Below you’ll find five potential issues we often find in personal insurance. While this list is not all-inclusive, I hope to give you an idea of some things to look for when reviewing your personal insurance contracts.
1. Dwelling Limit Not Adequate
For most, the home is one of the largest investments they will ever make. Homeowners insurance is one way to satisfy lending requirements and to protect the investment. Many insureds are misguided in believing that the coverage limit should mirror the market value of their home. In the homeowners policy contract, the insurance company’s obligation is to “repair or replace”, therefore the limit for your dwelling should be the cost to reconstruct the home and not the current market value. Sometimes these numbers differ greatly based on certain factors in the real estate and construction markets. With the increased cost of construction over the last several years, it is now more important than ever to make sure the dwelling coverage is adequate to rebuild.
2. Earth Movement & Water Damage Exclusions
Two of the perils insurance companies do not like to cover are earth movement and water damage. For this reason, most policies specifically exclude earth movement and water damage. These typically specifically exclude, but are not limited to: earthquake, landslide, mudflow, earth sinking or shifting, and erosion. On the water damage side, they commonly exclude: flood damage, sewer or septic backup into the home, seepage, and sump pump overflow. As you can see, insurance companies do not want to give coverage for the above perils. Some of these coverages may be available with specific additions to the homeowners policy or with a stand-alone policy.
3. Motor Vehicle Liability Exclusion
Liability coverage for golf carts, ATVs, 4-wheelers, and other motorized vehicles is not always given under a homeowners policy. These common items are inexpensive to get liability coverage for, but one must request coverage for it to be given. It is common for these items to be left off with the assumption that there is coverage and I see this as a major omission specifically in the areas where they are used in neighborhoods and public roadways. Physical damage coverage here would be an option, but it is critical to have proper liability coverage.
4. Automobile Liability Limits
State law determines minimum automobile liability insurance limits. Per Tennessee State Law, you must carry liability bodily injury insurance limits of at least $25,000 per person, $50,000 per accident and property damage limit of $15,000 (often shown as 25/50/15). If an insured had these limits and had an at fault accident, the insurance company would pay up to $15,000 for each claimant’s bodily injury and would not pay more than $50,000 for the total claimants’ bodily injury. In addition, the most they would pay for the claimant’s property damage would be $15,000. In 2022, with the cost of medical treatment and the cost of vehicles at an all-time high, these limits are simply too low, potentially leaving the insured personally liable for the remainder of the damages. Far too often we see inadequate auto liability limits.
5. Not Having a Personal Umbrella Policy
An umbrella policy is a personal liability policy that gives an additional limit of personal liability coverage. This policy is commonly written to give additional liability coverage above and beyond the underlying policies and can include automobile policies, homeowners policies, watercraft policies, and rental home policies. Umbrella limits start at $1,000,000 and go up in million dollar increments from there. The most common umbrella claims are severe auto accidents with large bodily injury losses. With the current legal environment, we find many insureds wanting to increase current umbrella limits. Even as insurance agents, it is difficult to quantify what umbrella limit is adequate, but with good communication with your agent, you can determine a comfortable limit. We like to say that the umbrella policy is the best buy in insurance due to the inexpensive cost and large limits available.
It’s my hope that this gives you a few things to consider when reviewing your personal insurance program. The best two ways to ensure quality coverage are reading your insurance contracts and quality communication with your independent agent.
At RSS, we service the insurance, bonding, and benefits needs of our clients with a focus on businesses and successful families.