Family & Business Liability Insurance-Need to Know

Courtesy of iii.org

One might think that family-owned and operated businesses would be relatively immune from employee lawsuits, but that’s not the case according to a recent Gen Re article.

The reasons family-owned businesses get sued include: most family owned businesses employ at least one non-relative; the non-relative is likely to be first to be fired when the business is struggling; and family members are reluctant to discipline each other for bad workplace behavior, especially if the family patriarch is the one misbehaving.

The article gives several examples of lawsuits against family businesses and the awards paid out, concluding that a family-owned business would benefit from including employment practices liability insurance (EPLI) as a part of its insurance package.

According to GenRe:

These workplace scenarios and settlement amounts mirror those we see for all businesses. Discrimination and sexual harassment – as well as wrongful termination, violations of privacy and other employment wrongdoing – are not limited to any type, place or structure of business.

When it’s time to evaluate insurance for the family business, be sure that Employment Practices Liability insurance is not overlooked. The chances of needing EPLI protection are no less than for a slip and fall or fire loss. It’s all relative.

Car Insurance Terms-What They Mean

Courtesy of iii.org

Don’t be intimidated by specialized insurance language. Below you’ll find definitions of some of the most common terms used when dealing with auto insurance.

Adjuster

An insurance company employee or contractor who reviews the damages and injuries caused by an accident and okays claims payments.

Bodily injury liability

Usually mandated by state law, this insurance provision covers costs associated with injuries and death that you or another driver causes while driving your car.

Claim

The formal request to an insurer for payment under the terms of your policy.

Collision coverage

Optional coverage that reimburses you for damage to your car that occurs as a result of a collision with another vehicle or other object—e.g., a tree or guardrail—when you’re at fault. While collision coverage will not reimburse you for mechanical failure or normal wear-and-tear on your car, it will cover damage from potholes or from rolling your car.

Comprehensive coverage

Coverage against theft and damage caused by an incident other than a collision, such as fire, vandalism, hail, flood, falling rocks and other events.

Credit-based insurance score

A confidential ranking developed by insurance companies based on your credit history that may be used to determine the cost of your insurance policy. A good credit score—an indication of responsible money management—has been shown to be a good predictor of whether someone is more likely to file an insurance claim.

Deductible

The amount subtracted from an insurance payout that you are responsible for. For instance, if you have a $500 deductible for your collision coverage, and an accident causes $2,000 of damage to your car, you pay $500 and your insurance covers the remaining $1,500. There is no deductible for your liability coverage.

Defensive driving

Driving in a way that reduces that chance of an accident. Defensive driving techniques include maintaining a safe following distance, scanning the road ahead, keeping both hands on the wheel and much more. If you take a defensive driving course, you may be able to get a discount on your auto insurance.

Diminished value

The value of a car after it has been in an accident and repaired. Even though the car may look fine, it is worth less than its value before the accident. If you’re the victim of an accident, you may be able to collect payment for the diminished value of your car, beyond the repair costs.

Distracted driving

Driving your car while distracted is dangerous and often illegal. Texting and using your phone are the most well-known distractions, but fiddling with your radio, looking at a map or GPS system, eating and drinking, talking to passengers and applying makeup also take your eyes off the road—and raise the risk of getting in an accident. Traffic tickets for texting or using your phone, as well as accidents caused by distracted driving, can drive up your insurance rates.

Gap insurance

As soon as you drive a new car off the dealer’s lot, its value begins to depreciate. And if you lease or finance the car, you’ll be responsible for the full amount you still owe should something happen to it, but your collision and comprehensive insurance will only cover the actual market value of the car. Gap insurance covers the difference between these two amounts—what the vehicle is worth and what you owe on it. The coverage can be purchased from the auto dealer or directly from your insurance company. For leased vehicles, gap insurance is usually rolled into the lease payments.

Liability

Your legal obligation to reimburse others for damage or injury that you cause. Nearly every state requires that you have liability insurance for your car so that if you or someone driving your car causes an accident, the victim will receive appropriate compensation.

Medical payments/Personal injury protection (PIP)

Coverage that provides reimbursement for medical expenses for injuries to you or your passengers stemming from an accident where you or someone using your car is at fault. This coverage may also pay lost wages and other related expenses.

OEM and generic auto crash parts

Crash parts are those that form the outside “skin” of a vehicle—such as fenders, hoods and doors panels—and are the most frequently damaged in auto accidents. Replacement parts provided by the manufacturer of your car are called original equipment manufacturer (OEM) parts. Parts that are made by another manufacturer are known as generic or aftermarket crash parts and are generally a lower cost, equally safe match for an OEM auto part.

Premium

The cost of your insurance policy, payable annually, semiannually or in monthly installments.

Property damage liability

Insurance coverage that reimburses others for damage that you or another driver operating your car causes to another vehicle or other property, such as a fence, building or utility pole.

Totaled

A car is totaled if the cost of repairs exceeds the car’s value. If your car is totaled and you have comprehensive and/or collision coverage, an insurer will pay you the full market value of your car or the limit of the policy, less your deductible if you are at fault.

Umbrella liability

Extra coverage beyond the limits of your regular liability policies. This will provide an additional layer of protection for your assets in the event you are sued. Your umbrella policy also covers claims that fall under your homeowners insurance policy.

Uninsured/underinsured motorist coverage

Uninsured motorist coverage will reimburse you when an accident is caused by a driver who lacks insurance—or in the case of a hit-and-run. In the case of a serious accident, underinsured motorist coverage will make up the difference between your losses and the coverage limit of the policy held by the driver who causes the accident.

Slightly Above Average Hurricanes in 2019

Courtesy of iii.org

Colorado State University’s Department of Atmospheric Science released a summary of the 2019 Atlantic hurricane season today.

Seven of the named storms lasted 24 hours or less – the most on record with such short longevity.

The 2019 season yielded 18 named storms, six of which became hurricanes, including three major ones (Category 3 or higher, with maximum sustained winds of at least 111 mph). While 18 is quite a bit more than the seasonal average of 12 , seven of the named storms lasted 24 hours or less – the most on record with such short longevity.

“The season ended up slightly above average when looking at integrated metrics, such as accumulated cyclone energy, that account for frequency, intensity and duration of storms,” said Dr. Phil Klotzbach, research scientist in the Department of Atmospheric Science, non-resident scholar at the Insurance Information Institute (I.I.I.), and lead author of the report. “We generally forecast a near-average season, so we slightly under-predicted overall levels of Atlantic hurricane activity.”

Dorian: most destructive

Of the three major hurricanes, Dorian was the most destructive. Forming in late August, it devastated the northwestern Bahamas at Category 5 intensity, causing over 60 fatalities and economic losses that could be as much as $7 billion, according to a recent Artemis report. It then made landfall near Cape Hatteras, North Carolina, as a Category 1 hurricane and later caused significant damage in the Atlantic Provinces of Canada. Insurance broker Aon estimates the economic value of the damage Dorian inflicted on the United States at approximately $1.2 billion.

Hurricane Humberto, forming in September, caused much less damage than Dorian, as it remained hundreds of miles offshore. Nevertheless, it caused large swells across the U.S. East Coast and resulted in one fatality when a man drowned due to a rip current in North Carolina. Another man was reported missing in St. Augustine, Florida after the storm. Bermuda officials reported that no fatalities occurred on the island during Humberto’s passage.

Hurricane Lorenzo became a Category 5 hurricane in the central subtropical Atlantic – the farthest east Cat 5 Atlantic formation on record. It generated 49-foot waves, with an occasional rogue wave nearing 100 feet, sending swells to both sides of the Atlantic. Lorenzo caused 10 fatalities.

She nearly didn’t get a name

The most destructive storm to hit the continental United States in the 2019 season almost didn’t have a name. Two hours before dumping 40 inches of rain in some parts of Texas, Tropical Storm Imelda was just “a tropical depression,” Dr. Klotzbach said. Imelda was upgraded to a named storm 90 minutes before landfall, but it proceeded to deluge southeast Texas, causing at least $2 billion in economic damage and at least five deaths, according to Aon.

“From a wind perspective, Imelda was practically a non-event,” Dr. Klotzbach continued. “But the rain it brought made it the most expensive tropical cyclone to hit the United States during the 2019 season.”

The 2019 Atlantic hurricane season began on June 1 and ends officially on November 30. Colorado State’s full summary and verification report is available here.

Freezing Weather Tips

Courtesy of iii.org

Here in Florida, we experience somewhat milder winters, but don’t be caught unprepared when freezing temperatures strike. Ice, snow and wind can have devastating consequences to your home—and to your household budget. Fortunately, there are precautions you can take to avoid the expense and inconvenience of winter damage—and even help you save on heating costs. Get started when the leaves begin to turn so your home is well prepared when the cold, harsh weather hits.


Winter weather prep for the outside of your home

When temperatures drop dramatically and the snow flies, you’ll be glad to have taken these measures to safeguard your house.

  • Clean out the gutters. Remove leaves, sticks and other debris from gutters, so melting snow and ice can flow freely. This can prevent ice damming, which is what happens when water is unable to drain through the gutters and instead seeps into the house causing water to drip from the ceiling and walls.
  • Install gutter guards. Gutter guards prevent debris from entering the gutter and interfering with the flow of water away from the house and into the ground.
  • Trim trees and remove dead branches. Ice, snow and, wind could cause weak trees or branches to break free and damage your home or car, or injure someone walking by your property.
  • Repair steps and handrails. Broken stairs and banisters can become lethal when covered with snow and ice.
  • Use caulking to seal cracks and wall openings to prevent cold air and moisture from entering your home. Caulk and install weather stripping around windows and doors to prevent warm air from leaking out and cold air from blowing in.

Winter weather prep for the inside of your home

Frigid temperatures, snow and ice can wreak havoc on water pipes and tax heating systems. Ensure all your home’s internal systems are “go” for winter safety and efficiency.

  • Add extra insulation to attics, basements and crawl spaces. If too much heat escapes through the attic, it can cause snow or ice to melt on the roof. Water then can refreeze, leading to more ice build-up—and may even lead to ice dams that can damage your roof. Well-insulated basements and crawl spaces will also help protect pipes. Consider insulating garages and other unfinished areas to keep pipes from freezing.
  • Provide a reliable back-up power source. In the event of a power outage, continuous power will keep you warm and help to prevent frozen pipes, or a frozen battery operated sump-pump. Consider purchasing a portable power generator to ensure safety—and be sure to follow all guidelines for safe operation.
  • Have your heating system serviced. Furnaces, boilers and chimneys should be serviced at least once a year to prevent fire and smoke damage.
  • Check pipes closely for the presence of cracks and leaks. Have any compromised pipe repaired immediately.
  • Protect pipes in attics and crawl spaces with insulation or plug-in heating cable. Be sure to purchase UL®-listed models of heating cables with built-in thermostats; these will turn on the heat on when it is needed. When using the cables, always follow manufacturers instructions closely.
  • Install an emergency pressure release valve in your plumbing system. This will protect the system against increased pressure caused by freezing pipes and can help prevent your pipes from bursting.
  • Move combustible items away from near any heat sources that you’ll likely be using. This includes fireplaces, wood stoves and space heaters.
  • Install or check smoke and carbon monoxide detectors. Not only do residential fires increase in the winter, but so does carbon monoxide poisoning—so regularly check that your detectors are in working condition.
  • Know where your pipes are located and learn how to shut the water off. If your pipes freeze, speed is critical. The quicker you shut off water or direct your plumber to the problem, the better your chance of preventing major damage.
  • Hire a licensed contractor to look for structural damage. If damage is found, have all necessary repairs performed as soon as possible.
  • Take steps to prevent flooding. Your licensed contractor can also advise you about measures to prevent flooding from melted snow and ice runoff. Plastic coatings for internal basement walls, sump pumps and other improvements can prevent water damage to your home and belongings.
  • Consider insuring yourself for a sewer backup. Flooding related to melting snow can overburden sewer systems. Raw sewage backed up into the drains in your home can cause thousands of dollars in damage to floors, walls, furniture and electrical systems. Sewer backup is not covered under standard homeowners insurance or renters insurance policies, nor is it covered by flood insurance but can be purchased as either a separate product, or an endorsement.

Statistics on Tornados and Damages

Courtesy of iii.org

Tornadoes

A tornado is a violently rotating column of air that extends from a thunderstorm and comes into contact with the ground, according to the National Oceanic and Atmospheric Administration (NOAA). In an average year about 1,000 tornadoes are reported nationwide, according to NOAA. Tornado intensity is measured by the enhanced Fujita (EF) scale. The scale rates tornadoes on a scale of 0 through 5, based on the amount and type of wind damage. It incorporates 28 different damage indicators, based on damage to a wide variety of structures ranging from trees to shopping malls.

The U.S. experiences more tornadoes than any other country in the world, according to a 2013 report by Lloyd’s of London. (See Executive Summary, page 4 of Tornadoes a Rising Risk? for additional findings and statistics.)

The Fujita Scale For Tornadoes

Original F scale (1)Enhanced F scale (2)
CategoryDamageWind speed (mph)3-second gust (mph)
F-0Light40-7265-85
F-1Moderate73-11286-110
F-2Considerable113-157111-135
F-3Severe158-207136-165
F-4Devastating208-260166-200
F-5Incredible261-318Over 200

(1) Original scale: wind speeds represent fastest estimated speeds over one quarter of a mile.
(2) Enhanced scale: wind speeds represent maximum 3-second gusts.

Source: U.S. Department of Commerce, National Oceanic and Atmospheric Administration.

Tornadoes accounted for 40 percent of inflation-adjusted insured catastrophe losses from 1997 to 2016, according to Property Claim Services (PCS®), a Verisk Analytics® business. In 2018 insured losses from U.S. tornadoes and thunderstorms totaled $14.1 billion, down from $18 billion in 2017, according to Munich Re. The number of tornadoes fell to 1,124 in 2018 from 1,429 in 2017, according to the National Oceanic and Atmospheric Administration (NOAA). The 2017 total was the highest since 2011, when there were 1,691 tornadoes, including two spring events that resulted in more than $14 billion in losses when they occurred. There were 10 direct fatalities from tornadoes in 2018, compared with 35 in 2017, according to NOAA. May was the top month for tornadoes in 2018, with 155 twisters. The United States experiences more tornadoes than any other country, according to a 2013 report by Lloyd’s of London.

Preliminary NOAA reports show there were 1,429 tornadoes in 2019 through early November compared to 1,060 for the same period in 2018. Tornadoes killed 38 people from January to November 2019, compared with nine people for the same period in 2018.

On March 3, 2019 a tornado struck southeast Alabama as part of a severe storm system that resulted in catastrophic damage in Alabama, Georgia, South Carolina and Florida. At least 23 people were killed in the March 3 tornado in Lee County, Alabama. In Beauregard, Alabama, the tornado left a half-mile wide path of destruction. The National Weather Service said that the tornado was F4 strength with top winds of 170 miles per hour. The tornado storm system of March 3 was the deadliest outbreak in the United States since a system in Arkansas and Mississippi in April 2014 killed 35 people.

There were 303 tornadoes in April which caused seven deaths: two each in Texas, Louisiana and Oklahoma and one in Mississippi. There were 556 tornadoes recorded in May. These tornadoes claimed another seven lives, including three in Missouri, two in Oklahoma and one each in Iowa and Ohio. Tornadoes from May 26 to May 29 in 13 states caused $2.8 billion in losses, according to the Property Claim Services unit of ISO. On October 20 and 21, a severe thunderstorm outbreak ripped through Texas, Oklahoma, Missouri, Arkansas, Tennessee and Louisiana, and produced several tornadoes including an EF-3 affecting the Dallas, Texas area. Aon said insured losses may reach the hundreds of million dollars.

Insured Losses

The United States experiences more tornadoes than any other country. Tornadoes accounted for 39.9 percent of insured catastrophe losses from 1997 to 2016, according to Verisk’s Property Claim Services (PCS). A March 2017 report by Willis Re found that the average annual loss from severe convective storms is $11.23 billion (in 2016 dollars) compared to $11.28 billion from hurricanes, based on PCS data. In 2018, insured losses from U.S. tornadoes/thunderstorms totaled $14.1 billion, up from $18.2 billion in 2017, according to Munich RE. The National Oceanic and Atmospheric Administration notes that tornadoes can happen any time of year. The costliest U.S. catastrophe involving tornadoes, based on insured losses, occurred in April 2011. It hit Tuscaloosa, Alabama, and other areas, and cost $8.2 billion in insured damages (in 2018 dollars). The second costliest catastrophe involving tornadoes, based on insured losses, struck Joplin, Missouri, and other locations in May 2011. The catastrophe cost $7.8 billion in insured losses in 2018 dollars. (See chart below.) The National Weather Service posts updated information on tornadoes.

View Archived Graphs

Number Of Tornadoes And Related Deaths Per Month, 2018 (1)

(1) Excludes Puerto Rico. A tornado that crosses state lines is counted as a single event in this chart.

Source: U.S. Department of Commerce, Storm Prediction Center, National Weather Service.

View Archived Graphs

Do I Need Business Interruption Insurance?

Courtesy of iii.org

Business interruption insurance can be as vital to your survival as a business as fire insurance. Most people would never consider opening a business without buying insurance to cover damage due to fire and windstorms. But too many small business owners fail to think about how they would manage if a fire or other disaster damaged their business premises so that they were temporarily unusable. Business interruption coverage is not sold separately. It is added to a property insurance policy or included in a package policy.

A business that has to close down completely while the premises are being repaired may lose out to competitors. A quick resumption of business after a disaster is essential.

  1. Business interruption insurance compensates you for lost income if your company has to vacate the premises due to disaster-related damage that is covered under your property insurance policy, such as a fire. Business interruption insurance covers the revenue you would have earned, based on your financial records, had the disaster not occurred. The policy also covers operating expenses, like electricity, that continue even though business activities have come to a temporary halt.
  2. Make sure the policy limits are sufficient to cover your company for more than a few days. After a major disaster, it can take more time than many people anticipate to get the business back on track. There is generally a 48-hour waiting period before business interruption coverage kicks in.
  3. The price of the policy is related to the risk of a fire or other disaster damaging your premises. All other things being equal, the price would probably be higher for a restaurant than a real estate agency, for example, because of the greater risk of fire. Also, a real estate agency can more easily operate out of another location.

Extra expense insurance

Extra expense insurance reimburses your company for a reasonable sum of money that it spends, over and above normal operating expenses, to avoid having to shut down during the restoration period. Usually, extra expenses will be paid if they help to decrease business interruption costs. In some instances, extra expense insurance alone may provide sufficient coverage, without the purchase of business interruption insurance.

What are My Liabilities When Hosting a Party at Home

Courtesy of iii.org

Whether you’re hosting a Super Bowl party for 50 or greeting the New Year with a few friends, if you’re planning to serve alcohol at your home take steps to limit your liquor liability and make sure you have the proper insurance.


Social host liability is the legal term for the criminal and civil responsibility of a person who furnishes liquor to a guest. Social host liability can have serious consequences for party throwers.

Social host liability law

Also known as “Dram Shop Liability,” social host liability laws vary widely from state to state, but 43 states have them on the books. Most of these laws also offer an injured person, such as the victim of a drunk driver, a method to sue the person who served the alcohol. There are circumstances under these laws where criminal charges may also apply.

While a social host is not liable for injuries sustained by a drunken guest (as the guest is also negligent), the host can be held liable for harm to third parties, and even for passengers of the guest who have been injured in their car.

Social host liability—insurance considerations

Homeowners insurance usually provides some liquor liability coverage, but limits are typically $100,000 to $300,000, which, depending on your assets, might not be enough. Before planning a party in your home, speak to your insurance professional to review your homeowners coverage for any exclusions, conditions or limitations your policy might have that would affect your social liability risk.

Protect yourself and your guests

Remember that a good host is a responsible host. If you plan to serve alcohol at a party, promote safe alcohol consumption and take these steps to reduce your social host liability exposure:

  • Make sure you understand your state laws. These laws vary widely from state to state (see final chart). Some states do not impose any liability on social hosts. Others limit liability to injuries that occur on the host’s premises. Some extend the host’s liability to injuries that occur anywhere a guest who has consumed alcohol goes. Many states have laws that pertain specifically to furnishing alcohol to minors.
  • Consider venues other than your home for the party. Hosting your party at a restaurant or bar with a liquor license, rather than at your home, will help minimize liquor liability risks.
  • Hire a professional bartender. Most bartenders are trained to recognize signs of intoxication and are better able to limit consumption by partygoers.
  • Encourage guests to pick a designated driver who will refrain from drinking alcoholic beverages so that he or she can drive other guests home.
  • Limit your own alcohol intake as a responsible host/hostess, so that you will be better able to judge your guests’ sobriety.
  • Offer non-alcoholic beverages and always serve food. Eating and drinking plenty of water, or other non-alcoholic beverages, can help counter the effects of alcohol.
  • Do not pressure guests to drink or rush to refill their glasses when empty. And never serve alcohol to guests who are visibly intoxicated.
  • Stop serving liquor toward the end of the evening. Switch to coffee, tea and soft drinks.
  • If guests drink too much or seem too tired to drive home, call a cab, arrange a ride with a sober guest or have them sleep at your home.
  • Encourage all your guests to wear seatbelts as they drive home. Studies show that seatbelts save lives.

Be Sure to Protect Your Valuables Today!

Courtesy of iii.org

The holidays are a time of giving and receiving gifts, but would you be able to replace those gifts if they were destroyed in a fire or other disaster? A home inventory is the best way to protect your personal possessions, yet only 50 percent of homeowners said they had an inventory in a 2016 Insurance Information Institute (I.I.I.) survey. That’s where Know Your Stuff®, the free, award-winning home inventory app can help.

The I.I.I.’s Know Your Stuff® home inventory app allows you to enter information on mobile or desktop and syncs across all your devices so you can access it anywhere, at any time. It can help you:

  • Purchase enough insurance to replace the items you own, if they are stolen or damaged.
  • Get insurance claims settled faster.
  • Substantiate losses or charitable donations for tax purposes.
  • Keep track of items that require maintenance or repair.
  • Declutter and organize your home.

“With the average property damage and liability claim costing more than $9,000 and about one in 15 insured homes having a claim each year, it’s important for homeowners to protect their assets,” said Loretta Worters, a vice president with the I.I.I. “Renters should also consider taking a home inventory.”

To simplify the task of creating an inventory, the Know Your Stuff® app allows you to take photographs of your possessions and organize them according to the room in which the items are located.

With the Know Your Stuff® Home Inventory app, you get:

  • Secure free cloud storage of your inventory data. You can also store and manage all your insurance policy information, including contact information for your insurance professional and your policy numbers.
  • Downloadable reports for easy recordkeeping and claims filing.
  • A tool that is backed by the expertise of the I.I.I., a leading independent insurance research and communications organization.

Know Your Stuff® also allows you to keep track of multiple properties and insurance policies. An opt-in service provides integrated weather alerts for your area as well as updates and tips on how to prepare your home against severe weather.

Is Your House Insured Against Animal Damage

Courtesy of iii.org

You may have read the recent story featured in the I.I.I. Daily about raccoon damage and homeowners insurance. The gist: raccoons got into a house and caused $80,000 worth of damage. The homeowners were surprised to learn that their insurance wouldn’t cover any of it.

So what’s the deal with animal damage and insurance?

Homeowners insurance

Let’s start with the easy stuff. If your dog Fido rips through your couch or pees all over the wall, you’re out of luck. Standard homeowners policies won’t cover any damage to your house or personal property caused by a pet. And”pet” is a pretty broad term. Doesn’t matter if it’s a Shih Tzu or a Clydesdale horse, pets are any animal you own.

What about animals that aren’t pets, like deer or birds or – God forbid – rats? That’s where things get interesting.

Building damage: You probably aren’t covered for any damage to the building caused by birds, rodents, insects, or vermin. There also probably won’t be coverage for any nesting or infestation. Insurance policies can vary widely, however, so make sure you ask your agent what is and isn’t considered a rodent or vermin (some insurers will say raccoons are vermin, some will say they’re not). The specific details of your policy will determine your coverage.

Damage to the building from other wild animals could be covered, though. If a moose runs through the sliding door to your deck, the damaged door would be covered.

Personal property damage: Unfortunately, your personal property is probably not covered no matter what kind of animal does the damaging. If a moose runs through your sliding door and wreaks havoc on grandma’s china, then you’re covered for damage to the door, but not the china.

Liability: You go to your friend’s house and bring Fido for a dog playdate. Fido then rips through your friend’s couch. Are you covered? Yes. Homeowners liability protection will cover the damage to other people’s property caused by your pets. Just not your property. Friendship saved.

Personal auto insurance

A squirrel chews through the wiring in your car. Fido dents your door chasing after a squirrel. A moose rams your car in a fit of rage, smashing the windshield. (Why do I keep thinking of moose scenarios?)

Does personal auto insurance cover animal damage? Yes, if you have optional comprehensive coverage. If you only have collision coverage, then you’re not covered.

Collision only covers damage when a car overturns or hits another car or object. Comprehensive covers…more or less everything else: damage from falling objects, fire, explosions – and birds and animals.

So if you paid the extra premium for comprehensive coverage (like most Americans do), then you’re covered for damage from chewing squirrels, incautious Fidos, and rampaging moose (meese?).

Insurance & Water Damage

Courtesy of iii.org

Pop quiz: what’s one of the most common types of homeowners insurance claims? (Hint: it’s not fire.)

It’s water damage. Maybe that’s not surprising – it rains a lot in many places. But what may surprise you is that things like pipe bursts and broken appliances are increasingly the main causes of water damage in homes.

In insurance-speak, these are called “non-weather water damage claims.” Worryingly, these claims are happening more often and are getting a lot more expensive. A Best’s Review article reports that the average homeowners water damage claim is now over $6,700. Large losses (over $500,000) have doubled in number over the past three years. Non-weather water damage is now costing insurers (and their policyholders) billions in losses every year.

This is happening for several reasons. Our housing stock is aging, as is our infrastructure. More houses are being built and they’re getting bigger – many houses now have extra bathrooms and second-floor laundry rooms, which means more piping. (The story is probably different in Florida. You can read why that is here.)

But the worst part is that many – if not most – water damage claims are preventable. Inspecting pipes or conducting routine maintenance can go a long way. That’s where the internet of things (IoT) comes in. Smart devices and connected sensors installed on piping can detect leaks before they occur or before they cause too much damage. They’re basically smoke detectors, but for water.

And they work. Best’s Review noted that installing IoT devices can reduce water losses by up to 93 percent.

The Review quoted an IoT company CEO who claimed that leak detection devices could save insurers and their customers $10 billion every year.

Homeowners have admittedly been slow to install IoT to help detect leaks. But insurers are hopeful that raising awareness about the issue, offering policyholder incentives like premium discounts, and encouraging IoT installation during home construction will begin to turn the tide.

Update: Of interest, Washington state adopted a rule in 2018 that specifically mentions water monitors and water shut-off systems as permissible tools for an insurer’s risk reduction program.