Are You Adequately Insured? A Primer About Personal, Casualty, And Commercial Insurance Coverages
There exists a range of property and casualty insurance coverages to protect you, your family, your residence, and your business. Working with your insurance agent or direct line insurance specialist, you should first coordinate your personal insurance policies so that your homeowners, auto, and umbrella policies are complimentary to each other. These personal lines policies should not be duplicative of the coverage provided by your business insurance policy, usually either a Business Owners Protection Policy (“BOP”) or a Commercial General Liability Policy (“CGL”).
PERSONAL LINES COVERAGES
Your personal lines coverages include your Auto, Homeowners, and Umbrella policies. They are interrelated, and should be evaluated separately from the property and casualty insurance needs for your business property(ies), commercial vehicle(s), workers compensation coverage, and other business-oriented coverages tailored to the unique needs of your business.
Coordination of your three personal lines policies (auto, homeowners, and umbrella) is essential to ensure that there are no gaps in your coverages and to meet your needs for a reasonable cost.
PERSONAL LINES – AUTO COVERAGES
The primary purpose of your personal auto policy is to protect you from liability to others for personal injury and property damage should you or a family member cause an accident which injures them. The coverages are provided per person/per occurrence for bodily injury and per occurrence for property damage. “Collision” coverage is afforded for damage to your vehicle from a collision with another vehicle, and “comprehensive” coverage is for all other damages which may occur which do not involve a collision. There are also ancillary coverages available, including but not limited to amounts of medical payments (covered regardless of fault), towing coverage, rental car coverage, windshield replacement coverage, etc.
A key coverage to purchase under your auto policy (and coordinate with your umbrella policy) is uninsured motorists/underinsured motorists coverage (“UM/UIM”). This coverage is vitally important for the preservation of both your personal and business assets. Should a driver of a vehicle cause an accident and either have no insurance coverage or have an insufficient amount of coverage to compensate for the injuries caused to you or your family members, your UM/UIM coverage will provide increased available limits, usually up to your liability limits which your auto policy provides to others for injuries incurred in accidents you or another insured driver may cause. Similarly, it is vitally important to make sure that your umbrella policy has UM/UIM coverage increased up to the limits provided by your umbrella policy.
In essence, by providing for the appropriate levels of UM/UIM coverage in your auto and umbrella policies, you will be making sure the same protection is provided for you and your family members should they be in an accident caused by another driver, as coverages you are providing to others should you or your family members cause an accident which injures them.
PERSONAL LINES – HOMEOWNER’S COVERAGE
While most people are familiar with personal auto coverages, your homeowner’s policy for your primary residence can and should provide a number of additional benefits beyond insuring the fair market value or replacement cost coverage (limits must usually be carried for at least 80% of the actual replacement cost of the damaged property) for the damage or destruction of your personal residence and its contents. A number of these coverages (sometimes provided through supplemental endorsements for a modest additional premium) are not as well known or as self-evident as is coverage for unexpected damage from naturally occurring perils such as wind, lightning, hail, gas or electric utility failures, frozen pipes, etc.
Other perils which may be covered by your homeowner’s policy (and you should have) include:
- Coverage to defend you and provide payment for any settlement or judgment up to a specific limit due to a dog bite or other injury caused by a pet;
- Coverage for personal injury protection to defend you and provide payments up to a specific limit for accusations that by word (slander) or writing (libel) that you defamed the reputation and integrity of another person;
- Coverage for invitees, guests and even trespassers for injuries they may sustain from slipping and falling either in your home or on your property due to an alleged defect;
- Coverage for damage caused to your home by raccoons, bats, or other wild animals (damage caused by “vermin” such as mice, squirrels, chipmunks, etc. is usually excluded from most homeowner’s policies). For example, millions of dollars are paid out by insurers to homeowners nationwide in late fall due to raccoons trying to get out of the cold by crawling down chimneys or entering through attic vent screens. (You may receive a reduction in your premium if you have/install wire mesh coverings to all chimneys and other potential entrances into your home);
- Coverage for injuries to invitees, guests, and even trespassers from trampolines, play houses, playgrounds, etc. on your property;
- Coverage for being sued arising out of your service (without compensation) to not-for-profit organizations;
- Coverage for loss or theft from your premises for specifically identified valuable personal property, such as laptops, jewelry, art, etc. (usually if they are specifically scheduled);
- Coverage for injuries which may be experienced by young children coming on to your property due to the existence of an “attractive nuisance” such as an unguarded fishing pond or pool;
- Coverage for changes to building ordinances or laws which will require a modification to your home;
- Coverage for identity theft and restitution of damages caused by the theft;
- Coverage for necessary work to stabilize Earth movement on the land surrounding your home; and
- Even reimbursement coverage for payment for any fire department service charges which may be leveled by a municipality or fire district for putting out a fire at your residence!
While the above coverages may be welcomed and unexpected additions to basic coverages for your home, there is one coverage which you may believe you have but do not:
- damages caused by water backing up due to a sump pump failure can (and should) be purchased, note that generally, the damage caused by infiltration of surface or ground water is excluded by most personal lines homeowner’s policies. If this is a concern for you, your insurance professional should assist you in exploring and potentially purchasing a separate flood insurance policy from the National Flood Insurance Program, a federal entity which will provide you with a single peril (flood) policy which covers the insured residential premises and/or personal property contents within the premises. While mortgages taken out on homes located in moderate to low-risk areas do not typically require the home to have flood insurance, lenders have the ability to require you to do so independently. If a residence is located near a flood plain as mapped out by FEMA, then flood insurance coverage may be mandatory as a condition to purchase/inhabit the residence.
PERSONAL LINES – UMBRELLA COVERAGE
Your umbrella policy importantly provides enhanced levels of coverage over and above the underlying liability limits in your auto policy. It also provides enhanced coverage for your homeowner’s policy. It will specify the underlying required limits before the enhanced umbrella policy coverages will apply. You should work with your insurance agent (or insurance professional with a direct writer) to secure liability coverage under your auto and homeowner’s policies at the lowest possible thresholds prior to the umbrella policy coverage becoming applicable. Umbrella policy limits are usually available for purchase in one million dollar coverage increments up to ten million dollars in extra coverage. You should buy enough coverage to protect your personal assets that is within your ability to pay the required premiums. While prices and multi-line discounts vary, you can expect to pay $500 for umbrella coverage of two million dollars in coverage.
By coordinating your personal umbrella policy to include enhanced coverages for potential liability claims otherwise covered by your automobile or homeowner’s policies, you will be providing important protections to your personal assets. You should consider using one insurance company for your automobile, homeowners and personal umbrella policies. This will help ensure the umbrella policy’s required minimum limits for your auto and homeowner’s policies are met and that the coverages work together as they are designed in the event they are needed, covering your risks adequately, without duplication. You should also receive a material multi-policy discount, lowering your overall premium costs.
COMMERCIAL LINES POLICY FOR YOUR BUSINESS
With regard to the BOP, CGL, or other commercial lines policies which need to be tailored to provide for the unique liability and property coverages needed for your business, your insurance professional should be heavily relied upon for recommendations.
By your insurance professional understanding the complexity of your business requirements and exposures, he or she can provide the needed and desired coverages for work vehicles, inventory, tools, trailers, workers compensation needs, etc. It is paramount for you to spend time with your insurance agent or professional to equip him or her to truly understand your business (For example, in addition to a BOP or CGL Policy, your agent may also recommend separate policies for Business Auto Coverage and a Commercial Umbrella Policy).
Given the added complexity and cost of most commercial lines policies, your insurance professional should also include (a minimum of) an annual checkup to make any needed additions, deletions, or adjustments in the level and types of coverages your business requires – and to meet more frequently if there is a material change in ownership or business exposures.
Lastly, together with your attorney and accountant, your insurance agent should be relied upon to properly protect your personal assets and business protection needs from unexpected loss events to allow you to keep focused on profitably running and growing your business. If done properly, in the event of a loss occurs, the claim process and any negotiation should go smoothly and fairly, with no major unforeseen surprises. While we have an open court system to seek redress when it does not, the goal should always be to avoid litigation, which by its nature can be more expensive and time consuming than originally anticipated, and necessarily diverts your attention away from profitable business ownership.
Author J. Mark McKinzie
From his law office in Indianapolis, attorney Mark McKinzie utilizes his 41 years of experience in the areas of:
- 1st and 3rd party insurance defense litigation;
- insurance regulatory and coverage issues
- business & corporate law;
- business contract drafting and negotiating;
- business entity selection;
- contract disputes;
- noncompetition agreements; and
- construction litigation;
to provide counsel to and advocacy on behalf of his clients. Mark understands the importance of cost effective representation of his clients’ interests. He identifies key issues and approaches resolving them with a view toward avoiding litigation which often can be more costly and time consuming for the litigants than initially anticipated.
Where reasonable resolution cannot be obtained, Mark aggressively protects and promotes his clients’ interests and goals. In pursuing a counterclaim for a business owner against a major insurance company in Hamilton County, Indiana, Mark and his co-counsel secured the largest jury verdict for defamation against an American corporation in United States history.
Mark joined Riley Bennett Egloff LLP as a Partner over 17 years ago, after a distinguished career in corporate insurance law, rising to be Senior VP, General Counsel, and Secretary for the Meridian Insurance Companies overseeing the claims and claim litigation functions, all 1st party litigation, including any allegation of bad faith by the company and serving in that position prior to the company’s sale and merger with State Auto Insurance of Columbus Ohio.
With his business and legal background and extensive and varied experience, having represented plaintiffs and defendants in a wide range of practice areas, Mark possesses and consistently demonstrates keen insight and pragmatic, resourceful solutions beneficial to the parties.
© Riley Bennett Egloff LLP
Disclaimer: Article is made available for educational purposes only and is not intended as legal advice. If you have questions about any matters in this article, please contact the author directly.
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Posted on Mar. 28 2017, by J. Mark McKinzie