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Thanksgiving, Christmas, and New Year’s Eve—these holidays mean celebrations, many of them in decorated homes filled with merry-making family members and friends. Trusted Choice® insurance professionals also know that the winter holidays bring greater-than-usual risks of fire in homes. The National Fire Protection Association reports that, over the course of a calendar year, the 10 worst days for fires in homes fall between December 24 and January 6. Fortunately, these risks can be reduced with safe practices that address the “four Cs” of winter fires: chimneys, candles, Christmas trees and children. Chimneys: Buildup or blockage within a chimney can catch fire. Chimney fires are unpredictable: they can be noisy and fierce, or can smolder undetected. Common-sense tips:
Remember fireplace basics, too: use a screen to contain sparks; and let ashes cool before disposing of them in a metal container. Candles: Home-candle fires happen on Christmas Day more often than any other day, according to the National Fire Protection Association. Next worst: New Year’s Day and Christmas Eve. How do they start? Half of home-candle fires begin because an item is left near a lit candle. Four of 10 home candle fires start in bedrooms, with bedding, furniture, and curtains igniting. Common-sense tips:
Christmas Trees: The National Fire Protection Association notes that 300 home fires start each year with Christmas trees. It’s not just live trees; artificial trees also burn. Three major reasons Christmas-tree fires start: electric malfunctions, heat too close to the tree, and children playing with matches, candles, or fireplaces. Common-sense tips:
Children: Perhaps the most unpredictable risks for winter fire are those young people who are, naturally, exploring and experiencing the wonders of the winter world for the first time. Remember that lights and flames are fascinating to children. Common-sense tips:
Trusted Choice® independent insurance agents and brokers stand ready to assist consumers with a homeowners insurance claim. The best claim is no claim, though. Use these common-sense practices to prevent home fires. Higher Deductibles - Are They Worth It? In these cost-conscious days, everyone is trying to save money wherever and whenever they can. It seems that people may especially look to their insurance policies as a place to realize some savings. More customers are now requesting a reduction in the dwelling limits on their homeowners policy or a reduction in the policy's liability limits. Some customers are even requesting a reduction in the limits of liability on their auto insurance policies. In most cases, these types of requests are not wise ones. We cannot stress enough how much you have to lose if a liability judgment goes against you -- for example, in an auto accident of if someone gets hurt at your home. A wiser and certainly more consumer-friendly way to save money on your insurance premiums is to increase your property deductibles. On a homeowners policy, going from a $250 to a $500 deductible may result in a savings of between 10 and 15 percent on the premium. We understand; we've heard customers tell us previously: "But if I have a claim, I can't come up with $500 at one time." The important thing for you to remember is this: you only have to come up with $250 more than you would right now (the difference between your current deductible and $500) -- not a big amount. And remember, with the savings you will experience in the premium, you will probably save that $250 in less than 2 years. Higher deductibles on the physical damage section of your auto insurance are also a good way save some money on the premium. A $500 deductible on both comprehensive and collision can save you to 30 percent on these coverage lines. A $1,000 deductible may result in savings of up to 40 percent. If you cannot take the big leap from a $250 deductible to $1,000, consider a graduated approach. We'd like to suggest going to a $500 deductible now and putting the premium you save into a "deductible fund." Then in a couple of years, you will have enough in that fund to increase the deductible to $1,000. The point to remember is this: don't risk a lot in
order to save a little. Water Back-Up Coverage - Add it to Your Policy Today Imagine this: It is a bright sunny morning, but the day starts off poorly when your house is flooded due to a horrific sewer back-up incident. It turns out that a blockage in a city sanitary main is the culprit. The waste has overtaken your entire house, resulting in a huge loss -- and it may not be covered under an unendorsed homeowners policy. Not only is this damage difficult and expensive to repair, but it can also create significant health hazards. What can make the matter worse is that a water back-up loss to a home caused by a municipal-owned and maintained sewage system may not even be recoverable from the municipality. There may be a law granting the municipality immunity from reimbursing homeowners for municipality-caused sewer back-up damage into residents' homes. (Note that in some cases, state law may grant this immunity.) The homeowner has to rely on his or her homeowners policy with a specific endorsement for water back-up coverage for proper protection. Other municipalities may not be so strict on this but many have other laws that limit their responsibility. For example, one city will reimburse homeowners for losses caused by city-owned sewer lines only if the city was aware of a problem and failed to take proper steps to resolve it in a reasonable period of time. In other words, if the municipality were unaware of the problem, they could legally deny liability. If it is determined that a combination of municipality-owned and homeowner-owned tree roots caused the sewer back-up, the municipality may only be willing to pay part of the loss. Also, some municipalities limit the maximum amount payable to a set figure, such as $5,000, a figure that may be woefully inadequate to properly repair the damage. Most homeowners do not realize that they are typically responsible for maintaining their house or sewer lateral, which is the main pipeline between the municipality sanitary sewer main (located under the street) and the affected home. In effect, the property owner may own the sewer lateral, including any part that may extend into the street or alleyway. For all these reasons, we recommend that you purchase a water back-up or overflow endorsement to your homeowners policy. This coverage is typically available for under $70. Unfortunately, this endorsement often contains a fairly low limit, such as $5,000. However, some insurers may provide higher limits for a higher premium. In addition, you should adopt several loss control techniques: First, grease should be properly disposed of because grease buildup in the lines is a common cause of water and sewage back-up losses. Second, homeowners should not connect any type of French drain or similar devices to the sewer system since resulting debris and silt can clog the line. Third, the installation of a backwater prevention valve by a licensed plumber is highly recommended. This valve allows sewage to go out, but not to come back in. Please contact us to discuss this important optional coverage. Copyright © 2008 International Risk Management Institute, Inc. Defective electrical wiring systems cause approximately 40,000 residential fires annually, according to a United States Consumer Product Safety Commission (CPSC) study. In addition, electric cords and plugs are involved in about 7,000 fires annually. The National Electrical Safety Foundation offers numerous tips to safeguard the home against electrical fire and related losses, including the following. * Verify that outlets and extension cords are not overloaded. * Examine electrical cords to ensure they are not frayed, damaged, or placed under rugs or carpets. * Verify that the proper wattage bulbs are being used in light fixtures and lamps. * Consider installing ground fault circuit interrupters (GFCI) in bathrooms, utility rooms, and kitchens. This device protects people against electrocution by shutting down the electrical system if it detects any imbalance in the electricity. * Take steps to safeguard electrical appliances from power surges. A power surge is a sudden rise of current or voltage in an electrical circuit that can last up to several seconds and can ruin electrical appliances and equipment, such as computers. You can purchase surge protection devices to safeguard against the problem. * Consider updating the entire electrical system if the home is over 40 years old. Older homes are more susceptible to electrical fire. For example, many older homes contain aluminum wiring, which is much more susceptible to starting fires than the copper wire required by modern building codes. * Install child tamper-resistant electrical outlets to prevent a child from inserting something into the outlet holes. * Install arc fault circuit interrupters (AFCI) to avoid fires caused by arc faults. An arc fault is a discharge of electric current across a gap. This can be caused by improper electrical connections, pinched wire insulation, and overheated wires. Note that many insurers offer discounts for some of these electrical safety improvements. Please call for details. Copyright © 2008 International Risk Management Institute, Inc. Insuring Your Collectible Cars Is your antique car properly insured? If you are a relatively new collector, you should be aware that this type of vehicle often requires specialized coverage, which we can help you obtain. Remember that collectible cars, defined as those built 30 or more years ago, have unique insurance needs compared to traditional automobiles. As you know, regular use vehicles are on the road every day but antique or classic cars are typically used for limited pleasure driving, auto shows, and parades. In addition, while normal vehicles depreciate in value, antique or collectible vehicles often significantly increase in value over time. The following are some issues to consider when procuring coverage for collectible cars. * Vehicle Condition -- Many specialty insurance companies may want to insure only classic cars that are in mint condition; if your collectible has prior damage or shows extensive wear and tear, it may be difficult to purchase coverage. But most specialty insurers are willing to provide coverage (with increasing values) if you are actively renovating the vehicle. * Vehicle Usage -- Most specialty insurance companies stipulate maximum mileage limits per year, such as 3000 or 5000 miles. Thus, it is important to verify the limits and keep track of the mileage on the vehicle. * Vehicle Valuation -- Agreed-value policies are better than stated value policies. Agreed value policies guarantee that, in the event of a total loss, the insurance company will pay you the full amount listed on the policy, less any applicable deductible. Stated value policies, while rare, are often open to interpretation concerning the vehicle's value. You should also consider inflation guard coverage (automatically providing increasing limits every quarter or year) for your vehicle. * Vehicle Storage -- Antique and collectible insurance companies normally require that these vehicles be stored in a fully enclosed, locked garage or storage facility when not in use. Failure to abide by this requirement could jeopardize coverage. Finally, please call us concerning your collectible; we can assist in the arrangement of the best insurance at the best value for your car collection. Copyright © 2008 International Risk Management Institute, Inc. The Dangers of Going Bare on Watercraft Coverage Boatowners typically face large property and liability loss exposures from their boating activities while often going without proper insurance. The following loss scenarios point to the need for specialized boatowners coverage. Remember that many of these loss examples are not covered (or have tough restrictions) under the standard personal auto or homeowners policies. * Your cruiser collides with a speed boat whose operator fails to yield the right of way, causing extensive damage to your boat. The owner of the speed boat does not have any insurance coverage. * An expensive bass boat you just purchased is stolen from your home. * Your 27-foot-long sailboat is damaged by a major hailstorm while docked at the marina. * Your sport fishing boat is struck by lightning, incapacitating its electrical system. * Your son's friend is water skiing behind your boat and he falls into the lake, injuring himself, due to the excessive speed of the boat. * You negligently cause another boat to overturn to avoid a collision. * Your outboard motor explodes, seriously injuring your next door neighbor. If you have any watercraft exposures, please call our office for a review of your loss exposures and insurance solutions. Copyright © 2008 International Risk Management Institute, Inc. Are the Limits of Insurance on Your Home Accurate? Is the amount of property insurance on your home correct? What is the appropriate amount of coverage for your home? To begin with, it should be insured for at least 80 percent of its replacement cost when covered under a standard homeowners policy. Replacement cost refers to the amount necessary to repair or replace damaged building parts with items of like kind and quality. Some insurance companies even require 90 percent or 100% when the guaranteed replacement cost option is offered. With this option, the policy pays the full cost of replacing your home, without any depreciation and often without a maximum reconstruction payment. (This gives you added protection if there is a sudden jump in construction costs due to a major shortage of certain building materials. Construction costs often "surge" following large catastrophes, such as hurricanes.) Note that guaranteed replacement cost coverage approaches can vary by state and are not even available in every state. Many homes are either underinsured or overinsured. For example, some homes insured for long periods of time with one insurance company may have inadequate limits of insurance due to increased building costs. In many cases, homes have been remodeled and improved, and this information has not been conveyed to the insurance agent or company, resulting in severe underinsured home values. If your home is underinsured, you not only have inadequate protection for total losses, but you may also lack full protection for smaller losses. Sometimes homes are mistakenly insured for their market value. However, market value is normally not indicative of the home's replacement cost. For example, market value also reflects the cost of the foundation and the land value, both of which normally survive intact if the house burns to the ground and has to be rebuilt. In addition, some homes may be insured improperly to meet mortgage company requirements. Some mortgage companies require the amount of insurance be at least equal to the mortgage balance on the house. The mortgage balance is also not reflective of the home's replacement cost, which is often considerably more but can also be less. Insurance companies and agents often struggle in properly educating mortgage companies about these distinctions, but there is nothing to prevent you from insuring to actual replacement cost if that is indeed greater than the mortgage balance. The problem occurs when the mortgage balance is greater than the replacement cost, which will result in the purchase of a higher limit than needed. The bottom line is that you should work with your insurance agent to determine the correct replacement cost and resulting insurance limit for your home. Most agents use sophisticated replacement cost estimating packages that can fairly and accurately determine the replacement cost value of your home. Factors that these programs use to determine this figure include the following. * Square footage of the home, including its configuration * Construction costs for your community * Exterior wall construction type, including frame, stucco, brick, or brick veneer * Style of home * Number of bathrooms and bedrooms * Roof type * Attached garages, fireplaces, built-in cabinets, and other special features, such as hardwood floors The more advanced replacement cost estimating programs require detailed information to improve the valuation estimate. For example, a rectangular-shaped home with 1,800 square feet will have a much lower replacement cost than a similar-sized home with an "L" shape. In other words, the better cost estimating programs require information about the number of corners in the home. The more detailed information your agent asks about your home, the more confidence you can place in his or her recommended limit of insurance. As a final note, you should request an annual review of your homeowners policy to keep up with increasing building supply and labor costs. Also ask your agent about the advisability of adding an "inflation guard" endorsement to your policy or about the availability of guaranteed replacement cost coverage to help assure that your home is properly protected. Copyright © 2008 International Risk Management Institute, Inc. ‘Tis the Season to Protect Gifts If you’re giving and getting gifts this holiday season, think about protecting the gifts. Americans spend handsomely during the holidays. The U.S. Department of Commerce estimated that U.S. retail sales for the fourth quarter of 2007 were more than $1 trillion, although an economic slump may cut into that number in 2008. Trusted Choice® insurance agents and brokers suggest you to take stock of what you own – and how it’s insured – soon after you finish unwrapping the Christmas gifts. Most consumers protect what they own with homeowners or renters insurance. Homeowners insurance covers personal property for a percentage of the insured value of the home. For instance, a $300,000 home might have its possessions insured for 50 percent of that amount. While $150,000 might seem like a large number, the value of clothing, electronics, furniture and kitchen appliances in the home adds up. Homeowners coverage will reimburse a consumer if those items are damaged by fire or stolen. Around the holidays, the value of what you own can change quickly. Rest assured that, when someone in the family gets new electronic equipment or jewelry for Christmas, those items are automatically insured by homeowners or renters coverage. But that coverage might be limited, so it’s timely to check your insurance now. There are two limitations on coverage for possessions: 1) amount of coverage and 2) risks covered. Amount of Coverage. Homeowners insurance may cover personal property for actual cash value and not replacement cost, depending on the policy. For example, a piano purchased five years ago has declined in value due to wear and age -- this is known as “depreciation.” Your insurance contract may reimburse the actual cash value (original cost, minus depreciation) of the piano, and not for the price of a new piano to replace the one that was damaged in a fire. By contrast, replacement-cost coverage is based on the amount it costs to buy a new piano. Replacement-cost coverage costs about 10 percent more, notes the Insurance Information Institute. Additionally, many homeowners policies put a dollar-amount cap on certain categories of property. So even if you have a large amount of personal property coverage on your homeowners policy, you might have a “sub-limit” of $2,000 for jewelry. In that case, a new pair of diamond earrings, combined with an engagement ring, might push the value of the jewelry above the limit. (Even replacement-cost policies have sub-limits for certain types of property such as furs and jewelry.) Deductibles on homeowners policies reduce the amount of any claim check. Deductibles are a way that the homeowner shares the risk of loss with the insurance company. Risks Covered. Homeowners policies provide coverage for, at a minimum, loss or damage of property due to fire, lightning, and windstorm as well as theft and vandalism. Depending on the policy, additional risks such as water damage may be covered. However, for personal property, some typical risks might not be covered. For example, if a toddler picks up a diamond ring off the bathroom counter and flushes it down the toilet, that loss likely is not insured. To provide additional amounts of coverage and to insure against additional risks (including breakage and accidental damage), many consumers should consider “valuables” coverage. Sold as an add-on to a homeowners or renters policy, this coverage is sometimes called a “valuable articles floater” or a “valuables rider.” Valuables coverage is suitable for expensive items such as jewelry, furs, art, antiques, fine furniture, and fine rugs. Valuables coverage either gives you a) a “schedule” or list of individually-listed items covered, or b) coverage for categories such as jewelry, fine arts, etc. Scheduled items typically need to be appraised by a third-party appraiser, or have their purchase price documented. One consideration in buying valuables insurance is whether you need to protect the financial value of the items, and not merely the sentimental value. Another criterion: if the item is likely to appreciate in value, check out valuables coverage. A valuables policy or rider typically provides all-risks coverage for the items listed on it. If you’re a collector of items such as collections of dolls, trains, or NASCAR© memorabilia, a different type of policy might be appropriate: Collectibles insurance. Available on a stand-alone basis, collectibles coverage provides a few thousand dollars of coverage for a small premium. Homeowners or renters coverage might pay only a small reimbursement if these items are stolen or damaged. Collectibles coverage also protects against more risks than homeowners coverage. Insurance is the last line of defense against financial loss, though. There are two vital ways to protect your property, especially as you add to it during the holidays: -- Keep an updated inventory of what you own. A written record of the cost, date/place of purchase, and description of your possessions is invaluable in knowing what you own. It’s easier and faster to get claim payments when you can document what you lost. Homeowners insurers and consumer software offer home inventory spreadsheets, including some that allow you to keep photos and receipts. Give a copy of the inventory to your Trusted Choice insurance agent or broker, and keep a copy outside your home. -- Protect your property. A secure home, with especially valuable items kept in locked cabinets and/or fireproof boxes, is the best way to deter the thefts that cause so much financial loss. Your Trusted Choice® insurance agent or broker can guide you as to which type of coverage you need for what you own. The holiday season is a good time to ask us about what you own and how it’s insured. Purchase Special Insurance for your Home-Based Business The United States has experienced a rapid growth in home-based businesses in the last decade. The U.S. Census Bureau reports that there are now more than 11 million home-based businesses in the country, a figure that is expected to rise in the coming years. But if you run a home business, losses associated with that business may not be covered under your homeowners policy unless special coverage endorsements are added. Some insurers sell an endorsement that covers losses associated with a home-based business. We can quickly find out if such an option is available. What if you are operating a home-based business without your insurer's knowledge? Suppose you had a small fire that damaged your home office and computer and resulted in some lost income. Once your insurer sends an adjuster who, while investigating your claim, discovers your business, your insurer may deny some or all of the claim because of business-related exclusions and restrictions found in many homeowners policies. Conversely, if you paid the additional premium to add a home-based business endorsement to your homeowners policy or you bought a businessowners policy (BOP), your loss would likely be covered—even the loss of income. (A BOP is a separate policy form designed to insure the property and liability exposures of small businesses.) And do not forget about liability. If you have business visitors in your home and they get hurt, many insurers' homeowners policies will not cover those injuries because of the business-related loss exclusion found in the personal liability section of the policy. Again, it is necessary to purchase a special endorsement to the homeowners policy or a separate BOP. Also, if your activities give rise to any type of errors and omissions or professional liability exposures, they are not likely to be covered under either your homeowners policy or a BOP. A separate errors and omissions (E&O) policy will need to be arranged for this loss exposure. Different insurance companies have different criteria for excluding business-related losses from their policies. If your current insurer cannot respond to your coverage needs, we can present several options to you. But the important thing to remember is this: if you are running a business out of your home, call us. We will work hard to assure you are properly protected. Arranging the proper insurance for your condominium is more difficult than a standard one-family dwelling since your condo coverage has to be properly coordinated with your condominium association's master policy. For this reason, it is a good idea to periodically have a quick condominium coverage checkup with your agent. The following are some ways for us to improve the insurance protection for your condominium unit to avoid any large coverage gaps.
Risk Management Strategies for Hiring Domestic Workers More and more homeowners in the United States now employ domestic workers, either on a full-time or part-time basis. In fact, the U.S. Census Bureau estimates that there are at least 1.5 million domestic workers across the country. The services these domestics render are great, but so are the risks for the employer. The following are some ways for you to mitigate the risks of employing domestic workers and for ensuring that these workers have the proper protection as well.
The advantage of workers compensation coverage is that it provides broader protection (e.g., disability payments) than your homeowners policy, including unlimited medical expenses in most states. So, even if not required by law, it is a good idea to consider voluntarily providing this important coverage.
Consider some type of fidelity bond for these employees, particularly for new employees. This bond will protect you if the domestic worker commits a dishonest act in your employment (e.g., theft of jewelry). If an employment agency or service provides these employees, verify that the employment agency has purchased fidelity bonds on them and ask for a copy of the bond certification form.
Evaluate Your Home's Need for a Lightning Protection System A lightning protection system is designed to control or redirect a lightning strike to a specified path. The system does not prevent a strike, but provides a path on which the electrical current can safely be redirected to the ground. Its objective is to prevent destruction or injury as the lightning travels that route. According to the Lightning Protection Institute (LPI), the system is composed of several key components, including the following.
So is a lightning protection system a wise purchase for your home? Most lightning experts recommend that individuals owning homes with several of the following characteristics or features should purchase a lightning protection system.
Lightning protection systems should meet the code established by Underwriters Laboratories and the LPI. Note that some insurers provide premium credits for homes with these types of certified systems. For an average size home, the cost for this system ranges from $2,000 to $3,000. Small Businesses: Don’t Let Business Risk Share Your Home The diversification of the U.S. economy over the past generation has meant that millions of Americans have started their own businesses. Americans still chase the dream of being their own boss by starting their own business—and the trend may pick up during economic slumps because of hiring slowdowns and spikes in corporate layoffs. Small businesses are the biggest driver of job growth, generating 60 to 80 percent of net new jobs annually over the last decade (1998-2008), according to the U.S. Department of Commerce. Small firms employ half of U.S. workers. And the sole proprietor is alive and well: In 2005, there were six million firms with employees but a whopping 20.4 million firms who had no employees other than the owner, according to the Small Business Administration. Of all small businesses, 52 percent are home-based. That means millions of Americans are earning their business income where they live. But business owner beware: Don’t expect homeowners insurance to cover business risks. Business insurance offers protection from liability and property risks. Often these coverages are combined into a package policy called a BOP or business owner’s policy. Millions of small and mid-sized business owners purchase or renew their BOP every year. Typically, a BOP includes the following coverages: Property insurance for buildings and contents of the business. Home-based business might not need coverage for their home, since it’s already insured against risks of fire, lightning and windstorm. But if there are additional risks to the structure because of the presence of business operations, those won’t necessarily be covered by homeowners insurance. Your Trusted Choice® insurance agent can help determine if a special endorsement or a separate policy are most appropriate. Home-based businesses might not have adequate coverage through homeowners insurance because homeowners policies often have “sublimits” restricting coverage for business property. For instance, the homeowners policy may cover business personal property, but typically only up to $2,500 while it is “on premises” and up to $500 while the property is “off premises.” One example of inadequate coverage was a home-based retail cosmetics/personal care business that kept $20,000 of inventory that was damaged by fire. The business inventory was covered only up to the sublimits of the homeowners policy. Another instance: Coverage would be limited to the “off premises” limit of $500 if a laptop computer valued at $1,500 that is stolen while the business owner has it away from home. If there are additional structures on a residential property where the homeowner operates a business, those won’t necessarily be covered by homeowners insurance. For example, a detached garage that contains business-related contents would not be covered by homeowners insurance; that business owner would need a policy endorsement to gain coverage for the building. Business interruption insurance. This protects against loss of income resulting from a fire or other covered event that disrupts the business. This coverage can also include the extra costs a business shoulders while it works from a temporary location. A fire in a home can be double trouble for a home-based business. Liability insurance. This protects the small business for legal responsibility for the damage it causes to other people or entities. Liability insurance is usually priced according to the risk of the industry in which the business operates. A business that manufactures toys, for example, faces different risks than a consulting firm. Liability insurance shields a business and its employees if they cause bodily injury or property damage. Not included in a BOP are professional liability coverage, automobile insurance, workers compensation, medical insurance and disability insurance. All can be covered with separate policies. Check with your Trusted Choice® insurance agent about what type of insurance protection a small business—especially a home-based business—warrants. You can find an insurance professional at www.TrustedChoice.com. With winter fast approaching, now is the time to properly safeguard your home from the harsh elements of this season. These steps can lessen your chances of a loss to your home due to inclement weather.
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