Frequently Asked Questions

What's the difference between Insured Value on my home insurance policy, and the market value of my home?

Home insurance is concerned with putting your home back the way it was – the cost of repairing or replacing the home.  Depending upon your area, the market value may be higher or lower.  If the market is low in your area, homes are likely selling for less than what they would cost to build.  In such a situation, the insured value of your home will be higher than the market value. Why? Because if your home is destroyed, you still need to build it back. The opposite can also be true, depending upon where you live.

The main idea is to insure your home for what it would cost to replace your home, so replacement cost is your goal.  If you don’t know, ask a qualified contractor for an estimate.  We can certainly provide guidelines, but nothing beats a contractor’s expertise.

Reference our article on home insurance values.

Am I penalized if I underinsure my home?

The goal of insurance is to put your home back the way it was before the claim occurred. Insurance policies are built upon the assumption the coverage is adequate to do so. Thus, an underinsured penalty can occur if enough coverage was not purchased. There are allowances since most penalties do not kick in until you are underinsured by more than 20%. Check your policy to be sure or ask your agent for details. Reference these posts for more information:

Will my homeowners insurance policy cover my lost jewelry or other valuable collections?

Standard homeowners policies provide limited coverage for theft of jewelry (not misplacement).  A typical amount we see is $1,500. Misplacing jewelry is not usually covered by basic homeowners insurance contracts. However, it is easy to obtain additional coverage for theft or misplacement by purchasing “valuable items” coverage.  Cost of such coverage is reasonable, easy to obtain, and involves providing an inventory of the valuable items.  Appraisals are sometimes required.

As an aside, a few homeowners policies provide “all risk” coverage that would cover misplacement of jewelry. Thus, the best answer is to check your policy or ask your agent regarding restrictions or limitations.

I don’t have many assets, why do I need higher liability limits?

Things are easy to fix.  People aren’t.  Having your child knocking over a shelf in a grocery store isn’t much of a concern, but should that shelf fall on someone and injure them, you could be held liable.  We live in a lawsuit-conscious society and personal liability exposure is higher than ever.  Whether you have substantial assets or not, your are still at risk from large damage settlements. If you lose a lawsuit, your wages can be garnished, taking years to pay damages in full.

I don't understand the different deductibles on my policy. What are they and what are my options?

A homeowners insurance deductible is the amount you are willing to pay in the event of a loss to your home. It is a means for a client to share in the initial cost of a claim and defines the line between what repairs are your responsibility versus those of the insurance company. A deductible also provides a monetary incentive to properly maintain and protect your property from damage. Thus, the higher the deductible, the lower your insurance premiums.

Policies will list a standard homeowners insurance deductible, often termed the All Other Perils (AOP) deductible. The most common AOP deductibles are $1,000, $2,500, and $5,000, though significantly larger ones are available for high-value homes or high-risk environments.

Many policies stipulate a separate deductible for damage by wind. These deductibles are larger than the standard AOP deductible. Since wind is the most common homeowners insurance claim, it is no wonder insurance companies handle this exposure carefully. Be sure to understand the wind and any other special deductibles on your policy and when they apply. Contact your agent with questions.

Learn more about your homeowners insurance deductible.

Is there coverage for property of someone else while it is in my home?

We often get this question from homeowners who are storing their children’s contents while they move. Fair warning: the answer is not entirely straightforward.

Homeowners policies cover your contents and limit the coverage for property belonging to others. Just because something is located on your property does not automatically mean it is covered. There is a limit for property of others stated in the insurance policy. Be sure the limit is adequate, or request it be increased.

If you are using the property, most policies automatically include it under your own personal property protection. For example, if you borrow a friend’s laptop and it is damaged in a house fire, it would be covered since you were using it. But if you were simply storing it because they needed extra space, it is your friend’s responsibility to insure his own stuff, so your policy would not protect it.

If you negligently damage the property, coverage may be afforded under the personal liability portion of your policy.

If the contents belong to a family member or someone living with you, they may fall under the policy’s definition of an insured party (like it or not) and thus those contents may be covered automatically.

Notice the common use of the terms may, might, or most? That is because exceptions and limitations exist. If you will be storing property belonging to someone else for an extended period, the best idea is to have them ensure they have their own coverage for it, or ensure they obtain a personal articles policy.

What is equipment breakdown coverage and what does it cover?

Equipment breakdown coverage is a unique safeguard on certain homeowners’ insurance policies that protects against the cost to repair or replace a covered system or appliance in your home for an unexpected mechanical or electrical breakdown. This breakdown cannot be due to wear, tear, corrosion, or neglect. Some policies can be endorsed to include equipment breakdown coverage, while other insurance companies simply do not offer it.

Covered equipment is only what is permanent to the home, such as a furnace, water heater, central vacuum, whole house attic fans, pool equipment, sauna equipment, water softener systems, etc. It does not cover items that can be removed from the house when a homeowner moves, such as a freestanding range, microwave, window air conditioning units, portable dehumidifiers, or refrigerators (except permanently installed units). Keep in mind this coverage is subject to the policy deductible, though a separate deductible may be stipulated. Each policy is different, so review your policy and know what it covers.

Does my homeowners policy cover the food in the refrigerator or freezer that was lost during a power outage?

Probably not, but most companies offer this coverage as an option for an additional charge. The optional coverage usually covers power outages as well as failure of the appliance. A typical coverage limit is $500 with no (or a small) deductible.

What is ordinance or law coverage? Why is it important?

Many municipalities have building codes that require a structure be rebuilt to current codes when damaged beyond a certain percentage. Meeting these requirements can be costly. Standard homeowners’ insurance policies include a limited amount of ordinance or law coverage just for this purpose. This coverage pays for those additional expenses without taking away from the coverage on your dwelling. Policy limits are typically $1,500 or $2,500, but may be increased.

A tree blew down in my yard. Will my homeowners policy pay to remove it?

Generally, the answer is “No”, unless it falls on covered property. The idea is that the insurance company insures the home, not the trees around it. Consider a home located on several acres of forestland. We would not expect the homeowners policy to pay to remove downed trees in the surrounding forest after every storm. In the same way, if the tree fell in the yard and not on any covered property, only nominal coverage, if any, is provided.

However, if the tree falls directly on the home or other covered property, policies cover the reasonable cost to remove it from the structure. Limits are often $500 to $1,000 and the client is responsible for expenses in excess of that. If you need more, ask your agent to see if your insurance carrier offers higher limits. Note this protection covers the cost to remove the tree from the covered property, not necessarily the entire tree. Thus, if a large tree were to fall next to a home and a branch damage the roof, the policy would pay to remove the branch and repair the home. Removing the tree from the yard would be the client’s responsibility. Any exceptions are at the discretion of the insurance company.

Lightning hit a tree in my yard. Will my homeowners policy pay to cut it down?

Many homeowners policies provide a limited amount of coverage to replace trees, shrubs, and plants damaged by lightning. Crazy, right? They don’t even need to have fallen. Typical limits are $500 per tree/shrub/plant, with the total limit being 5% of the coverage carried on the dwelling. But keep in mind that any claim, even lightning claims, go against your policy and can mean higher future premiums.

If, as a result of the lightning strike, the tree fell on the dwelling or other covered property, the policy would pay to remove the tree and repair the home. If only a portion of the the tree fell on the home and the rest fell in the yard, coverage would likely be found under the dwelling and lightning portions of the policy. You can see that each scenario is different and there are situations where the limits of insurance would not be sufficient to cover the entire expense of removal.

My tree fell on my neighbor’s house, does my homeowners policy cover the damage?

Your policy only provides coverage for your neighbor’s damage if you were careless or negligent in some way. If a tree on your property creates a hazard because it is damaged or diseased, it is your responsibility to remove it within a reasonable time. If you fail to remove the tree and it falls on your neighbor’s house, your homeowners liability insurance will cover the neighbor’s damage because you were negligent in maintaining your property. If a healthy tree falls on your neighbor’s home during a storm, your policy does not cover the damage.  There was no negligence, therefore no liability.  Such coverage is to be provided by your neighbor’s own homeowners insurance policy, subject to limitations.

Where is coverage for my fence?

Fences are considered detached structures on your homeowners’ insurance policy. If your policy contains coverage for other structures, a fence will be covered there. Damage will be covered up to the limit of the other structures coverage specified in the policy, and subject to the deductible. Wear, tear, neglect, and maintenance are not covered.

What is debris removal coverage?

Debris removal coverage is an additional safeguard for building or structure debris in the event of a claim. If you have a fire, this coverage will pay to remove the damaged structure up to the limit specified in your policy. Most policies limit this coverage to 10% or 25% of the dwelling coverage.

What is overhead line coverage or service line coverage on my policy?

Often homeowners are responsible to repair damage to a service line (water, electrical, data communication, etc.) which runs between their home and a public connection. Such repairs can be burdensome. This expense is typically not covered under a homeowner’s insurance policy but can be endorsed (added) to it.

Are other drivers covered by insurance when they drive my car, or are they covered by their own auto policy? What if it is a driver who does not have an auto policy?

As long as you give the other person permission to drive your vehicle, they are covered by your policy while driving it. Your policy pays first. The other driver’s policy (if any) may provide secondary coverage.

However, just because they are covered does not mean you should loan your vehicle. Any accident claimed on your policy, even if caused by another driver to whom you lent your vehicle, will affect your claim history and therefore your cost of insurance.

If I were to cause an accident, are bodily injuries of my passengers covered, or just those of people in other cars?

The bodily injury limit on your auto insurance policy covers drivers and passengers in other vehicles, not your own. If you carry medical payments or personal injury protection (PIP) on your policy, that coverage protects your passengers. PIP often protects you (the at-fault driver) as well.

Are my personal belongings covered while in my car? (Laptop, camera, phone, etc.)

No. Homeowners or renters policies typically cover such items. A limited amount of personal items coverage can be added to certain auto policies. However, if these personal belongings are permanently mounted, they are considered a part of the car and can be covered under the vehicle’s physical damage coverage as long as the insurance company is made aware of the modifications. Examples can include permanently mounted laptops and aftermarket TV’s.

Does my auto policy cover me when I rent a vehicle?

If the car is rented in your personal name within the US or its territories, your auto policy provides the same coverage on the rented automobile that you carry on your own car, including deductibles.

However, there may be other expenses in the rental contract that your policy does not cover such as the loss of the rental fee or a service charge. For example, while the car is being repaired, the rental company is not able to rent it out, therefore losing rental fees.  Most rental companies will require reimbursement of such expense per the contract.  Some credit cards, should you rent the vehicle on that card, will cover this contingency.  Check with your credit card company directly.  The lesson here is the only way to be sure that you have maximum coverage is to purchase the optional insurance offered by the rental agency.

Motor homes or commercial types of vehicles such as moving trucks are not covered by your personal policy.  Contact your insurance agent.

What deductible should I choose?

For auto insurance, a deductible applies for comprehensive and collision coverage. Have your agent price various deductible options and choose the one that represents the greatest cost savings while not representing a financial burden should an accident occur.

Be careful to not select a low comprehensive deductible simply to avoid paying for a broken windshield out of pocket. Many insurance carriers now offer a separate glass deductible. A popular option is a $500 comprehensive deductible with a $0 glass deductible.

Common collision deductibles are $500 and $1,000.

Is my trailer covered when I tow it with my vehicle?

Liability coverage is provided by the vehicle towing the trailer. The coverage of the tow vehicle is extended over the trailer in the event it injures someone or damages something. However, once the trailer is unhooked, no liability coverage exists. Physical damage to the trailer is not automatically included. If you need protection for the trailer in the event of theft, vandalism, hail, etc., ask your insurance agent. Solutions include adding the trailer to your policy as a separate vehicle, or obtaining a separate policy altogether.

If I cause an accident while volunteering for a non-profit or church, such as taking kids to camp or carrying children on a school field trip, will my insurance protect me?

Great question! Most personal auto policies do not cover liability for autos associated with a business you are engaged in. However, since you are not running this business yourself and are not being paid, there is an argument you are not “engaged in the business”. Thus, your personal auto policy may protect you. This is a gray area. Each claim is different. Most non-profits, churches, and schools have a coverage called ‘non-owned vehicle liability’ which protects volunteers should their own policy not provide it. However, this coverage will not include physical damage to your vehicle.

If you drive for such organizations on a regular basis, advise your insurance carrier. That way, it is on record should a claim ever be reported.

Standard personal auto policies do not cover autos used in business, such as food delivery, courier services, contractor pickups, Uber, Lyft, and other ridesharing services. Options exist, so speak with your insurance agent.

Will my pet be covered by my auto policy if I am in an accident?

Only certain policies cover pet injury in an accident. Many do not. For instance, one of our auto insurance carriers covers pet injury when collision coverage is in place. They limit this protection to $1,000, and proof of ownership and residency of the animal is required.

What coverage do I have for special equipment or modifications to my vehicle?

Be certain to tell your insurance company what you have done to the vehicle and associated costs. Some policies include a limited amount (typically $500-$2,000) of unreported modifications, such as an upgraded stereo or custom wheels. If the modification is unreported, you will need to show proof of purchase in the event of a claim. Other policies will limit coverage even if reported. Some policies do not offer any such coverage at all. If the cost of vehicle modifications are a concern, seek the advice of your insurance agent.

Why do I have to buy uninsured motorist insurance for all the drivers who don’t carry insurance?

State laws vary, but most require all automobile insurance policies include uninsured motorist coverage. This coverage protects you against uninsured vehicles, not the uninsured vehicles themselves. If you are injured or have damage to your auto which is caused by an uninsured driver, your own policy covers your vehicle repairs, medical costs, and other related expenses. Your insurance company will then take action to collect against the responsible driver.

If I write my homeowners and auto insurance with the same company, will I get a reduction in my rate?

Usually.  Most insurance companies offer an account credit when they insure your home and automobiles. Check with your agent to see if your company provides this discount.  However, there are situations when it is more beneficial to have coverages separate.  This is a great question for your local insurance agent since they know the best combinations in your area.

Will my auto policy pay for a rental vehicle if my car breaks down?

No.  The rental reimbursement coverage on your auto policy does not cover mechanical breakdown.  It will pay the cost to rent a comparable replacement vehicle, up to the policy limit, if your auto is undrivable because of damage covered under the comprehensive or collision sections of your policy.  If you do not have comprehensive or collision coverage, no rental reimbursement will apply.  Most policies do not offer rental reimbursement automatically.  This coverage is an option, available for a small additional premium.

Why do I need to carry Workers’ Compensation insurance?

This policy is used to comply with the Workers’ Compensation coverage required by state law. Under this requirement, an employee can be compensated if an injury or occupational disease arises out of and in the course of employment. Benefits are payable for medical costs, temporary or permanent disability including lost wages, vocational rehabilitation, or death. Specific requirements and benefits vary from state to state.

Helpful Links

  • NFIB’s list of workers compensation requirements by state that is particularly helpful.
  • Subcontractors and Workers’ Compensation: Regardless of your state, employees of uninsured subcontractors may be considered your employees. An employer is not relieved of its liability or requirement to carry workers compensation insurance by calling its employees “independent contractors”, even if issued a form 1099. If a business utilizes a subcontractor that does not maintain workers’ compensation insurance, the business may be liable for work-related injuries to the sub’s employees.
  • Workers Compensation Insurance: Our main page on this topic.

Virginia

In Virginia, the Workers Compensation Act applies to employers with two or more regular employees, whether full- or part-time. “Covered employees” include corporate officers as well as managing members of limited liability companies. (EXCEPTION: Officers who reject coverage AND are not paid salary or wages on a regular basis at an agreed upon amount, OR non-compensated officers or employees of tax-exempt 501(c)(3) corporations, are not considered employees under the Act.) Sole proprietors, partners and non-managing members of limited liability companies are considered to be owners, not employees, and thus are not covered under the Act unless they voluntarily elect to be included in writing. Farmers must provide coverage if they have two or more full-time employees. Domestic, casual, or farm workers are not covered automatically but employers may arrange Workers’ Compensation coverage for their benefit.

North Carolina

The North Carolina Workers’ Compensation Act requires that all businesses that employ three or more employees, including those operating as corporations, sole proprietorships, limited liability companies, and partnerships, obtain workers’ compensation insurance or qualify as self-insured employers. Individuals who are sole proprietors, members of LLCs, and partners are not automatically counted as employees. Corporate officers may elect to be excluded from coverage but are still counted in determining whether a business has three or more employees. Executive officers, directors, or committee members of a non-profit corporation are also not automatically counted as employees so long as they meet certain requirements under the North Carolina General Statutes.

Just what is covered by General Liability insurance?

This coverage protects against claims arising out of an accident which results in alleged bodily injury, personal injury or property damage which you neither expected nor intended. It includes protection related to premises you own and/or occupy, operations or services you render or arrange for others to render on your behalf (e.g., a subcontractor), and products you sell. Coverage payments can include judgments, attorney’s fees, court costs, or other related expenses.

Occurrence General Liability coverage applies to a claim that occurs during the policy period regardless of when the claim is made against you. This is the most common policy form. Claims Made General Liability coverage applies only to a claim that occurs and is reported or first made against you during the same policy period. This latter policy form is normally used only for Professional Liability (Errors and Omissions) coverages rather than General Liability coverages.

What are adequate liability limits for my business?

This question has received considerable attention over the years by insurance professionals and legal advisors without resulting in definite answers. The question is somewhat akin to posing the query, “How high is up?” Nevertheless, there are some perspectives which may be helpful in determining the amount of liability insurance limits to purchase. These include:

  • Attempt to ascertain the largest judgment rendered against your type of business within the judicial area in which you are located or in which you sell your product or service.
  • Examine your balance sheet (assets v. liabilities) to determine what you have to lose and thus need to protect. Remember, that liability losses resulting in judgments or out-of-court settlements generally have no respect for wealth or lack of it.
  • Similar to setting liability limits based on your balance sheet, use your income statement for the same purpose.
  • Consider liability limits you can afford. Unfortunately, this approach does not provide a quiet night’s sleep for most business owners.  The next verdict could exceed your limits several times over.
  • Review all business contracts you have signed, including premises and/or equipment leases, for their specific liability limit requirements.  Most contracts have them.  This can help determine the minimum liability limits you should carry.
  • Consider what level of liability protection is being carried by other area businesses and competitors. While we cannot disclose confidential client information, our agency is a good source of general information of this nature because of the number and cross-section of businesses we insure.

All of this causes one to ask what a business owner can do to determine proper liability limits if the listed techniques are filled with uncertainty. There is no single acceptable method. It requires an examination of the legal climate, the type of exposures presented, and all of the previously suggested parameters.

Nevertheless, we suggest you carry at least a minimum limit of $1,000,000 each occurrence for bodily injury, personal injury and property damage combined, preferably supplemented by an umbrella liability limit of at least $1,000,000 each occurrence.

What is cyber liability insurance?
How many participants does it take to purchase group health insurance?

Within certain participation guidelines, 2 participants is the minimum number required to set up a group health policy.

What are the participation requirements to fulfill the group health insurance requirement?

Generally, 75% is the industry norm.  Within populations under, a higher participation level may be required.

If we switch group insurance carriers, will we have to serve another waiting period for pre-existing conditions?

Due to the new federal legislation, credit for previous coverage may be extended to group participants. For specific cases, check with your agent or refer to the Health Insurance Portability and Accountability Act of 1996 for guidelines.

I don’t know how much life insurance I need? How much life insurance is enough?

The answer to this question should consider current assets, current income, life expectancy, debts, and liabilities, to name a few.  Many of these items are unknown or difficult to define.  However, there are means to examine your current situation, make assumptions, and calculate an answer.  To guide you through this process, we suggest consulting a qualified life insurance agent.

What kind of information do I need to provide an agent to work on life or health insurance coverage for me?

An agent can prepare a quote with your answers to only a few questions.  They will need to know your age, some lifestyle detail, current medical conditions, and where you reside.  At that point, if you desire to put the coverage in place, a detailed application be required which health records and a medical exam.