Five Coverage Gaps to Review on Your Own Policies
Your dwelling limit, your auto liability limits, your umbrella, your valuables and a home business are the five places to check your own policy wording.
This article is general information about how insurance usually works. Your policy’s own wording decides what it covers. Ask us about yours.
Short Answer
Dwelling coverage should be enough to cover the cost to fully rebuild the home. Minimum auto liability limits satisfy the legal requirement, but they may not be enough protection, as the state facts below describe. An umbrella policy can pay above the limits of the primary policy.
1. A Home Limit Below the Cost to Rebuild
Dwelling coverage should be enough to cover the cost to fully rebuild the home. A policy can insure on replacement cost, which is the cost to rebuild, or on actual cash value, which is market value. Check which basis your policy uses, and whether the limit still matches the cost to rebuild.
2. Auto Liability at the State Minimum
The minimum limits satisfy the legal requirement, but they may not be enough protection, as the state facts below describe. The state facts below give one state’s numbers. At your next renewal, ask to see the price of higher limits beside the minimum.
3. No Umbrella Over Your Assets
A personal umbrella policy provides coverage for liability and defense costs that primary policies, such as auto and homeowners, do not cover. It can pay above the limits of the primary policy. The National Association of Insurance Commissioners says to consider one as you assess your risks.
4. Low Limits on Valuables
A typical homeowners policy limits coverage for jewelry, art and heirlooms, and a scheduled personal property endorsement can raise those limits. Art, collectibles and jewelry may need a separate policy and an appraisal.
5. A Home Business the Policy Excludes
Business inventory or supplies kept at home are not likely covered. If you run a business from home, tell your insurer about it, because leaving it out could lead to a cancelled policy. Coverage added to a homeowners policy by rider can protect a small amount of business equipment and provide liability coverage for third party injuries. Larger operations need a business policy, and Business Insurance shows the range.
State Facts
In Connecticut
- The minimum auto liability is $25,000 per person and $50,000 per accident for bodily injury, and $25,000 per accident for property damage.
- The Insurance Department says the minimum limits may not be enough protection.
Frequently Asked Questions
What are the most common gaps in a home and auto program?
The most common gaps are a home limit below the cost to rebuild, auto liability at the state minimum, no umbrella policy, low limits on valuables, and a home business that the policy excludes. Your policy wording determines each one.
Does a homeowners policy cover my home business?
Business inventory or supplies kept at home are not likely covered. You can tell your insurer and ask about a rider or a business policy.
Is replacement cost the same as actual cash value?
No. Replacement cost is the cost to rebuild, while actual cash value is market value.
Sources
- National Association of Insurance Commissioners, Homeowners Insurance
- National Association of Insurance Commissioners, Consumer homeowners guide
- National Association of Insurance Commissioners, What’s an Umbrella Policy
- Small Business Administration, Get business insurance
- Connecticut Insurance Department, Auto Insurance Information Center
- Connecticut Insurance Department, Storm Water Coverage and Flood Insurance fact sheet