Tag: homeowner

Assignment of Insurance Benefits: Non-Assignable Policies Provide New Way to Save on Property Insurance

In a previous article we introduced you to the sweeping statutory reform of Florida’s assignment of insurance benefits (AOB) laws. This reform was designed to limit the use of post-loss AOB agreements by insureds to assign their rights under an insurance policy to a third party. Home and business owners commonly used AOBs after a property loss to authorize a vendor, like a water remediation company, to collect payment for services rendered directly from the property insurance company rather than from the insured. But that was before various statutory reforms regulating the use of post-loss AOBs went into effect on July 1, 2019.

According to Office of Insurance Regulation, Florida’s property insurance market is being harmed by the abuse of post-loss AOBs. Individual policyholders, on the other hand, often benefit to some degree from having the freedom to enter into an AOB agreement. A homeowner with an overflowing toilet, for example, can sign an AOB agreement to get urgent water remediation services without going out-of-pocket instead of paying the bill upfront and waiting to be reimbursed later.

Though a collective approach to fixing the problem sounds good in theory, it’s hard to worry about the overall property insurance market when three inches of standing water is in your living room. Fortunately, those who are not willing to “take one for the team” may be able to keep the right to enter into post-loss AOB agreements…for a price.

As of July 1, 2019, Florida insurers have the option of offering residential and commercial property insurance policies that preserve, partially restrict or completely eliminate an insured’s right to enter into a post-loss AOB agreement. However, an insurance company may only offer polices that restrict the right to execute a post-loss AOB agreement in whole or in part IF:

  • The insurer also offers coverage under a policy that does not restrict the insured’s right to execute a post-loss AOB agreement.
  • Each restricted policy is available at a lower cost than the unrestricted policy.
  • Policies prohibiting post-loss AOBs in whole are available at a lower cost than policies that prohibit them in part.

Each restricted policy must also include the following notice in boldfaced type: THIS POLICY DOES NOT ALLOW THE UNRESTRICTED ASSIGNMENT OF POST-LOSS INSURANCE BENEFITS. BY SELECTING THIS POLICY, YOU WAIVE YOUR RIGHT TO FREELY ASSIGN OR TRANSFER THE POST-LOSS PROPERTY INSURANCE BENEFITS AVAILABLE UNDER THIS POLICY TO A THIRD PARTY OR TO OTHERWISE FREELY ENTER INTO AN ASSIGNMENT AGREEMENT AS THE TERM IS DEFINED IN SECTION 627.7152 OF THE FLORIDA STATUTES.

Insurance companies must notify insureds of their restricted policy options at least annually. Insureds must reject fully assignable policies in writing or electronically using an approved form with the following boldfaced type heading: YOU ARE ELECTING TO PURCHASE AN INSURANCE POLICY THAT RESTRICTS THE ASSIGNMENT OF BENEFITS UNDER THE POLICY IN WHOLE OR IN PART. PLEASE READ CAREFULLY.

We don’t yet know which insurance companies may begin offering policies with restricted post-loss AOB rights, how these policies will read or how Florida’s property insurance market will react. We’ll let you know when we find out. Please contact us if you have any questions about Florida’s AOB reform.

Does Homeowners’ Insurance Protect Airbnb and other Home-Sharing Hosts?

Most of us don’t care whether homeowners’ insurance covers claims caused by renters. After all, how many people actually rent their homes to strangers? As it turns out, a lot of people do. Home-sharing services have turned a growing number of ordinary homeowners into part-time innkeepers.

According to the Pew Research Center, 11% of American adults have used online home-sharing services like Airbnb or VRBO. Airbnb boasts of having over 3 million listings worldwide. This means that a lot of people really need to care about whether homeowners’ insurance covers claims caused by renters.

The Risks

Home-sharing is not without risk. For example, host homeowners face an increased exposure to:

  • Personal and structural property damage or loss.
  • Criminal activity, theft and vandalism.
  • Liability to guests for property damage or bodily injury that occurs on the premises.
  • Liability to third-parties for property damage or bodily injury caused by guests.

Standard Homeowners’ Insurance

Standard homeowners’ insurance policies don’t directly address home-sharing because it didn’t exist when these policies were created. Nevertheless, there are a number of long-standing provisions in standard policies that could limit or exclude coverage for the host homeowner.

  • Eligibility. Many policies are restricted to dwellings used exclusively for private residential purposes.
  • Property Coverage: Standard policies generally do not cover the theft of a host’s personal property from areas that are rented to guests. The same is true for a guest’s personal property. They can also limit coverage for appliances, carpeting and household furnishings in areas that are rented to others.
  • Liability Coverage: Standard policies don’t provide liability coverage for business conducted from the home, like renting your home guests.

As you can see, standard policies may not cover a host homeowner’s losses even though home-sharing is not expressly mentioned or excluded. These coverage gaps are common when standard (old) policies are used to insure non-standard (new) activities.

Unfortunately, the insurance industry doesn’t move as fast as the Airbnb’s and Über’s of the world. So, before joining the sharing economy, review your standard insurance policies carefully to identify any potential coverage gaps. If you’re not sure, ask an experienced insurance agent.

Please contact us to learn more about home-sharing host insurance coverage.

To receive regular updates about important insurance developments, subscribe to Setnor Byer Insurance & Risk’s weekly risk management news brief.

Does Homeowners’ Insurance Cover Drone-Related Claims?

Drones were a popular gift during the holidays. The Federal Aviation Administration estimates that approximately 800,000 recreational drones were sold in the last quarter of 2015. However, despite being recreational, drones are not toys. In fact, drones are considered aircraft under federal law and must be registered with the FAA if they weigh more than .55 pounds (250 g).

The growing number of drone owners with no prior aviation experience or knowledge about operating requirements has caused a dramatic increase in reports of potentially unsafe operations, from 238 reports in 2014 to 1,133 in 2015. Given their size and speed, an improperly operated drone can easily cause serious bodily injury or property damage.

When this happens, the owner or operator may be held personally liable. Would this kind of drone-related claim be covered under a standard homeowners’ insurance policy? The answer is yes…probably, at least for now.

Unfortunately, a more definitive answer is not possible since recreational drones are not specifically mentioned in standard homeowners’ policies. After all, they were virtually nonexistent until recently, so there was no need.

Nevertheless, it looks like standard homeowners’ policies would cover drone-related claims. Standard policies generally cover damages an insured becomes legally obligated to pay because of bodily injury or property damage, which would be the case if a drone accidentally hits a neighbor’s car or head.

It’s also unlikely that any of the policy’s standard exclusions would automatically apply to a drone-related claim. It’s true that standard policies typically exclude coverage for claims arising out of the ownership or use of an aircraft. However, model or hobby aircraft are generally not considered ‘aircraft’ under the policy, so this exclusion likely wouldn’t apply to recreational drones.

However, the lack of a specific exclusion doesn’t mean recreational drones are always covered. Other exclusions may apply. For example, drones used for business purposes, rather than as a hobby, would be considered ‘aircraft’ under the policy’s aircraft exclusion, so there would be no coverage. There would also be no coverage if the bodily injury or property damage caused by a drone was expected or intended.

For the time being, insurance companies appear to be treating recreational drone-related claims like any other mishap, but this may change as the number of drones and drone-related claims steadily increase. Given the lack of clarity and uniformity in this rapidly-developing area, it’s probably a good idea to find out if drone-related claims are covered under your homeowners’ insurance policy before heading off into the wild blue yonder.

Finally, remember to register your drone. As of December 21, 2015, drones weighing more than 0.55 pounds (250 g) must register with the FAA’s Unmanned Aircraft System (UAS) registry before they can be flown outdoors. Drones weighing less than 55 pounds can be registered online. Failure to register a drone can result in civil (up to $27,500) and criminal penalties.

Please contact us if you would like more information about homeowners’ insurance coverage for drone-related claims.

You can receive regular insurance news and informational updates by subscribing to Setnor Byer Insurance & Risk’s weekly Risk Management Newsletters.

Can You Save Money by Customizing Your Homeowners’ Insurance Coverage?

Many believe that expensive homeowners’ insurance is just the reality of living the American Dream. But, there are ways to lower your premium. This year, instead of (only) cringing and cursing about the cost of renewing your homeowners’ insurance, find out if any of these tips can reduce your policy premium.

Increase Your Deductible: The deductible is the amount you have to pay before the insurance company starts paying a claim. As a general rule, policies with higher deductibles have noticeably lower premiums. Also, find out if a hurricane-only deductible can be expanded to an all-wind deductible, which can produce policy credits and lower premium.

Bundle Policies: Some insurers offer substantial multi-policy discounts. Consider buying your homeowners’, automobile and umbrella policies from the same insurance company.

Eliminate Unnecessary Coverages: Homeowners’ policies often include coverages or limits that may be unnecessary or excessive. For example, Coverage B (Other Structures) under a standard homeowners’ policy generally covers structures that are not attached to the home, like sheds, detached garages, gazebos and pools. Homeowners with inexpensive or nonexistent ‘other structures’ may be able to lower their premium by removing or reducing this coverage.

Discuss Ordinance and Law coverage and other ‘Bells & Whistles’ endorsements. Weigh the benefits against costs. Consider how you want personal property (content) claims to be settled. Do you need replacement cost or can you settle for depreciated actual value?

Think Twice Before Filing a Claim. Gone are the days when homeowners’ insurance was used for every conceivable claim. Since filing a claim can lead to higher premiums, it may be cheaper to pay minor claims and claims that are clearly not covered out of your own pocket. If you’re not sure whether to file a claim, ask your agent.

Assess Your Personal Property. Make sure your personal property values are in line with the automatic coverage provided in most policies. Oftentimes, an accurate valuation reveals that coverage limits are significantly higher than necessary.

Your Home More Disaster Resistant: Insurance companies typically provide premium credits and discounts for improvements that increase the structural security of your home, like adding storm shutters or reinforcing the roof.

Improve Home Security: Discounts are often available for various safety and security features, many of which are relatively inexpensive, such as smoke and carbon monoxide (CO) detectors, burglar alarms and deadbolt locks. Bigger discounts may also be available for more advanced security devices, like sprinkler systems and monitored fire and burglar alarms.

Eliminate Recreational Safety Hazards: Did you know that in 2014 there were nearly 105,000 hospital emergency room-treated injuries associated with trampolines? Your insurance company did. Getting rid of recreational items like trampolines, tree houses and jungle gyms may lower your premium.

Maintain a Good Credit Rating: Insurers are increasingly using credit information to price homeowners’ insurance policies and charging higher premiums to those with lower credit scores. It’s a good idea to review your credit reports regularly and promptly correct any errors.

Work with an Independent Insurance Agent: Shopping around may be a good way to save money, but it can be time consuming and frustrating. Since independent insurance agents have access to multiple insurance companies, they can do the shopping around for you. Reputable independent agents are also more likely to know about special rates and discounts that may be available.

There are a number of other ways to reduce your premium, but options may be limited by market conditions or individual circumstances. Nevertheless, you should at least consider all the alternatives before renewing your homeowners’ insurance policy.

If you have any questions or would like to learn more about premium discounts that may be available, please contact us.

If you’d like to subscribe to our weekly newsletters, please click here.

Have You Outgrown Your Insurance?

They say change is the only constant in life. Chances are you’ve already experienced some of life’s bigger changes, like marriage, childbirth, a new job, house or car, becoming an ‘empty nester’ or retirement. Chances are you didn’t consider how these changes may have affected your insurance needs.

To be effective, insurance must match your situation. To make sure you haven’t outgrown your insurance, it’s a good idea to review your coverage at least once a year. Consider whether insurance changes are needed to keep up with any recent life changes. The following questions from the Insurance Information Institute can help you get started.

  • Have you gotten married? You may be entitled to marital status or multi-car premium discounts on your auto insurance. Your homeowners’ insurance may no longer be sufficient after merging two households under one roof.
  • Have you had a baby? New children need to be covered by health insurance and should be protected by life insurance.
  • Did your ‘baby’ get a driver’s license? Covering a teenager under a parent’s auto insurance policy is often cheaper than purchasing a separate policy. Discounts may also be available for good grades or driving school.
  • Have you switched jobs? New jobs often mean new fringe benefits, so identify which employer-provided coverages have been gained or lost, and adjust personal coverages accordingly. If income increases, coverage limits may also need to be increased.
  • Have you done extensive renovations on your home? Major home improvements, such as adding a new room, enclosing a porch or expanding a kitchen, may leave you under insured. Homeowners’ coverage limits may need to be increased to cover the increased value of your renovated home. New structures, like a gazebo, pool or hot tub, may not be covered under your current policy.
  • Did you buy a second home? The risk of loss may not only be greater in a second home, but completely different. Second homes may be harder to insure because they are often located in areas with specific risks (earthquakes, avalanches, floods, etc.) and vacant for long periods of time.
  • Have you acquired any new valuables (jewelry, electronics, fine art, antiques)? Standard homeowners’ policies offer limited coverage for highly valuable items, so a personal property floater or endorsement may be necessary.
  • Did you purchase any new toys? In addition to being valuable, items like boats, motorcycles and recreational vehicles can create potentially significant liability exposures that must be covered by insurance.

These questions can help avoid painful coverage gaps that are likely to occur when your life becomes too big for your insurance. They can also help save money when your insurance is too big for your life.

If you have any questions or would like to discuss how your insurance needs may have changed, please contact us.

If you’d like to subscribe to our weekly newsletters, please click here

Homeowners’ Insurance Claims: By the Numbers

Homeowners insurance is designed to protect against losses to your home and its contents, as well as liability for accidents that may occur on the property. Since the United States homeownership rate is nearly 65%, homeowners’ insurance is an important topic for many of us. To get a better understanding about the nature of homeowners’ losses and insurance claims, let’s take a look at some research compiled by the Insurance Information Institute.

  • Approximately 1 in 15 insured homes have a claim each year.
  • Wind and hail claims, which are experienced by approximately 1 in 30 insured homes each year, are the most frequent.
  • Claims related to fire, lightning or debris removal, which are experienced by approximately 1 in 230 insured homes every year, are the costliest.
  • Approximately 1 in 55 insured homes have a damage claim caused by water or freezing each year.
  • Approximately 1 in 190 insured homes have a theft claim each year.
  • Approximately 1 in 830 homeowners have a liability claim related to the cost of lawsuits for the bodily injury or property damage of others.

Loss Claims

Loss claims can be calculated in terms of frequency and severity. Claims frequency is the average number of claims filed per 100 policies. According to the Insurance Services Office (ISO), the most frequent homeowners’ loss claims are:

  • Wind and hail (3.37)
  • Water damage and freezing (1.79)
  • All other property damage (1.04)
  • Theft (.52)
  • Fire, lightning and debris removal (.43)
  • Bodily injury and property damage (.12)

Claims severity is the average amount paid for each claim. According to ISO, the most severe homeowners’ loss claims are:

  • Fire, lightning and debris removal ($34,306)
  • Bodily injury and property damage ($18,804)
  • Wind and hail ($7,307)
  • Water damage and freezing ($7,195)
  • All other property damage ($4,684)
  • Theft ($3,428)

Content Claims

The Content Claims Index shows the top contents categories of homeowners’ claims filed with approximately 300 insurers. The top categories, ranked by dollar value as a percent of total claims, include:

  • Jewelry (16%)
  • Electronics (13%)
  • Apparel (13%)
  • Furniture (10%)
  • Tools (5%)
  • Appliances (4%)
  • Sporting goods (3%)

Injury Claims

According to the National Safety Council (NSC), injuries requiring medical attention occur more often at home than in public places, in the workplace and motor vehicle incidents combined. In 2012, one in 16 people experienced an unintentional injury in the home that required medical attention. The NSC identified the following causes of the 63,000 deaths from unintentional home injuries in 2012:

  • Poisoning (50.5%)
  • Falls (28.1%)
  • Other (12.1%)
  • Fire, flames or smoke (4.1%)
  • Choking (3.7%)
  • Drowning (1.6%)

In addition to showing how claims happen, these statistics show that claims are likely to happen. Adequate homeowners’ or renters’ insurance is the key to recovering after a claim. An experienced and reputable independent insurance agent can help you identify those risks associated with your home and obtain the right insurance coverage to protect it.

If you have any questions or would like to see how Setnor Byer Insurance & Risk can help protect your home, please contact us.

Shopping for Homeowners Insurance Video from Tower Hill® Insurance

For most people, their biggest purchase is their home. Following the four must-dos for shopping for homeowners insurance can help you find the best value and the best protection for your home:

  • Get advice from a professional agent who will take the time to guide you through the selection process
  • Shorten your list to the best companies, those with a great reputation for financial strength, claims handling, and customer service.
  • Compare multiple quotes for similar coverages, and ask your agent to explain any differences in coverages.
  • Tailor your policy to your wants and needs, as well as your tolerance for risk. Make sure price is not the primary factor.

The video below does a great job discussing these items in further detail.

https://youtu.be/us4P2QNnI70

If you would like to learn more about this coverage please contact us.