Do I need Wedding Insurance?

Now that it’s finally warm outside, its not just summer, its wedding season! As you prepare to walk down the aisle, you may have been told you need insurance for your wedding. Do you? After all, isn’t a wedding just a private event? What could you need insurance for?

Well, just to start, if you look hard enough there is someone willing to sell you insurance for just about anything. That doesn’t mean you need to buy it. There are three basic categories that come under the heading of “wedding insurance.” They are wedding liability insurance, wedding gift and jewelry coverage, and event cancelation insurance. While these all cover real things, you personally may not need some or all of them.

Two out of the three of these have elements included in your renters or homeowner’s insurance policy. Wedding liability insurance is a personal liability insurance policy that covers bodily injury and property damage including liquor liability, specifically for the event. It usually costs somewhere from $100-$300 depending on the size of the event. Well, all forms of homeowner’s insurance (including renters and condo) covers personal liability. Personal liability covers bodily injury and property damage that you cause while acting as a private citizen. (Of course there are limits to this, but getting married isn’t one of them and neither is liquor.) Personal liability insurance policies, however, generally cannot list other parties (like your venue) as additional insured, while a special event policy can. Your insurance agent can provide proof of coverage to the venue for you.

The most important thing to do is to make sure the parties covered for the homeowner’s policy are the parties getting married. In this case, it’s not a bad idea to add your spouse to your homeowner’s insurance before the actual wedding day. And, if it was the parents that signed the contracts to rent the venue, than it is their homeowner’s insurance covering the event.

At the very least, ask your venue if they will accept your homeowner’s insurance instead of a special policy – it can be a source of significant savings for something that you already have.

Wedding gift and jewelry coverage is strictly personal property insurance with more narrowly defined covered property. Your homeowner’s insurance provides coverage for your property anywhere, not just in your home. The issue here is sub-limits to covered property. When people think of what could happen to wedding gifts, they are mainly concerned with theft, theft of cash and checks. Actual physical gifts are mainly sent ahead of the wedding. Your homeowner’s insurance usually limits theft of cash to about $500. Weddings often involve more, much more. Some wedding gift policies can cover larger amounts of cash, but require that you estimate the amount beforehand, which presents its own challenge. A better solution might be giving all the cards in a lock box to a responsible member of the wedding party to be retrieved the after the event. If you are in a hotel, give the box to the front desk to put into the hotel safe.

Wedding policies also often cover wedding rings and jewelry. This is universally covered (but limited) on homeowners insurance. Since you will have your wedding jewelry forever, short term insurance doesn’t make much sense. Yes, it’s only a few dollars to add to the wedding insurance policy, but if you annualize that amount, it’s not a very good deal for the year. Fine jewelry should be placed on a jewelry floater, or rider on your homeowners insurance that specifically lists the items and values, and is supported by documentation if necessary.

This leaves us with wedding cancelation insurance. There is no equivalent homeowner’s coverage that you may already have. Event cancelation insurance pays you for your out of pocket expenses should your wedding be delayed or canceled due to a specified list of reasons (and yes “change of heart” can be a coverage trigger). It returns deposits lost to the travel, venue, caterer, photographer, band, limo, et cetera. Before purchasing this insurance, compare it to the refund policies of your individual vendors. If your venue will refund your deposit in case of severe weather such as a hurricane (or re-schedule for no additional cost) then why purchase what is basically a refund policy through insurance? This is an especially important consideration for “destination weddings” where severe weather can prevent travel.

The take away message of this is not that wedding insurance is never needed. Each couple should evaluate what they already have on their homeowner’s insurance and what they actually need. Best wishes to all the brides to be!

Don’t fall victim to copper theft!

With copper currently trading at over $4.00/lb and scrap yards paying $3.25/lb or more, copper is becoming an increasingly attractive target for theft. And, to make matters worse, increasingly thieves are “scrapping” actively used copper to sell.

Most of us have heard of thieves breaking into vacant homes buildings to steal the wiring and old plumbing to sell for scrap value, but with higher prices thefts have become increasingly brazen. Currently, there is an uptick in theft of copper condenser coils from building air conditioners. The Des Moines Register reports on a case that a police officer said was his first experience with air conditioner copper theft, but I can personally testify it is common in Chicago.

Air conditioners contain a large copper coil that is used to exchange heat from the building with the outside. While home air conditioner coils typically weigh in the range of twenty pounds, commercial coils can weigh far more. This makes small and midsize commercial buildings attractive targets. Thieves cut the coils from the units at night. To operate these units must be located outside, and are often behind the building or on the roof. They have a flimsy sheet metal cover that is easily cut away even if locked. Coils are rarely removed delicately, often destroying the unit in the process. Building occupants often go unaware of the theft for days or weeks, until the air conditioning is turned on. The cost to replace the unit often runs into the thousands of dollars for what, at most, is a few hundred paid on the scrap value. To make matters worse, replacing the air conditioner on a commercial building can trigger that the system is brought into compliance with current HVAC building codes, costing thousands more.

As an insurance broker, I have personally been a party to three copper thefts from air conditioners this year. The smallest claim was for just under $6,000 and the largest was for over $25,000. No thief made off with over $1,000 of scrap metal. The economic impact of these crimes is large and growing.

So how can we protect ourselves? Most steps to prevent general vandalism and burglary will also discourage copper theft. Good lighting at night is a must. Exterior recorded cameras are better, and roving watchmen are best, but usually impractical. Don’t leave ladders around the exterior of your building, and fire escapes should be secured to prevent access from the street. When able, often building a fence around exterior mechanical units or the entire roof can discourage theft. Thefts are effectively discouraged not when it is impossible to commit, but when it is substantially harder than other similar targets.

Also – scrap yards enable this problem. Without scrap yards, thieves would have nowhere to sell their take. Scrap yards however provide a needed service for the community and should not be overly regulated. Most scrap yards are already required to record identity and take pictures, as well of keep a record of what was purchased. However, a balance should be struck. Clearly, scrap yard staff must be suspicious of condensers removed with bolt cutters still dripping with refrigerant. Law enforcement can partner with scrap yards to discover and prosecute offenders.

Until that happens, we must all remain vigilant and protect our own property from this rising cause of loss.

Insurance and Hiring a Domestic Employee

Many people have turned to hiring a nanny or part time maid as both parents have obligations on their time and their days get over scheduled. Often, people wonder if they need new insurance coverage. I know this is a small departure from my usual writings on commercial insurance, but I think you may find it helpful.

There are a few things to consider for insurance after you have decided to hire a domestic employee. The easiest is workers compensation. This paragraph is specific to Illinois, and each state has separate requirements that basically fall into three categories. The first category is that usually domestic employees are not required to be covered under workers compensation. The second is that full time employees are required to be covered and the third is that even part time employees are required to be covered. In Illinois, Any worker or workers employed for a total of 40 or more hours per week for a period of 13 or more weeks during a calendar year by any household or residence must be provided workers compensation insurance. However, if the position is part time (35 hours) it is not required. Workers compensation for a domestic employee ends up costing about $600, so it's nice to avoid when possible.

As far as liability insurance, your homeowners insurance will extend coverage automatically. At renewal, you should make them aware you have a regular domestic employee. This would be true of a nanny or any other domestic employee. Your homeowner's insurance covers any bodily injury they may cause to a non-household member and any property damage they may cause in the course of their work outside the home.

Homeowners insurance would also apply as normal (with the deductible) to any theft of your property committed by your employee.

The household's auto insurance also extends to your employee driving your vehicle. So you can have your employee drive your auto without additional coverage. No notification of the carrier is required. Despite what a personal lines agent may tell you, the employee would not be considered a household member and should not be rated on your policy.

Following the above conditions, you should not require any additional coverage.

Workers Compensation Audits

You may or may not be aware, that your workers compensation premium is just an estimate. Sure, you faithfully paid your bills all year, even renewed your policy. Months after your policy expires, the insurance company can send you a bill for thousands of dollars. And can even send your business to collections, because you owe. So how does this happen?

Workers compensation policies are issued on payroll forecasts, but payment is due on actual payroll. And if you admit you can't document one of your subcontractors workers compensation polices, you could owe for them as well. So how do you avoid this? Be informed and document! First - be honest with your broker and help them write an accurate policy. Give them accurate payrolls based on history and expectation. Break out payroll by job duties and help your broker assign good class codes. This helps a good estimate be used for your policy and minimize audit premiums. If you over estimate, you can earn a refund - you will get your money back.

So what happens at the end of the year? You will either get a paper audit form or a "physical audit" where someone comes to examine your records. Do not staff out the audit. Call your broker first for advice. The auditor is looking for ways to grab your money - keep it! If you have employees with split responsibilities - you need to keep payroll records by job duty. In the office 4 days answering the phone and one day making deliveries? Document! There is no form for this, make your own. It will pay off.

Second, the auditor wants to see source documents. Quarterly and annual payroll tax records, payroll records. Know what you have - and know what can be verified. Most payroll reports are generated by employer internal reports. What you can document is the truth. Don't contradict yourself, and you will come out with a no surprises audit. Let your broker be your advocate, and they will tell you what your options are. Don't trust your broker that much? Call me.

My business doesn’t own a car, why do I need auto insurance?

Many business owners think just because they don’t own a vehicle, they don’t have any exposure to auto liability. Often, even businesses that do not own a vehicle need auto insurance, specifically hired and non-owned auto insurance.

Any time an employee is driving a vehicle, even their own, on “company time” or for a business purpose, the employer is exposed to liability. This is due to vicarious liability, the concept that one can be responsible for the acts of another. This is commonly referred to as the master/servant rule or respondent superior “let the master answer.” Because of this rule, employers are often responsible for the actions of their employees, even when the employer did not direct them to do something. If the employee drives their personal vehicle for a business purpose and is responsible for damage, the business is just as responsible. Cases are even more clear cut if the employee was in a vehicle rented primarily for business. For instance, when the employee is attending a conference and rents a vehicle.

The answer to this is hired and non owned auto insurance. For most small businesses, the insurance carrier writing the package policy or the “BOP” business owner’s policy, is happy to include the coverage. Most of the time, hired and non owned auto liability insurance is only a few hundred dollars per year, and is a worthwhile addition to your insurance program.

Insuring Vacant Buildings

Vacant buildings, especially recently, are a fact of life. There are a few things that everyone should be aware of with insuring vacant buildings, especially going into the winter.

A vacant building is any building, which contains no furniture, fixtures or equipment and is not used on an ongoing basis. It also has not been used for at least 30 days. Vacant buildings are prone different risks than occupied ones. They have higher rates of vandalism and theft of building property. Vacant buildings also have higher rates of frozen pipes because they are frequently not winterized.

There are real consequences for insurance on vacant buildings. If you do not tell the insurance company that the building will be vacant and you have a claim, payouts are often reduced by 15% and there is no coverage for loss by damage in the course of a theft or vandalism. Also, frozen pipe claims are generally excluded when the pipers were not drained or the building was not heated.

If you do tell your insurance company that a building is vacant, they may choose not to renew the policy. If there is a plan to re-occupy or dispose of the property, than the insurance company is likely to grant a "vacancy permit" which gives most coverage back on a vacant building and eliminates the claim payment penalty. If you happen to have a number of buildings, most companies have standards for vacancy percentages. Alternative insurance is available specifically for vacant buildings. These policies are easy to obtain, just ask your current broker.

It's best to have a plan for your vacant property. Even hold for 12 months pending market improvement then list for sale is better than not offering a plan to use the property. And while you hold the property, there are some things that you can do to minimize your risks. If it is a residential property, make it appear occupied. You could put some lights on timers, leave some furniture in the home, or install some "staging furniture" (made entirely from cardboard). At the very least, drop by the property on a weekly basis, keep the lawn mowed, and in the winter drain the pipes if the building will not have heat.

With a little time and effort, you can really minimize the chance that you will take an uninsured loss on a vacant building.

If you just need the insurance - call my office today - 312-566-9700.

Property Insurance Limits in a Declining Real Estate Market

It wasn't that long ago insurance agents were explaining to property owners and mortgage brokers that they didn't need an $800,000 homeowners policy on a 2000 square foot house, even though that was the market value. Property insurance valuations can be done on three valuations, replacement cost (what it would cost to rebuild), actual cash value (replacement cost less depreciation), or agreed value (a fixed number agreed with the underwriter).

The vast majority of property insurance is written on a replacement cost basis. The idea is that if there was ever a total loss to the building, most people would want the ability to rebuild. Replacement cost includes the increased (or decreased) cost of updated building methods and includes the cost of construction to current building codes. Replacement cost is not market value. Market value is what someone is willing to pay for the building and the land in its current state. Replacement cost does not include the value of the land, which can not be destroyed. Just a few years ago, in the booming real estate market, replacement cost was usually less than the market value of the home. Insurance agents were constantly explaining to insureds that just because their house appraised for double purchase price several years prior does not mean that the insurance value needs to be increased. This fight was often lost with the mortgage company with the processor saying over and over again "we need to insure the mortgage value" or "that's not what the appraisal says." Many homes went over insured, and premiums were inflated.

Now most homes have declined in market value. Especially in urban settings, market value of the home is now replacement cost. So what's a homeowner to do? Well, it depends on your objective. If there was a significant loss would you rather rebuild at the same location, or take one of the comparable properties on the market at a lower cost? If you would want to rebuild, you need to make sure the insurance policy limit covers the cost to rebuild. Sometimes that can be found on an appraisal, but most mortgage companies don't require it to fund the loan, so it's often not done. If it wasn't done, your insurance agent can help you determine a replacement cost for you. This number could be higher than the purchase price.

If you would just buy a new home for market value (assuming it's still less than replacement cost), than you would want to insure your home for actual cash value. This is the replacement cost of your home, less depreciation, and is closer to fair market value. The cost per thousand of insurance is slightly higher, but the overall policy cost can be much less. As always, don't let someone else make your choice. Your mortgage broker isn't interested in protecting you and your insurance agent doesn't know what you want. Both replacement cost and actual cash value are good options. In light of deflated home values and foreclosures, evaluate all your options.

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