Mind the Gap
Filling insurance coverage holes.
Whether it’s a car accident, house fire, theft or other tragic event, you rely on insurance to protect you. If, however, you discover you don’t have enough coverage, you could be on your own to pay bills totaling tens of thousands of dollars.
“Don’t wait until after a loss to find out by surprise you weren’t properly insured,” says Steve Davis, vice president of Zions Insurance Agency. “Take the time now to review your current insurance coverage.”
Fortunately, many insurance gaps are easy and relatively affordable to address. The following categories are the areas where Davis commonly sees missing coverage.
Personal Umbrella Liability Policies
Many people do not have a personal umbrella policy. An umbrella can provide added liability protection for bodily injury, property damage and uninsured motorists in addition to your auto, homeowners and other insurance coverage liability limits. If you injure someone in a car accident and your financial liability exceeds your auto insurance limit, your umbrella would provide added coverage.
“In a wrongful death lawsuit, someone could stand to be sued for $1 million,” Davis says.
Umbrella policies typically come in increments of $1 million. An umbrella also includes coverage for legal defense, which is unlimited and separate from the liability limit.
“If you’ve built up substantial assets, it’s a great way to protect the assets you’ve worked so hard to build,” Davis says.
Another gap is having an umbrella policy but not the proper underlying home or auto liability coverage limit before the umbrella policy applies. For example, if you have an auto liability limit of $100,000 and an umbrella requires that you carry a $300,000 limit of liability, you potentially have $200,000 that may not be covered. That’s why Davis recommends working with your insurance agent to review your current policies to make sure you have adequate underlying coverage. Or, obtain a personal umbrella policy if you don’t have one now.
Even though your home is insured, it may not have sufficient coverage if an incident destroys the house.
“It’s very common for the cost to rebuild a home to exceed the dwelling coverage amount under the policy,” Davis says. “In some cases, it might be two times what a home is insured for.”
If a homeowner had a $200,000 policy with a 20 percent cap, the maximum recovery amount is $240,000. If the replacement cost is $300,000, the homeowner would pay $60,000 out of pocket to rebuild. To solve this problem, make sure your policy has guaranteed home replacement coverage so you can rebuild the home regardless of the total cost.
Another gap is not having adequate insurance for valuable personal property, including jewelry, watches, collector items, firearms and art. Itemizing these on a schedule under your homeowners policy will cover each item’s full value, rather than a limited amount.
Many people falsely assume boats, dirt bikes, ATVs and snowmobiles are insured under their homeowners insurance.
“If you are riding up in the mountains and you have an accident where your ATV hits another person and you do not have a policy, you could be very sorry,” Davis says.
He suggests buying a policy specifically for recreational vehicles, with at least liability coverage. With all these pitfalls, Davis recommends reviewing your coverage with your agent to avoid any insurance gaps. “If you fail to do so, the results can be catastrophic in terms of economic and financial loss,” Davis says.