Good damage coverage may not be high on your financial priority list. For example, compared to investment decisions and estate planning issues, questions about writing your homeowners policy are hardly worth considering. However, the more successful you are, the more complicated your asset protection needs will be and the more you will have to lose. For example, in addition to your primary residence, a historic home, you also have a waterfront home and a townhome. Properties are in three different states. The value of his collection of Abstract Expressionism paintings has increased rapidly. And he just volunteered to serve on the board of directors of a nonprofit organization.
Almost every aspect of this situation can cost you dearly. Insurance laws can vary widely from state to state, different types of property require specific coverage, and it can be difficult to fully protect art collections, vintage cars, and other unique items. Meanwhile, joining a charitable board of directors can expose you to additional personal responsibilities.
Protecting yourself and your family may mean buying additional coverage, but additional insurance is not necessarily the answer. Rather, it’s important to review all of your needs, consider specific guidelines or policy options, and coordinate your coverage with other aspects of your financial situation. Here are 6 different loopholes that could prove costly.
1. Leave holes in the landlord’s coverage
All homeowners should check their coverage regularly to keep up with rising replacement and repair costs. However, insuring different types of homes in different locations brings additional challenges. If you purchase insurance from multiple providers, different rules, restrictions, and data renewal dates may apply. For example, the policy liability limit for a second home may fall below the minimum liability insurance intended to supplement your primary residence insurance. You could be responsible for the difference.
2. Ignore the properties of unique properties
One of the advantages of prosperity lies in the means of owning exceptional homes; One downside is that adequate insurance can be difficult to obtain. Standard home insurance does not cover the materials and crafts necessary to rebuild the meticulously restored 19th century site. Homes on the coast can be exposed to hurricane damage, while a place in the mountains of California can be exposed to earthquakes or wildfires. A foundation repair company in New Orleans, LA found homes in the region are particularly susceptible to basement leaking. Meanwhile, municipal cooperatives or condominiums may need guidelines tailored to the coverage of their buildings or associations.
3. Take out art and collectibles insurance
Standard homeowners policies limit coverage for loss of antiques, furs, and other valuables. And while you can plan for additional coverage, insuring the true value of a contemporary art or vintage sports car collection will likely require specific guidance that addresses several critical issues. How is the value of the collection determined? (You need a professional appraisal when the policy is current, with frequent updates as items are evaluated.) Will a damaged or destroyed item be paid in cash or will a damaged or destroyed item need to be replaced or restored? Are additions to your collection automatically covered?
4. Forget insuring domestic workers
If someone works for you or your family as a babysitter, environmental manager, personal assistant, or any other role, you could be liable for medical bills and lost wages if the employee is injured in the workplace. In some states, employers are required to make contributions to a local employee compensation fund; in other states, this is optional. However, such insurance may be mandatory to ensure your financial well-being. If an employee drives your car, make sure it is included in your policy.
5. Ignore your responsibilities as a board member
Excess liability coverage can protect you if you are sued as a director of a nonprofit board of directors. For more comprehensive protection, you should also consider purchasing special director and officer liability insurance.
6. Failing to review and update policies frequently
Your financial life is not static and your insurance needs. The value of the collection may increase; A major home renovation can add significant value to your property. A change in ownership as part of your estate plan (divorce, family death, or the birth of a child) may require a policy change. Even in the absence of major events, you will likely need a full review of all insurance coverage at least every two years.
