One of the worst calls for me to take as an insurance agent has to be the one where a client has experienced a loss and I have to deliver the bad news that this particular loss is not covered by their insurance policy. As I peruse various insurance complaints I am often struck with how many complaints are due to the insured not understanding the coverage that was purchased.
Sometimes this is unavoidable. For example, “Flood” is never covered by a home insurance policy. This is always specifically excluded. The way to have flood covered is to purchase a Flood Insurance policy. But sometimes this conversation never had to happen if the policy were endorsed with specific coverage. Some of the most common coverages that I have seen lately are:
1. High wind/hail deductibles. I’m not opposed to high deductibles, I always recommend purchasing the highest deductible that you can reasonably afford to pay. Give up the claims that carry a lower dollar amount in favor of savings on your insurance. That said, a percent deductible is dangerous, a 1% wind hail deductible on a $250K home policy is $2500. The danger comes in that each year as the property coverage increases, so does that deductible. It can quickly get out of hand. I’ve also seen policies with ACV coverage on the dwelling or on the roof which means that the home will have it’s value depreciated and the payout may be far less than what is necessary to make a repair.
2. No Water Backup coverage. The minimums that I put on a quote are $5000 or $10000 if a home has a finished basement. Often after discussing what this coverage does we end up increasing it from this amount. Water backup is second only to wind and hail claims here on the Front Range.
3. Auto Insurance with no rental reimbursement. If you are at fault in an accident and your car is out of commission for a period of time, you may need a rental car. This is not automatically included with most insurance carriers. A better coverage than “RR” is Loss of Use so that the payout comes from the loss of a vehicles use rather than needing to rent a vehicle. That way you have a choice in how to spend that money.
4. No Towing coverage. Towing coverage is pretty cheap with most auto insurance policies. It ranges anywhere from $4 – $40 per year. Many times people think this is automatically included but it’s not.
5. Delivering pizza on a personal auto policy. Most companies will specifically exclude coverage for this use when you have a personal auto policy. If you plan to use your vehicle for any kind of business, check with your agent to make sure your current insurance company doesn’t exclude coverage.
The moral of the story is that it’s best to know what your coverage is before the loss than to discover it after a loss.