  And guess what, IT IS CHEAP COVERAGE! For more information refer to our blog specifically on Limited Collision.

We are here as your agent to help in any way possible but sometimes even we cant get a company to change it’s mind on paying out on third party insurance claims.  So, make your life easier by purchasing Limited Collision so you dont have to work with any company other than yours!

 Personal Property Coverage for the renter’s belongings in the apartment, condominium or house.  The main structure of the house or building is already insured by the owner so the renter does not need to worry about that, they need to worry about their stuff inside where they reside.  This is the main focus of the renter’s insurance policy. 

Loss of Use is the second part of the coverage on the Renters Insurance Policy.  It is coverage for the renter if they are not able to stay in their apartment, condominium or house if there is a loss that makes it inhabitable.  This part of the policy will pay for the renter to stay elsewhere until they can go back to the apartment or until the policy reaches its limits.  It will also cover any additional living expense that it is out of the ordinary so you can maintain the household’s normal standard of living. 

The Renters Insurance Policy does have Personal Liability for the renter which follows him/her worldwide and can be anywhere from 100,000 to 1,000,000 in coverage.  While we don’t suggest 1,000,000 on the renter’s policy, if that is the kind of coverage you are looking for, an umbrella policy would be better suited.

 Medical Payments to Others is the last coverage on the policy and that can go up to 5,000 in coverage.  It is paid to a person who is injured on the insured location with permission and to others off the insured location who has been injured by the activities of the insured, caused by a residence employee or cause by an animal owned by or in the care of the insured. 

That is the basic coverage of the Renters Insurance Policy, keep in mind that a Renters Insurance Policy is an inexpensive policy and if paired with an auto insurance policy can be eligible for a discounted rate.   When you prepare to purchase a Renters Insurance policy, you need to know what you are looking for in personal property coverage.  I suggest you go to http://www.knowyourstuff.org/ to take an inventory of all your personal belongings in the rented space.  This will help you get the right coverage and keep an itemized inventory if you were to have a loss.

 According to the United States Environmental Protection Agency (EPA) when water leaks, as long as it is cleaned up and dried within 24 – 28 hours, mold will not grow.  But there are ways to prevent these areas from leaking before it happens.

           Clean and repair roof gutters regularly

          Keep air conditioning drip pans clean

          Clean up any condensation as quickly as possible on the windows, walls, pipes etc.

          Vent appliances that produce moisture

          Use air conditioners and de-humidifiers when needed

          Run the bathroom fan when showering or open windows

          Use fan when cooking or running the dishwasher

          Open doors and windows as much as possible to increase ventilation and air movement

          Cover cold surfaces

          Fix leaks as soon as you see them

          Pay special attention to carpet on concrete floors

 If you come across mold and have to clean it up be sure you wear safety goggles and gloves to reduce contact with the mold spores.  Scrub the mold off hard surfaces with detergent and water then dry completely.  Avoid using bleach.  Don’t paint over moldy surfaces because it is likely to peel, Throw away all absorbent materials like tiles and carpets and then remove the mold, it will be difficult to get into the crevices and cracks if you leave the tiles or carpet. 

 Scrub until it appears to be all gone, odor as well, and check the area again at a later date to be sure there is no more growth or water damage.

 It is your responsibility as a homeowner and an insurance policy holder to try to prevent a loss before it happens so stay on top of all the suggestions we made above in order to prevent mold.  Prevention is important for not only for the sole reason of preventing property damage, but also for the health of your household members, family and friends.

On the homeowner’s policy, property damage caused by “mold, fungus or wet rot” is excluded but only when the mold, fungus or wet rot is the cause of damage not the result.  So basically, just to confuse you a little, the policy is saying that mold, fungus or wet rot can be covered in certain situation and as long as the damage has not been caused by mold, fungus or wet rot. 

The certain situation we can find coverage for mold is when “mold, fungus or wet rot that is found HIDDEN in the walls or ceilings or beneath the floors or above the ceilings of a structure if such loss results from the accidental discharge or overflow of water or steam from within

A. a plumbing, heating, air conditioning or automatic fire protective sprinkler system or a household appliance on the residence premises or

B. a storm drain or water, steam or sewer pipes off the residence premises.”

The policy will not cover mold, fungus or wet rot in these certain situations if the mold, fungus or wet rot was caused by a “sump pump or related equipment or a roof drain, gutter, downspout or similar fixtures or equipment”.

WOW, did you get all that?  So in summary, the policy doesn’t cover it when it is the CAUSE of damage but will when situations A & B happen but with other exclusions.  But guess what, the cost to remove the mold is not covered; only the property it damaged.

So, how about an example?  If you see mold on your wall under a window that has been leaking in water, it is not covered.  But, if you open up a wall and see mold inside the wall that has been caused by a leaking pipe, it is covered. 

Each situation is different and would have to be looked at to find if there is coverage or not, I could go on all day with examples but they best thing that you as a homeowner and insurance policy holder should do is to make sure you are doing routine maintenance checks and fix any water issues immediately.  Also, there is a way to add some coverage onto your policy.  Again, it won’t cover all situations but will add coverage to some.

Stay tuned to our next blog on ways to prevent and cleanup mold.

This week, we have had a few sump pump failures so I have decided to re-post a previous blog to refresh your memory. 

Sump pumps are mostly used in homes where the basement is lower than the water table level and places where flooding is common.  They come in very handy especially when it rains and the soil around your home gets so soaked the foundation gets wet and the water leaks into the basement. 

Sump pumps are usually powered by electricity, although some have a battery backup system, and it is imperative that it not lose power supply or else water would get in the basement and you could have water damage or flood on your hands. 

Why should you care?  Because, sump pump failure is not covered on your homeowner’s policy leaving you responsible to cleanup and repair any damage.  

Don’t worry; there is a way to add coverage!  The Water Back Up and Sump Discharge or Overflow endorsement adds $5,000 in coverage for direct physical loss to property covered under section 1 of your policy if your sump pump were to have mechanical breakdown.  Certain restrictions apply; ask Michaud Insurance Agency more about this coverage.

If you would like to know what a Flood Policy costs, please let us know and we would be more than happy to quote a policy for you.  Remember, you dont have to be in a flood zone to have flood insurance!