A look at endorsements to help create
a well-rounded personal lines program
Don’t make replacement cost on contents be the exception—make it the rule.
By Marc McNulty, CIC, CRM
Our last two editions of “Mind the Gap” have focused almost exclusively on commercial lines endorsements that should be considered as agency standards. However, many of us cut our teeth in personal lines, so it only makes sense to take a step back and explore a few personal lines coverages that should be considered in similar fashion.
Depending on your type of prospects, providing well-rounded personal insurance programs to business owners can undoubtedly open doors to bigger and better opportunities.
Replacement cost coverage
We’ve explored enhanced and guaranteed replacement cost options in the past, so we don’t need to dive into too much detail here. The key is to offer something more than the homeowners Coverage A limit in the form of one of these endorsements. Amazingly, total losses seem to find their way beyond the dwelling limit once contractors start putting together bids.
Surprisingly enough, there are still homeowners policies in the marketplace that follow the format of the unendorsed HO 00 03 and cover personal property on an actual cash value basis. In fact, some of us may recall a television ad campaign from a national carrier several years ago in which the concept of replacement value for one’s contents was touted as a novel idea!
Don’t make replacement cost on contents be the exception—make it the rule. And while you’re at it, make sure contents have special form coverage (rather than named peril coverage) via the HO 00 15 endorsement or insurance carrier equivalent.
Water backup
While some companies automatically include some water backup coverage in their proprietary forms and/or suite of endorsements that are included with their homeowners products, many still require this to be separately endorsed onto the policy.
When working with your clients to determine an appropriate limit, keep in mind that restoration contractors will keep fans running for a while to dry the affected area out, so estimate a value for flooring, drywall, and contents … and then add a little more to the total to account for costs that aren’t related to damaged property.
Finally, don’t fall into the trap of only offering this to prospects and clients with basements or lower levels, as backup situations can certainly occur in slab homes as well.
Equipment breakdown and service line
Two of the newest homeowners insurance endorsements are now mainstream and we’ve even seen some carriers package them together. In the instance of service line coverage, this homeowners insurance endorsement can replace insurance offered by utility companies (which is usually much more expensive).
For our folks who are brand new to the industry, equipment breakdown coverage is to protect against losses in which home equipment—such as furnaces or air conditioners—breaks down due to a sudden mechanical or electrical failure. It is not coverage for wear and tear, nor does it function as extended warranty coverage.
On the flip side, service line endorsements typically do cover wear and tear claims, which is a rarity in the insurance world. These forms provide coverage for underground water, gas/fuel lines, electric lines, and communications lines (fiber optic lines, cable lines, etc.) that run from the insured’s home out to the street. While tree roots and weight from vehicles and equipment seem to be the most common causes of loss, you’ll provide additional comfort to your insureds when you inform them that deterioration and corrosion are also covered.
Identity theft and cyber coverage
Once seen as two separate endorsements, many personal cyber forms now include coverage for identity theft. This means that the policy will reimburse the insured for lost wages and out-of-pocket expenses incurred as they work to restore their identity should it be stolen.
Also included within most cyber endorsements is coverage for cyber extortion, data breach, cyber bullying, and online fraud.
Cyber coverage also addresses attacks in which smart home devices (security systems, appliances, thermostats, lighting, etc.) are hacked and taken over.
Additional homeowners coverages
While exposures such as smart home devices are new by industry standards, the perils of earthquake, flood, and mold/fungus have been around for a long time. Earthquake losses have occurred in areas that aren’t traditionally prone to earthquakes, as have flood-related losses in areas not deemed to be high-hazard areas, so there is a reason why the coverage is offered.
Mold-related losses are a bit more tricky; the unendorsed HO 00 05 0322 only provides for mold, fungus, orwet rot from the accidental dischargeor overflow of water or steam when “hidden within the walls or ceilings or beneath the floors or above the ceilings of a structure.” Furthermore, the form excludes mold coverage from “a sump, sump pump or related equipment or a roof drain, gutter, downspout or similar fixtures or equipment.”
Fortunately, many proprietary forms include basic limits of insurance for mold, wet or dry rot, and bacteria, such as $10,000 for Section I (property) losses and $50,000 for Section II (liability) losses. These limits may not carry the same limitations and exclusions that are found in the base homeowners form, and increased limits are usually available if your client feels additional protection is required.
Similarly, the HO 00 05 includes a $2,000 limit for loss assessment charged against the insured as the owner or tenant of the residence premises provided the assessment stems from a covered bodily injury or property damage claim from the association. Coverage also extends to the acts of volunteer association directors, officers, or trustees. Check with your insured to see if additional coverage is needed, as increased limits are relatively inexpensive.
Auto loan/lease gap and new car replacement
So far, we’ve focused on homeowners coverages, but let’s not forget about our clients’ personal auto exposures—especially those who have new cars.
One thing to stress to your clients is for them not to purchase gap coverage (loan/lease payoff insurance) through their finance agreement when purchasing new vehicles, as it is exponentially more expensive to go that route as opposed to purchasing it as an auto policy endorsement.
Better yet, also offer replacement car coverage when available. This will provide your insured with a new car of the same make and model if the covered vehicle is totaled within a specific time frame (typically one to two years).
Full or reduced deductible auto glass
If you’ve had to replace a windshield recently, you know how expensive they are. Offering your prospects full glass coverage or, when that isn’t available, offering them a reduced deductible for auto glass losses will help to ease the pain of losses that are nothing more than frustrating.
Personal umbrella
Finally, don’t forget to offer personal umbrella coverage. New producers should be more familiar with this coverage than any of the aforementioned ones, but that doesn’t mean it isn’t worth noting.
Other than total home losses, the largest claims we typically see in personal lines involve large liability claims when umbrellas come into play. For a few hundred dollars, you can add an extra layer of liability protection onto your personal insurance programs that also provides significant peace of mind for your clients. The coverage far outweighs the cost and there is no shortage of examples to illustrate the importance of why personal umbrellas are needed.
The author
Marc McNulty, CIC, CRM, is a principal 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 marcmcnulty@uhlagency.com.
