Archive for the ‘Specialty’ Category

The Art of Coverage: Collectibles Insurance vs. Traditional Homeowners Policy   Leave a comment

stamp vase 1918 coin

The chances are good that you are a collector of something. So what makes something a collectible or when do you need to “Schedule” your personal belongings. The simple answer is: it depends.

Some of the most commonly collected items include fine art, sports memorabilia, wine, rare books, stamps and coins, antique rugs and tapestries, musical instruments, action figures, dolls, toys, auto and movie memorabilia, and guns.

Large private collections generally have proper risk management in place including fine-art insurance that covers the full value of the items. But many smaller collections (those valued below $1 million) tend to be insured under a traditional homeowners policy or have no insurance at all. If these collectors face a devastating event resulting in damage, they may discover too late that their coverage is not sufficient to address their financial losses.

In simple terms, the process of insuring collections of fine art and collectibles under a traditional homeowners policy tends to be time-consuming and difficult while possibly yielding lower limits and less expansive coverage when compared to obtaining coverage with a fine art and collectible insurance policy. The comparisons below address specific differences between the two types of policies.

Appraisals – Homeowners policies generally require appraisals for collections or individual items valued over $2000 as part of the underwriting process. Many collectibles insurance policies do not require appraisals at the time of application.

Deductibles – Zero-dollar deductibles are the standard for collectibles insurance policies with some offering additional deductible options. Homeowners policies may offer zero-deductible policies, but it is not as common.

Limits – The limit on fine art and collectibles coverage generally ranges from $500 to $2000 for a homeowners policy without the addition of a floater or rider. Even with an added floater or rider, homeowners policies tend to limit the level of exposure. A collectibles policy may offer coverage up to $1 million or more.

Coverage – One of the most important coverage differences between a homeowners policy and collectibles policy is the valuation of covered items. Homeowners policies tend to insure for actual cash value while collectibles policies insure the full collectible value of items in the collection. This distinction alone can reflect a startling difference in potential claims payments in the event of a loss. Homeowners policies generally cover named perils only, exclude coverage for items during transit, limit coverage on items stored away from the home to as little as 10 to 15 percent, and extend coverage to newly acquired items for only 30 days. By contrast, collectibles policies typically include all risk coverage and provide coverage for items in transit, items stored away from the home (such as in an office or storage facility), and newly acquired items for up to 90 days. Some collectibles policies may offer additional coverage benefits such as discounts for monitored fire and burglar alarms or items kept in a UL-rated safe.

Claims – In today’s insurance market, filing a claim against a homeowners policy may leave an insured vulnerable to premium increases at renewal or the possibility of non-renewal. With a separate collectibles policy, claims do not affect homeowner premiums or loss history. In addition, companies that offer collectibles insurance may have claims adjusters with a high level of expertise in this area. Adjusters with this specialized knowledge are better able to determine the value of unique or rare items, which should expedite the claims process and lead to a better outcome for the insured.

A detailed comparison of the benefits and limitations of standard homeowners insurance versus collectibles insurance demonstrates that specialty coverage can be very advantageous for even a small collector.

Standard homeowners policies have limitations for most common items such as Firearms, Jewelry, Furs, Silverware, Precious and Semi-precious stones, Money, Gold, Silver, Coin or Stamp collections etc. Anything that has a special value such as an oriental rug (worth more than an area rug you may purchase as a home improvement store), anything that is “one of a kind” that can’t be replaced by going to a local department store, a collection of things such a porcelain figurines, fine art, breakable art such as a vase or statue. These are things that may need to be insured by a personal articles policy. Sometimes referred to as “scheduling”, this is a policy that insures specific items at a specific value determined by an appraisal or other means of valuation.

If your $10,000 Persian rug is damaged but not insured for $10,000, it is a rug and can be replaced for about $150 at Home Depot. A 1938- 3 legged Buffalo nickel may appraise for several thousand dollars depending on the grade, but if it is not insured for that value, you guessed it, it’s just a nickel worth 5 cents. Sentimental value is dear to us and nothing can replace sentimental value but Grandma’s old wedding ring could be worth a few hundred dollars or a million bucks. Every insurance policy has limitations, exclusions and provisions that you may need to comply with before you are properly insured. Please contact Lee County Insurance Agency for additional information about insuring your valuables.

“Our blogs are for general education and information only and may not represent your unique needs. Coverages will vary. Please contact your insurance agent to verify your specific policy terms and conditions.”

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Citizens Homeowner Policy Coverage Gaps   Leave a comment

Citizens Homeowner Policy Coverage Gaps

In making a decision to use Citizens (either voluntarily or involuntarily), the customer needs to understand the differences between a Citizens policy and a standard Insurance Service Office (ISO) policy. This article summarizes some of the more significant differences, yet is not a complete “line by line” analysis of the policies in question.

Note: Our comparison uses the standard ISO HO-3 policy with an edition date of 04/91, the policy used by Citizens. Many carriers have filed modified ISO coverage forms, others filed “me too” type policies matching Citizens, and still others have their own unique forms; so, you must be diligent in your comparisons with each client who requests to move to Citizens. Remember, too, some carriers use the ISO “HO-2000” program forms now; ISO has even rolled out a 2011 revision to the homeowners program that is likely not being used yet by many carriers. Additionally, the coverage provided by some standard companies provides even more “bells and whistles” than the basic ISO policy. Comparing a Citizens policy to one from companies who provide “upscale” coverage would reveal even more dramatic differences.

Additional exclusions and coverage reductions are planned with Citizens. Those future changes are also addressed here.

Current Gaps 

Assessments 

No discussion about a Citizens policy is complete without a reminder (and warning) of the huge potential assessment faced by Citizens’ policyholders in the event that Citizens does not have adequate funds to pay for losses, as much as 45 percent of the premium of the policy. Policyholders should carefully review the assessment potential as outlined by the Citizens’ article available by clicking here. As one agent said, “I tell my customer that the cheapest choice today may be the most expensive choice after the loss.”

Coverage D: Loss of Use 

Citizens: 

Coverage D is ten percent of Coverage A and is limited to 24 months.

ISO: 

Coverage D is twenty percent of Coverage A and does not have a limit of 24 months.

Coverages B & C and Catastrophic Ground Cover Collapse 

Citizens: 

“Catastrophic” coverage applies only to the “principle building.” Damage to other structures is not covered. Personal property in an other structure is not covered for this peril either.

ISO: 

No such limitation.

Coverage C: Food in Refrigerators and Freezers 

Citizens: 

Limited to $500. No coverage for food in refrigerators and freezers off premises.

ISO: 

No such limitations.

Coverage C: Theft Peril 

Citizens: Theft on premises is covered. Theft coverage applies off premises only if the property was stolen from a public warehouse, bank, or safe depository company.

ISO: 

No such limitation.

Coverage A: Constant or Repeated Seepage or Leakage 

Citizens: 

Excluded is damage caused by constant or repeated seepage or leakage of water or steam, or the presence or condensation of humidity, moisture or vapor; which occurs over a period of time, whether hidden or not and results in damage such as wet or dry rot, “fungi,” deterioration, rust, decay or other corrosion.

ISO:  

No such exclusion. This exclusion was removed from the ISO policy in 1991. Losses such as a slow leak from a water line or HVAC unit are typical claims under this peril.

Fungus 

Citizens: 

Limitation of $10,000 for damage caused by fungus, wet or dry rot, yeast, or bacteria.

ISO: 

No such limitation, although many carriers impose a limit.

Section I: Vacancy Limitations 

Citizens: 

If the dwelling has been vacant for more than 30 consecutive days prior to a loss, there is no coverage for damage caused by vandalism, sprinkler leakage, glass breakage, water damage, theft, or attempted theft. Payment for damage caused by any other peril is reduced by 15 percent.

ISO: 

The limitation applies only to damage caused by vandalism. The more restrictive Citizens language closely tracks the wording found in ISO’s commercial property program.

Animal Liability 

Citizens: 

There is no coverage under Coverage E, Personal Liability for bodily injury caused by an animal owned by or in the care of the insured, whether on or off premises.

Coverage F, Medical Payments to Others provides coverage for such claims only if the occurrence takes place off of an “insured location.”

ISO: 

No such exclusion, although many carriers have similar exclusions.

Liability and Medical Payments Limits 

Citizens: 

Maximum Coverage E limit available is $300,000. Maximum Coverage F limit available is $2,000. (See discussion below about further reductions to $100,000 maximum below.)

ISO: 

Limits of $500,000 and $5,000 are available. Some carriers offer even higher limits.

Section II: Lead Paint 

Citizens: 

There is no coverage for bodily injury or property damage resulting from the ingestion or inhalation of paint that has lead or lead compounds in it.

ISO: 

No such exclusion.

Section II: Radon 

Citizens: 

There is no coverage for bodily injury or property damage resulting from radon or any substance that emits radon.

ISO: 

No such exclusion.

Endorsements and Coverages Not Available (Current Gaps) 

While not all inclusive, the list below details some of the common coverages and endorsements not available under a Citizens policy.

  • Personal property limited to 50 percent of Coverage A with no option to increase above that limit.
  • “Special” property coverage (HO-15 or HO-5) not available.
  • Water/sewer back coverage not available.
  • Increased loss assessment above $3,000 not available.
  • Scheduled property (floaters) coverage not available.
  • Increased special limits of personal property (jewelry, furs, etc.) not available.
  •  
  • Watercraft liability endorsement not available.
  • Inability to schedule other structures off premises.
  • Liability coverage cannot be extended to other locations (rental property or vacation home)
  • Business pursuits liability not available.
  • Personal injury liability not available.

Changes Effective 1/1/12  

New and Renewal Policies 

Coverage A: Property Not Covered 

Citizens: 

The following property is not covered and there is no buy-back option:

  • Any structure enclosed by screens on more than one side, constructed to be open to the weather, and not constructed of and covered by the same or substantially the same materials as that of the primary dwelling.
  • Carports, open sided porches that have a roof covering, and patios that have a roof covering, not constructed of and covered by the same or substantially the same materials as that of the primary dwelling.
  • Any structure or attachment where that structure’s roof coverings or exterior wall coverings are of thatch, lattice, slats, or similar material.
  • Slat houses, chickees, tiki huts, gazebos, cabanas, canopies, pergolas, or similar structures, constructed to be open to the weather.
  • Awnings, aluminum carports, and aluminum framed screened enclosures.

ISO: 

No such exclusions.

Coverage B: Property Not Covered 

Citizens: 

The following property is not covered and there is no buy-back option:

  • Any structure enclosed by screens on more than one side, constructed to be open to the weather, and not constructed of and covered by the same or substantially the same materials as that of the primary dwelling.
  • Carports, open sided porches that have a roof covering, and patios that have a roof covering, not constructed of and covered by the same or substantially the same materials as that of the primary dwelling.
  • Any structure or attachment where that structure’s roof coverings or exterior wall coverings are of thatch, lattice, slats, or similar material.
  • Slat houses, chickees, tiki huts, gazebos, cabanas, canopies, pergolas, or similar structures, constructed to be open to the weather.
  • Awnings, aluminum carports, and aluminum framed screened enclosures.

ISO: 

No such exclusions.

Cosmetic or Aesthetic Damage to Floors 

Citizens: 

The total limit of liability for Coverages A, B, and D combined is $10,000 per policy period for cosmetic or aesthetic damages to floors.

ISO: 

No such limitation.

Future Coverage Reductions 

The Office of Insurance Regulation has approved a rather lengthy list of coverage reductions under all Citizens’ policies, including personal lines and commercial lines. Those reductions will be phased in starting in March 2012 and will not all appear all at once. Those pertaining to the homeowners policy are below.

Effective 5/1/12 for new business and 6/1/12 for renewal policies: 

  • Reduce default Coverage B from ten percent to two percent. (Option to buy back up to ten percent.)
  • Eliminate option to schedule individual Coverage B items.
  • Eliminate option to buy back coverage for other structures rented to others.
  • Eliminate option to buy back coverage for other structures used for business purposes.
  • Reduce default Coverage C from 50 percent of Coverage A to 25 percent. (Option to buy back to 50 percent.)
  • Eliminate increased loss assessment coverage. Provide only $1,000 in the HO-3 and HO-4, and the statutorily mandated $2,000 in the HO-6.
  • Implement mandatory ten percent sinkhole deductible.
  • Reduce personal liability coverage from $300,000 to $100,000. (Medical Payments to Others Coverage remains at 2,000).
  • Expand sinkhole inspection program to an additional 12 counties.
  • Eliminate increased mold limit options of $25,000 and $50,000.

Date to be determined: 

  • Eliminate liability coverage for incidental exposures related to motor vehicle, watercraft, animal, home business, and premises liability. The result will be a total exclusion of coverage for all such claims. Newly excluded examples in this category would be the use of a non-owned golf cart, use of a non-owned ATV, use of a non-owned outboard watercraft, use of an owned outboard boat under 25 horsepower, use of a sailboat under 26 feet, the occasional rental of the dwelling, and the rental of the dwelling in part, such as renting out a bedroom to a college student.
  • Implement a sublimit for items such as jewelry, furs, silver, and firearms for all perils. Currently the limitations apply only to the peril of theft.
  • Eliminate coverage for dropped objects.
  • Revise contract to reduce coverage for water losses.
  • Expand vacancy penalty.
  • Implement loss history surcharge program.
  • Restrict ordinance & law coverage to apply only to Coverage A.

This is a summary only. Please refer to the policy for specific coverage interpretations.

“Our blogs are for general education and information only and may not represent your unique needs. Coverages will vary. Please contact your insurance agent to verify your specific policy terms and conditions.”

Posted September 11, 2012 by leecountyinsurance in Condo, General Info, Homeowners, Specialty

Jet Ski’s and Your Homeowner’s Coverage   Leave a comment

When you head to the waterways in search of fun on a jet ski, you may discover you have an insurance problem. You may find that you have limited coverage for a jet ski under your homeowner’s policy. Face it, the last thing on your mind when you are about to hop on that watercraft is, “is my homeowners policy going to protect me?” Since a jet ski is an inboard watercraft, and since so many folks will purchase, rent, or borrow them, you need to see what coverage is provided by your homeowner’s policy. Unfortunately your answer is somewhere between “none” and “not much.”

Let’s see what covered

Predominately, your homeowner’s policy provides $1,500 for watercraft. The typical Homeowner’s (HO-3) policy provides coverage for 16 named perils. Specific limitations are; no theft away from the residence premises and no coverage for windstorm damage unless the watercraft is inside a fully enclosed structure. With the typical jet ski costing in excess of $5,000 the coverage gap is obvious.

Section II (liability or medical payments) of the policy provides no coverage at all for an owned jet ski. This means that as soon as the dealer gives the keys for the jet ski to the customer, there is no coverage for liability or medical payments under the homeowner’s policy. Watercraft liability for an owned inboard watercraft is excluded. Always consult with your insurance agent before you decide to purchase a jet ski.

What about a rented jet ski?Your homeowner’s policy responds for a rented jet ski as if it were owned by you and as outlined above. The homeowner’s policy covers: “…personal property owned or used by an insured while it is anywhere in the world.”

Section II of your homeowner’s policy is most likely not going to respond for claims arising when you rent a jet ski. For inboard or inboard/outdrive watercraft (such as the jet ski) Section II coverage is provided only for such watercraft of 50 horsepower and under. If you research jet ski manufacturers, it will reveal that the smallest jet ski they manufacture is about 70 horsepower. Considering the number of folks who rent a jet ski this is perhaps one of the most significant gaps found in your homeowner’s policy. Once again: “If you rent a jet ski you do not have any liability or medical payments coverage under your homeowner’s policy.” There is no endorsement to remedy this gap in coverage since the watercraft liability endorsement (HO 24 75) provides coverage only for a watercraft shown on the schedule.

 Let’s see what there is for your borrowed Jet Ski…

Your homeowner’s policy responds for a borrowed jet ski again as if it were owned by you. The homeowner policy covers “…personal property owned or used by an insured while it is anywhere in the world.”

Section II of your homeowner’s policy does provide liability and medical payments coverage for you as well as family members. In fact, the insured and family members have Section II coverage for any borrowed watercraft, even a U.S. Navy submarine!

With jet ski type watercraft making up about 10% of the watercraft population but accounting for nearly 55% of watercraft injuries you need to be concerned about this coverage gap. Your homeowner’s policy provides, at best, limited coverage for a jet ski. We suggest you consult your agent because there are obvious coverage gaps in your homeowner’s policy, and they may be able to provide you with better coverage specifically designed for your jet ski.

“Our blogs are for general education and information only and may not represent your unique needs. Coverages will vary. Please contact your insurance agent to verify your specific policy terms and conditions.”

Posted September 4, 2012 by leecountyinsurance in Specialty