As an insurance profressional, I continually remind myself that my customers (for the most part) do not fully understand the coverages that they have (or don’t have).  In all honesty, they shouldn’t have to.  If every person fully understood exactly what coverages are present, or not, in their various insurance policies, there would be no need for someone like me.  Insurance carriers would simply move their “distribution” system to an online environment (hello GEICO).  Customers would go to a website, type in what they needed coverage for (exactly), press a button, and presto!  The problem lies in the details.

Many people think they know what is covered under their various policies (like Home Insurance & Auto Insurance) simply because they can read their coverage limits off of their current declarations page.  While this does tell you what coverage limits you have, does this actually tell you under what circumstances these coverages would “kick in”.  If you really think about it, you have the insurance coverages / limits (auto and home) you have today because the first time you purchased insurance someone (friend, parent, insurance agent) told you that this limit or that was what you needed.  Under that assumption, you better hope that your source was very smart.

The value of understanding exactly what is covered and what is not on an insurance policy became clear to me when I was hit in the face with a fresh dose of reality on a snowy winter day in January.  I was just finishing a great book by Vince Flynn when my oldest daughter yelled from the basement that the floor was wet.  Having dealt with a few times where it had rained so much that water had gotten in our basement, I knew what weather conditions caused such an event.  While we had received quite a bit of precipitation, the form we received was in the form of white powder (better known as snow) and not the clear liquid which could usually lead to a basement of water.

Wearing a T-Shirt, jeans, socks, and a pair of flip flops (I thought you should get that odd visual in your head); I rushed down the steps to get a handle on the situation.  Our washing machine is downstairs, so I first thought that maybe a hose had come loose and soaked the basement.  Once my feet landed on the terracotta colored tile that covered the bottom stoop, I swung my gaze to the right.  As I looked into the half bathroom that was at the bottom of the steps, I realized that I would have been lucky if the water had come from the washing machine.

Much to my dismay, the “water” was coming from, and mostly contained in, the bathroom.  None of the kids had been in the basement for days, so I knew something was disgustingly wrong.  As I entered the tiny bathroom, I looked into the toilet and was overcome with….well just let me say I was overcome and leave it at that.  Evidently, my “waste” line had backed-up.  Being the lowest plumbing fixture in the house, all water and waste that had been used in the house was now backing up in this particular toilet.  Of course, a single toilet can not hold all of that run-off, so fluid had come out and on to the floor.  Needless to say, I am happy I have a strong stomach and a Shop-Vac.

Luckily for me, we caught the problem in time.  We were able to get the water off the floor and mediate the problem before any real damage was done.  However, once I was done cleaning up my first thought went to a little known fact about home insurance.  To that end, I thought it would be helpful to give a little lesson about Home Insurance.

Homeowner’s Insurance Covered Cause Of Loss

I would assume that if I were to make a wager with every person who reads this article (which is not an insurance professional (notice I said professional and not agent as I would win my bet with most agents)) that they could not tell me if the difference between a Named Peril Policy & a Special Form Policy, that I would make a few bucks.  The fact is, most people do not even know what a “Peril” is.  Let the class begin!

Dictionary.com gives the following definition:   Peril:  something that causes or may cause injury, loss, or destruction.

Now that we know what a “Peril” is, we need an understanding of the common property insurance forms: Named Peril & Special Form.

Named Peril

Just as the name suggests, the policy will cover only those perils that are specifically listed (named) in the policy.  Comparitively speaking, this policy type provides the least amount of actual coverage.

Special Form

In direct contrast to the Named Peril coverage form, the Special Form coverage form provides coverage for ALL Perils unless the policy specifically EXCLUDES coverage.

North Carolina Home Insurance Common Policy Form(s)

To the best of my knowledge, the majority of North Carolina Homeowner’s Policies are on one of two Homeowner’s Forms (HO-3 & HE-7).  Both of the aforementioned North Carolina Homeonwer’s Form are Special Form policies.  As a matter of performing your due diligence, I would suggest you determine which form your current home is covered under.  To be clear, when I refer to “Homeowner’s Insurance” I am referring to policies that cover your primary residence and not property that you may hold for rental.

Damage Caused By Water / Sewer Backup

The HO-3 & HE-7 policy forms both have the following Exclusion:

Water Back-Up Of Sewer Or Drains

Included in the HE-7 Form with the HE-21 Endorsement

1. The policy forms excludes coverage for loss resulting from water or water-borne material which backs up through sewers or drains or which overflows or is discharged from a sump, sump pump, or related equipment.
2. The policy may be endorsed to provide such coverage up to the policy limits of liability

Conclusion

Hopefully you have a better understanding of Perils, Named Peril Policy Forms, Special Form Policy Forms, & Water or Sewer Back-Up.  You might think that this particular endorsement or coverage does not apply to you.  Let me give you a nugget of wisdom:

If you own your home, there are, to my knowledge, on two ways that your “waste” can leave your house (and I am talking about waste in the plumbing since of the word).  Your home is either hooked into the city sewer system or you have a septic system.  In either case, your waste system can become clogged or broken and literally “back-up” into your home.

While I hear the argument daily about not needing this coverage because “I am on city sewer”, what you may not understand is that the city is not going to take responsibility for any damages (to the system or your property) unless the problem is found to be on their property.  That means that if there is a problem in one of the drain lines (underneath the ground) but still on your property, the “city” has determined that they are not “at-fault”, thus you get no help from them.

If your North Carolina Home Insurance policy is not endorsed to cover Water or Sewer Back-Up, you should highly consider it.  Most carriers charge an additional $25 (approximate) a year to add this coverage back.

About The Author:  Jack Wingate is the Co-Founder and President of ALLCHOICE Insurance in Greensboro, NC.  For more information about Homeowner’s Insurance, ALLCHOICE Insurance, or Jack Wingate, please visit http://www.allchoiceinsurance.com

Erie Insurance announced to their North Carolina Agency Force today that they are now able to accept Credit & Debit Card Payments for Premiums in North Carolina.  Long known for their superior customer service (their motto is “Above All In Service”), Erie was not an early adopter of this payment method in North Carolina due to various restrictions & details they felt needed to be worked out so that their customers would not be inconveinenced.

Erie hopes this new mode of payment will increase their customer’s ease of doing business.  Customers will simply link to the appropriate web page (ALLCHOICE Customers can link through the “Member Center” of http://www.allchoiceinsurance.com), enter their policy & payment information and complete their transaction.  Erie will e-mail a payment confirmation noting the date and time of the transaction.

Are you a North Carolina (NC) Landlord?  Do you own rental property in North Carolina?  If so, the State of North Carolina has introduced a new law that you need to pay attention to.

Starting January 1st, 2010, all North Carolina rental properties that have an attached garage or use fossil fuels for heat and/or appliances must have a working Carbon Monoxide Detector.

N.C. Gen Stat. § 42-42 to 42-44 – Landlord and Tenant Articles – Residential Rental Agreements

This statute requires NC Landlords to provide one operable carbon monoxide detector per rental unit / per level.  NC Landlords that install one such detector per rental unit level shall be deemed to be in compliance with the standards.  The statute goes on to say that the landlord shall replace or repair the carbon monoxide detectors within 15 days of receipt of notification if the landlord is notified of needed replacement or repairs in writing by the tenant.  The Landlord is responsible for ensuring that a carbon monoxide detector is operable and in good repair at the beginning of each tenancy.  Unless the Landlord and the tenant have a written agreement to the contrary, the Landlord shall place new batteries in a battery operated carbon monoxide at the beginning of a tenancy, and the tenant shall replace the batteries as needed during the tenancy.

In regards to Carbon Monoxide Detectors, many Insurance Carriers that write NC Rental Property Insurance have been requiring their customers (which fit the above statute standards) to have Detectors in place.  While their is a small cost for the detectors (typically $25 – $30), Landlords should be concerned with the threat of Carbon Monoxide and the danger(s) it presents to their tenants.  Having a house burn down is bad, being sued by a tenant for the death of a loved one due to Carbon Monoxide poisoning would be worse.  If you own NC Rental Property, make sure you abiding by best practices with regard to the up-keep of your property.  As a Landlord, you should also make sure your Liability arising out of your rental property business is protected.

About The Author:  Jack Wingate is the Co-Founder and President of ALLCHOICE Insurance in Greensboro, NC.  For more information about Jack Wingate, ALLCHOICE Insurance, or North Carolina Rental Property Insurance please visit http://www.allchoiceinsurance.com