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Created: Thursday March 8th, 2012 | Last Updated: Monday March 19th, 2012
No one wants to endure an insurance claim, but there are steps to take to ensure you're properly covered. You should be familiar with a few key insurance coverages, such as, gap insurance, umbrella policies and water backup. Avoid the surprise of an uncovered claim!

I used to feel frustration when listening to people gripe about the insurance industry as a whole.  Afterall, we (and I use this term loosely, I am an insurance agent) are not trying to swindle people.  What would you do if you DIDN'T have insurance? (I would ask).  Plus... we're here to help and we're FRIENDLY.  Well, if you can generalize... I can generalize!

But I will admit, there a few things I feel that everyone should know and in some cases, do not.

Gap Insurance

Gap insurance is added to a policy if you have a loan or a lease on your vehicle.  Many popular leasing companies provide gap (some don't!!) In the case of a loan, gap coverage protects you if your vehicle is totalled and the value is less than what you still owe on your loan.  Similarly, in a lease situation, a vehicle loses value as soon as its driven off the lot, if your vehicle is totalled, gap (true to its name) bridges the difference.  It is generally an inexpensive coverage, approximately $25 a year, although recently some companies have increased this price based on the vehicle.

Liability Only

It is common practice to reduce your coverage to liability only on older vehicles.  It can be tricky to determine when to do so.  Ask your agent to calculate how much you are paying for full coverage a year and weigh this against the current value of your car.  There are several sites which can help to determine the value, such as Kelly Blue Book and NADA Guides.  You do have the option to keep comprehensive coverage on the vehicle as well, which costs significantly less than collision.  In doing so, you would continue to be covered in the event of a windshield claim, theft, vandalism, hail damage and hitting a deer, to name a few.

Customization

If you have invested money into your vehicle in the way of speakers, amps, etc... this is not always covered under your regular auto policy.  Some companies provide a limited automatic coverage but others will not cover this at all unless the items are scheduled.  So, if your vehicle is totalled, the adjustor determines the value of your vehicle without the added equipment.  You will probably have the option to remove your electronics but you will have no coverage if they were damaged in the claim.  This is a pricey coverage to add, but could be worth it depending on how much you have invested in the customization.

Vandalism and Theft

If someone breaks into your vehicle and steals your belongings, this is considered two claims – TWO deductibles (and yes, I realize this is criminal).  Let's say the vandals broke the window to get it... that would be an auto claim, which would use your comprehensive deductible.  The stolen contents would be covered under your home or tenant policy.  SO...if you are renting and you do not have a renters policy – NO coverage for your stuff!  Tenant policies are a must!!!  A renters policy should be approximately $150- $250 a year.

Jewelry (Personal Articles Policy)

The benefit to scheduling your prized posessions is two fold: no deductible (unless you choose one) and a personal articles claim typically does not count against you.  If your piece of jewelry was not scheduled, you would need to pay the home deductible (usually $500 or $1,000) and it would count as a claim against you come renewal time (rates will go up).  Also, most home policies have certain limitations.  The most prevalent being a $2500 to $5000 limitation of jewelry away from the premises.  Meaning, if you lose your $7,000 engagement ring on vacation – you would only receive the amount per the policy limitations – less your deductible.  That being said... this is important in scheduling:  the adjustor uses the value listed on the policy.  So, if you added a ring 5 years ago at a certain value and today the price of gold has skyrockted, you will not get the full value of your item.  You need to review the value of your items at each renewal.  You will not necessarily be required to provide an updated appraisal either.  Most companies have a value the item must be worth in order to require an appraisal.

Umbrella Policies

The tendency to sue is increasing.  An umbrella policy is essentially a safety net to protect you from this possibility.  The liability coverage an umbrella provides – minimum of $1 million – is excess coverage over your underlying limits on any insurance policy you carry: home, auto, boat, motorcyle, rental property- anything!  Most common and frightening example: you are at fault in a car accident which seriously injures the passengers in the other vehicle.  Your policy limits are $100,000 bodily injury per person and $300,000 per accident and one of these passengers is paralyzed.  The $100,000 limit is not going to be enough, especially if others in the vehicle were injured (remember: $300,000 per accident – no matter the amount of people injured).  Do you have a pool someone could get injured in?  A youthful driver?  A dog that could possibly in a freak accident, bite a child?  Umbrella policies are worth investing in – only $150 or so a year depending on how many policies you want to cover.  You can also add excess uninsured motorists coverage which would protects you in case the another person has insufficient liability limits.  Better safe than sorry.

Water Backup Coverage

I would guess the large majority of you have water backup coverage on your home policy.  This endorsement provides coverage for water backup of sewer and drains.  In the event of a claim, the cost to remove the water, drying machines etc, cost to repair/replace flooring and walls and the cost to replace damaged contents are included in this limit.  If you have a finished basement – a minimum of $10,000 is an absolute must.  The cost to clean up the water alone can cost thousands of dollars! And the difference between carrying $10,000 coverage and $25,000 should be under $50 a year.  Trust me, after hail damage this is by far the most common claim for homes!

Lienholders

I will be brief on this one... just want to mention that insurance companies are not typically notified when you pay off a home mortgage or auto loan.  So the bank stays on your policy until your agent hears otherwise.  Which means, the bank will be listed on your claims check.  And its the insured's responsiblity to have the bank sign off on it – unnecessary work for you!  And guess how fun it is to try to get a bank that has since dissolved to sign a check!  Pretty impossible.

I hope that some of this can help!  Your agent does NOT want give you bad news.