Remaining Under the Radar with Your Homeowner’s Coverage

If you contact your insurance company to verify coverage for a particular claim, it goes on your record.  Even if you call your agent directly, they might be obligated to inform the insurer of your inquiry.  Too many inquiries, even if you never file a claim, can jeopardize your policy.  Too many claims, regardless of their size, can result in non-renewal at the end of your policy’s term.

Here are several ways to stay under the radar with your insurance company:

  • Don’t file for small claims.  When property damage occurs, get estimates first before calling your insurer or agent.  Pay for small repairs yourself, if possible.
  • Consolidate coverage.  Have your homeowner’s and auto insurance with the same company.  The insurer might think twice about canceling if you’re likely to pull the other coverage and move elsewhere.
  • Increase your deductible.  If you heed the earlier advice and don’t intend to file for small claims, save the money you’re spending on a policy with a $250 deductible and raise it to $500 or even $1000.
  • Insure your home for its replacement cost, instead of the balance of the mortgage, and save money.  Approximately 25 percent of your mortgage represents the cost of the land.  If your home burns to the ground, you’ll still have the land.
  • Stay with the same insurer indefinitely.  You’ll build up a track record, and your insurer might refrain from canceling your policy if you do have a claim. 
  • If you purchase a house, check into a homeowner’s policy before your closing date.  Thanks to the Comprehensive Loss Underwriting Exchange (CLUE), there is a database of insurance claims that inform an insurer if a particular house has ever been subject to a claim.  If previous claims were paid on the house, you’ll have a hard time obtaining coverage, even if you’ve personally never filed a claim.  Furthermore, any insurance you’ll find will be more expensive than standard rates.

At the same time, if you’ve filed claims before and purchase a new home, you could be denied a policy, not because of the house, but because of your own claims history. 

Call your state’s insurance commission to ask about state regulations concerning non-renewal or cancellation.  A few states have laws that prevent an insurer from refusing to renew your policy for claims caused by acts of nature.

Bearing the Risks of Condo Ownership

Living in a condo can be risky business if you fail to discover where you are vulnerable so that you can remove or at least lessen your liability.  As always, any liability assessment starts with the condo association’s master policy.

There are four basic types of risks that associations must protect themselves against. The first is property loss, which means physical property as well as intellectual property such as legalities of the association’s operations. The second is liability resulting from a person or legal entity filing a claim against the association. The third is any unplanned loss of revenue or increase in expenses in an accounting period, and the fourth is losses resulting from the inability of an association employee or board member to continue in their current capacity.

In order to manage the risk associated with these losses, condo associations generally have master policies that include:

  • General Liability – for claims of bodily injury or property damage
  • Workers’ Compensation and Employer’s Liability – coverage of employees against injury while they are working
  • Directors & Officers – to cover claims of negligence or malfeasance by association leaders
  • Fidelity Bond – for claims of misappropriation of association funds

These policies can be written separately, but they usually are combined into one umbrella policy.

As a unit owner, you need a personal policy to cover personal property. Your policy is typically written on Form HO-6. The liability coverage on Form HO-6 is similar to other homeowner’s policies, but the property coverage is not.

Form HO-6 covers your personal property, as well as improvements, additions, and private ownership spaces such as balconies, private entranceways and private garages. However, the policy only covers physical damage to property if it is caused by a named peril that is specified in the policy. Named perils are standard and include events such as fire, lightning, storm, explosion, riot, aircraft, smoke, vandalism, theft, and broken glass.

Your personal property is not covered for damage resulting from perils listed in the exclusions section of your policy. These usually include damage that occurs from enforcement of building codes, earthquakes, floods, power failures, neglect, war, nuclear hazard or intentional acts of destruction.

As the condo unit owner you also have to be vigilant about property loss in the master policy coverage.  In general, a condo association’s master insurance policy will require you to share a part of the loss if the building is damaged by fire, lightning, vandalism or the weight of ice or snow. Remember, as the common owner of shared spaces, you assume the liability connected with damage to those shared spaces. Your personal insurance coverage will provide you some relief from this debt, but be advised that you may want to consider augmenting it. That’s because a policy written on Form HO-6 entitles you to collect up to $1,000 for loss assessments charged to you by the condo association. Be aware that Form HO-6 has a unique feature in this regard. When a loss is covered by both the condominium’s master insurance policy and your individual policy, your homeowner’s insurance will only pay for the balance of the loss that remains after the master insurance policy pays 100 percent of its limit.

Understanding the features of your personal coverage as well as the master policy will help you know your rights and responsibilities in the event it becomes necessary to collect on your coverage.