“Wear and Tear” Vs. “Sudden and Accidental”

Two terms that are important to know when it comes to the reason behind an insurance claim. Those terms are “Wear and Tear” and “Sudden and Accidental”.

“Wear and tear” is defined by Wikipedia as “damage that naturally and inevitably occurs as a result of normal wear or aging.” An example on a home would be a house settling over time, a pipe that corrodes and leaks water over several months or years, or a roof that after 15 years starts to drop shingles. All these items would not be covered under an insurance policy as an insurance policy does not cover “Wear and Tear”. Insurance policies cover “Sudden and Accidental” events.

So what is “Sudden and Accidental”? The best way to define it is by giving examples. If a pipe in your house just suddenly burst from pressure or because of freezing that is sudden and was done accidently. If wind blows through your neighborhood and suddenly blows off your roof or chunks of your roof that is sudden and accidental. If a tree falls and damages your home that event is sudden and accidental.

“Sudden and Accidental” events are things people can not totally prevent which is why insurance exists and covers them. On the other hand, “Wear and Tear” damage can be prevented by making sure your property is well maintained and updated. Insurance policies are not maintenance contracts.

So next time you have damage to your property ask yourself is this “Wear and Tear” or “Sudden and Accidental”? If it is “Sudden and Accidental” be sure to call your insurance agent or if you are not sure which it falls under call your insurance agent and let them help you figure that out.

Insurance and Your College Kids

Out in front of our Oxford, OH insurance office, it is a busy place. Today 16,000+ Miami University students return to begin a new school year. This annual pilgrimage brings up potential insurance issues pertaining to what parent's personal insurance policies cover or don't cover. Three areas that parents should be aware of:

(1) If your son or daughter is going away to school over 100 miles from home without a car, most companies will rate your Personal Auto Policy for them being married which is a nice discount. Let us know if this discount might apply to your family and your Personal Auto Policy.

(2) Most insurance companies will extend personal property (contents) coverage and personal liability for your son or daughter while they are in college and living in a dormitory. Some, but not all, will also extend coverage if they are living in off campus facilities such as an apartment or other student housing. Please check with us to see if your insurance company provides this extended protection. If not, we should be able to write a Tenant/Homeowner for your student to cover both their personal property and personal liability while they are an undergraduate. If they are in graduate school, they should definitely have their own Tenant/Homeowner Policy.

(3) If you or your children are using a rental truck to take their things back to college, U-Haul, Penske, Hertz and other will offer you coverage on the vehicle (collision damage waiver) and extended liability. While these may be covered by your Personal Auto Policy, not all companies extend the protection, so check with us before renting the vehicle. Whether or not they are covered will depend on the length and Gross Vehicle Weight of the vehicle and several other factors. We may be suggesting you buy the extra protection from the rental company before your trip.

Leaving Your House Vacant? Consult Your Agent! (9/17/10 Repost)

In today’s real estate market it can be somewhat common to purchase a new home with out having first sold your current home. Prices are low so if you want to upgrade your house, now seems to be the time even if you know you may have to wait a few months until you sell your current home. So many are purchasing a new home, moving into it and then leaving the old home vacant until it sells. This can pose an insurance problem that Fey Insurance feels many don’t realize.

In a typical homeowner policy there is wording that refers to a 60 day period. For sixty days your homeowner policy will have no change in coverage once it becomes vacant. However, and this is important, once the house has been vacant for 60 days some of the coverages are no longer provided. Example, vandalism or malicious mischief claims would no longer be covered. Same with glass breakage claims. The reason for this is that a homeowner policy is priced and designed for buildings that are being lived in and cared for by the owners. Once the owner no longer lives there and it is vacant then the building is more at risk for claims and therefore the insurance companies require it be on a special vacancy policy. What does vacancy mean? Vacancy means the following, “Substantially empty of personal property necessary to sustain normal occupancy.”

So if you are considering purchasing a new home and leaving the current home vacant until it sells, please be sure to call your insurance agent so they can make sure coverages don’t disappear from your policy

Special Limits in Your Homeowner Policy

Your homeowners insurance policy places limits on certain types of property. In your policy there is a section titled “Special Limits on Certain Property.” This section will list various items and place a dollar limit on each type of property- such as jewelry, fine arts, guns or money.

Why do insurance policies contain such provisions? The homeowners insurance policy is written to provide coverage for the average policy holder. Most of us do not own collections or keep large amounts of cash at our homes. While the policy provides some limited coverage for special types of property, it in no way serves the needs of the unique collector.

There is, however, a solution for the collector or owner of unusual property items. It is possible to amend your homeowners policy, by endorsement, to provide special coverage for unique collection items such as coins or stamps. By asking your agent to include a schedule property floater in your coverage, you can specifically insure items of special interest. The personal property floater also expands coverage for perils not included in the homeowner policy.

Our 100th Blog Post!

We have now reached 100 posts on the Fey Insurance Services blog. Over the past few years we have posted about a variety of insurance and risk management topics. We have helped to educate businesses and individuals on how to best protect their hard earned assets such as their home, cars, and businesses. We have also give tips on how to stay safe in an ever changing world including tips on online identity safety and how to best prepare your home for the winter months.

Our hope is that you have enjoyed the 99 other posts and found some information that was helpful in each one. For the years to come we will continue to add helpful content so that our clients and readers can enjoy a safe and protected life.

Business Income

Calculating the appropriate business income limit does not have to be a mind-numbing process. To understand business income coverage limits, you must simply understand that the coverage is almost entirely based on time. The amount of coverage and the correct coinsurance amount can be calculated once a reasonable estimation of the time necessary to return to full operational capability is determined.

Four Key Objectives must be accomplished as quickly as reasonably possible:

1) Rebuild the building, or find a move to an alternate permanent location.
2) Find, purchase, and have operational, replacement machinery and equipment.
3) Replace and/or replenish stock (raw materials for manufacturing operations).
4) Return operations to the same level existing just prior to the loss.

Business Income’s Necessity

According to the Federal Emergency Management Agency (FEMA), there is a structure fire ever 4.5 minutes. Approximately 25 percent of businesses never reopen after a shutdown of just 30 or more days, according to the insurance industry. When you include the number of business failures within five years that are directly traceable to the same kind of claim, the number could approach 40 percent.

Business closings as a result of natural disasters also reach 25percent. The U.S. Small Business Administration reports that more than 90 percent of small businesses fail within two years after being struck by a disaster. Combining these two pieces of statistical data, losses can lead to the closure of thousands of business in any given year due to an interruption in operations.

The Calculation

Once total revenues and the total amount of non-continuing expenses (production-related expenses that do not continue during the interruption) is known and applied to an honest worst-case scenario estimate of the time necessary to resume operations, the correct coinsurance percentage can be calculated. Coinsurance percentages, in 10 percent increments, can be from 50 percent to 100 percent- each representing a proportion of one year (50 percent equals six months; 60 percent equals 7.2 months; 100 percent equals 12 months). It is also sometimes possible to obtain a 15-month business-interruption period at a corresponding coinsurance limit of 125 percent.

The Reality

Most businesses that close and never reopen after a catastrophic closure (30 days or more), don’t close because of the lack of building and business personal property coverage. They close because there is no money coming in the door. Few businesses can remain viable without a source of income. Many business expenses continue even during the period of temporary closing.

Obviously, the optimal goal is to have the building, contents and business income all properly insured. Ultimately, only the business can provide these figures, but this simple approach can make this exercise much easier. Once you accept the reality that loss of income is as important to the insure as insuring your property, we can help guide you to the proper coverage to further protect your business.

Extended Replacement Coverage on Home Insurance

The recent devastation caused by the spring tornadoes is a sobering reminder that catastrophes can strike at any time. When a total loss occurs, homeowners coverage is designed to reconstruct a home under normal conditions. But following a catastrophe, increased demand for building materials and labor can cause these costs to rise significantly, potentially leaving policy limits inadequate.

Fortunately, many insurance companies offer extended dwelling coverage to help prevent such shortfalls.

How it works

Two coverage levels give you options: Extended dwelling coverage is available at levels of 25% or %50% of additional Coverage A amounts, allowing people to choose the level that fits their needs.
Example: A home is insured for a Dwelling Limit (Coverage A) of $100,000. Following a total loss, reconstruction cost amount to $120,000. Without extended dwelling coverage, the policy holder could incur significant out of pocket expenses or be forced to make difficult rebuilding choices to reduce the costs. With 25% or 50% in extended dwelling coverage, the home would have those extra costs covered (i.e. 25%-Dwelling is increase to $125,000 or 50%-Dwelling is increased to $150,000).