What’s Your Insurance IQ?

Insurance is a very complex business governed by years of market demands, legal cases, public policy and special circumstances. In addition, many insurance policies have different terms of coverage including the amount they are required to pay when an accident or incident occurs. As you’ll see below, that means you need have an agent who really knows the business.

So here are answers to the coverage questions from a seasoned claim manager:

The fallen tree (1): The responsibility of the tree cleanup falls upon the owner of the property where it fell. There are some endorsements that will provide limited coverage ($250 or so ) for debris cleanup caused by wind even when there is no damage to covered property. If the tree simply was rotted, there is no peril that caused the loss such as wind or lightening. However this coverage is still subject to the policy deductible. For example, a $500 debris bill with a $1,000 deductible may have limited coverage but it is under the deductible and therefore, there is no claim. If there is no endorsement on the policy, then there is no coverage.

The auto fatality (3): The insurance company will definitely pay for the defense cost of a suit. However, the insurance company needs to determine the value of the deceased’s life (e.g. earning power, number of dependents, etc.) in order to determine if the $50,000 Bodily Injury policy limit will resolve the claim. If not, then the insurance company will pay the first $50,000 and the family would owe any judgment balance. The insurance company might also offer their medical payment limit, as well, as a goodwill gesture.

The flooded finished basement (2): Provided the water comes into the basement from a drain or sump hole there is limited coverage but only IF the insured has the proper policy endorsement, usually around $5,000. Some companies will deny this coverage if water enters in any other manner. Water that enters through the foundation is excluded by all companies. If you have coverage under the National Flood Insurance Program, they require that adjacent properties also sustain damage and the program only covers getting the property habitable.

The Business Interruption (1): More maybes here. Business Interruption Coverage often has a first party 72 hour time frame before a business income loss can be honored. How power was lost also can be an issue. Sometimes power is excluded if overhead power lines are the reason for the outage. If you’re looking for coverage from the driver, the insurance company for the driver might not be responsible if the driver incurred a medical emergency.

The Health Savings Account (3): The money belongs to the employee as long as it is used for allowable medical expenses. The beauty of having a health savings account is that the money goes into the account pre-tax, earns interest without tax liability, and comes out without a tax consequence when used to pay for allowable expenses – including payment of Medicare supplemental insurance premiums.

The Non-profit law suit (3): The liability adjuster would have to review the exact wording of the Summons and Complaint as well as the insured’s Business Owners Policy in order to make a coverage determination that would protect the board of directors and whether or not defense costs would be considered.

The Rotted Deck (3): The insured’s homeowner’s policy would at first pay the policy limit for Medical payments which usually is around $5,000. Any liability payment will be determined by the investigation of the adjuster who will ask if the insured is actually legally liable? For example, did the injured claimant contribute to his own injury? As for the repair of the deck, property insurance does not generally cover damage due to rot or wear and tear.

If you were able to answer 6-7 questions correctly, consider yourself a very astute insurance consumer; 4-5 correct answers means you are far more knowledgeable than most; knowing three or fewer puts you in the category of being like most people – you rely on your agent to really know your needs and provide the right insurance coverage.

That is why we take a lot of time to help educate our customers about insurance and help them make informed choices. We’d love to do it for you if you are not already a customer.