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The Rough Notes Company Inc.



October 04
07:11 2018

Mind the Gap


Give your clients peace of mind with state-of-the-art coverage solutions

Although the insurance industry is often slow    to adapt to exposure changes—a prime example being the sharing economy—a few personal insurance carriers are starting to get innovative by offering nontraditional enhancements that broaden coverage under the homeowners policy. These forward-thinking carriers are using the homeowners policy as a personal risk financing tool with which policyholders can purchase protection against situations that otherwise would be addressed through different channels—or not addressed at all.

Let’s take a look at some of these state-of-the-art coverage solutions that allow home owners to purchase additional peace of mind.

Underground utility lines

Many homeowners policies do not provide coverage for the underground utility lines that run from an insured’s house to the street. Home owners are exposed to costly repair bills any time an underground pipe or utility line needs to be replaced. Protection against this exposure typically can be purchased through the utility service provider. Several insurers, however, now offer coverage for underground pipes and wires that fail, and the coverage overrides some of the exclusions in the typical homeowners policy.

Erie, Central Mutual, Western Reserve, and Hanover offer service line coverage that protects items such as:

  • Water supply lines
  • Drainage pipes
  • Steam pipes
  • Fuel and natural gas pipes
  • Power lines and electrical wiring
  • Heat pump ground loop piping
  • Sewer pipes or private septic pipes
  • Internet, phone, and cable lines

Covered causes of loss for these forms include corrosion, ground freeze, tree root invasion, rodents, and digging accidents. Better still, not only are the lines or pipes covered, but also expediting expenses, excavation costs, and damage to outdoor property.

Personal cyber protection

Identity theft coverage has been a mainstream offering for a number of years, with many insurers providing it as a homeowners endorsement whereas others add it to it the personal auto policy.

Because of the way personal cyber coverage is structured, I advise my clients and prospects to have in place a proactive identity theft solution that monitors their credit, bank accounts, investment accounts, and so on. Even with this mechanism in place, however, a potential coverage gap existed until recently.

Offering a prospect a solution he or she has never seen before is a great way to boost sales while cementing your place as a trusted advisor.

In the April 2018 column we explored cyber extortion and breach notification costs that are addressed by most commercial cyber liability policies. Individuals and families—especially given the increase in household technology use—aren’t immune from these same scenarios, and products now are available to provide needed protection for these exposures.

These situations, along with online fraud, data breach, and cyber bullying, previously were not appropriately addressed by standard identity theft endorsements or basic identity theft monitoring services. New coverage offerings address each of these perils and even contemplate the exposures created by smart home technology. Better still, the premiums for this coverage are modest, in the range of $50 to $75.

Options now are available to put into place a comprehensive program that uses insurance and monitors personal cyber exposures.

Personal flood coverage

Alternatives to FEMA’s National Flood Insurance Program (NFIP) have been penetrating the marketplace for some time, in part because of the continually rising premiums for NFIP coverage. In response, some insurers are offering two- and even three-year rate guarantees; and in many cases the waiting period for new coverage is less than the NFIP’s 30 days. Private coverage can be more comprehensive than that provided by NFIP, especially for homes that are in low-risk flood areas.

For example, the NFIP program doesn’t cover personal property in basements other than washers and dryers, food freezers (and the food contained within them), and window air conditioners. This is a huge problem for people who have finished basements or have unfinished basements and use them for storage purposes.

I’ve seen one alternative in the form of an inland flood coverage endorsement to the homeowners policy that specifically addresses this exposure and also addresses another issue associated with the NFIP coverage. The insuring agreement reads:

We cover against “direct physical loss by or from inland flood” to “basement personal property.”

The NFIP’s policy language reads:

“Basement Personal Property” means personal property owned by you, your household family members, guests or “residence employees” when such property is located in the “basement” of the “residence premises.”

Another definition in this endorsement is inland flood, which is defined as:

A general and temporary condition of partial or complete inundation of normally dry land area resulting from:

  1. Overflow of inland water;
  2. An unusual and rapid accumulation or runoff of surface waters from any source including but not limited to rainfall and ice melt; or
  3. “Mudflow”

Notice anything missing? Those who are familiar with NFIP policies, know that the dwelling form defines “flood” as:

“A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (one of which is your property).”

In addition to covering contents in a basement, the new personal flood endorsement excludes the “two or more” language, making it a clear winner for policyholders who are located in low to moderate flood hazard areas.

Equipment breakdown coverage

Equipment breakdown coverage is an option for home owners to cover the sudden mechanical or electrical breakdown of pressure vessels or piping, vacuum vessels, and other equipment and appliances that use electricity. Make sure you are familiar with the specific language in the policies offered by your insurers. Some endorsements still lack this coverage.

For instance, one carrier that offers this coverage excludes kitchen or laundry appliances, electronic entertainment equipment, computer equipment, and electronic data processing equipment. Essentially it is willing to cover HVAC equipment and that’s it. In addition, the limit is $50,000, whereas other companies offer higher limits.

It pays to take the time to learn about the coverage offerings of each carrier your agency represents. Offering a prospect a solution he or she has never seen before is a great way to boost sales while cementing your place as a trusted advisor.

The author

Marc McNulty, CIC, CRM, is vice president of insurance operations at The Uhl Agency in Dayton, Ohio, and has been with the agency since 2001. He divides his time among sales, marketing,technology and operational duties. You can reach Marc at

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