Insurance Overview

Insurance policies can be divided first between residential and commercial/business policies. This overview applies to both, with additional business considerations addressed separately below.

What Policies Might I Have?

Residential policies are usually referred to as "homeowners" policies. If you live in a high-risk (coastal) area, you may have two or even three residential policies. First, your homeowners policy would cover typical risks such as fire but will exclude coverage for hurricane losses. Second, your windstorm policy would cover against risks associated with the winds accompanying hurricanes but would exclude flood damages (typically defined to include storm surge associated with a hurricane). Third, your flood policy would cover against risks associated with flooding, which all primary flood policies define to include "overflow of tidal waters" (that is, storm surge). It is not uncommon for older homeowners policies (or policies in low-risk/non-coastal areas) to include coverage for wind in the same policy that covers fire losses and the like.

Wind vs. Flood. Wind coverage is written by private insurers like State Farm and Allstate. Disputes concerning those policies will be governed by state law. Primary flood coverage is handled by those same insurers, but all policies are identical and disputes arising under flood policies will be governed by federal law. The National Flood Insurance Program (NFIP) is administered by FEMA with the help of private insurers. If you have excess flood coverage (above and beyond the federal $250,000 limit), disputes arising under those coverages typically will be governed by state law.

It is extremely important to locate or obtain copies of your policies and to highlight the definition of flood that is excluded under your homeowners or windstorm policy. Some definitions are broader than others and might provide coverage for surge-related losses that would not be covered under other, similar policies. In general, however, the insurers have taken great care to exclude coverage for any damage caused by rising waters of any sort so that such losses would be covered only under the "federal" flood policies.

Other properties may be covered by separate policies. For example, if your car was damaged by or during the storm, you may have to make claim that loss under your auto policy.

Insurance policies are contracts between you and your insurer. By entering into these insurance contracts, you have agreed to pay premiums and take certain steps in the event of a loss (such as notifying the insurer, mitigating damage to your home, etc.) and your insurer has agreed to fairly determine the cause and value of your loss and to pay you accordingly. Any failure by either you or your insurer to do what is required under the agreement would be a breach of the contract.

How to Read a Residential Insurance Policy

To read your policy intelligently, it is important to first understand how policies are structured. Insurance policies typically include the following sections or similar ones:

  • a declarations page that will include your policy limits for each coverage;
  • a section setting out policy definitions;
  • a section setting out what is covered, known as coverage sections;
  • the insuring agreement;
  • a section setting out what is not covered, known as exclusions; and
  • a general conditions section.

Declarations Page. The declarations page (a/k/a the "decs" page) outlines each coverage you have and should reflect the limit of your potential recovery under each coverage. Typical coverages reflected in the decs page might include coverage for your physical structure (the actual building that is your home), contents coverage (which pays for personal items), other-structures coverage (which might apply to your tool shed or pool house), loss of use or additional living expenses coverage (that would pay for lost rents or additional costs you incur for living in a hotel), and any number of other coverages such as costs incurred to comply with new codes when you rebuild your home, coverage for your fence, and other special provisions of that sort.

The declarations page also should identify every "form" that makes up your policy. Those forms often bear strange numbers such as HO-334-9, and for each one identified on your decs page you should find a corresponding page or section within your policy. In this way, your decs page serves as a table of contents for the rest of your policy. You can tell whether you have your entire policy by checking off each form listed on the decs page. Be sure also to check your files for any endorsements or riders that may have been sent to you after you received your original policy. Your decs page also will reflect your deductible.

Definitions. It is extremely important to familiarize yourself with the definitions section of your policy because insurers use very specific and technical definitions for policy terms (which usually appear in bold or italic script throughout the rest of the policy). For example (and speaking hypothetically), the term "flood" could be defined as "the rising and falling of waters in rivers or other similar estuaries" or it could be defined as "any rising water from any source, including tidal surge." Your entitlement to benefits could vary greatly depending upon which of those (hypothetical) definitions appears in your policy. Tab your definitions section as you will refer to it often while reviewing your policy.

Coverage Sections. These sections describe in detail what is covered under the policy. For example, a homeowners policy might include as "Coverage A" your dwelling structure and as "Coverage B" your other structures and as "Coverage C" your contents. The limit of the insurer's liability for each type of coverage usually will be set out in this section.

Insuring Agreement. This portion of your policy will explain exactly what perils are covered. The coverage language often is written very broadly and then limited by the exclusions that follow. You may find that there is a separate insuring agreement under each coverage section.

Exclusions. This is where the insurer takes away much of what seemed to have given under the coverage sections and insuring agreement. The coverage sections and insuring agreement basically say: "We cover everything except what is identified in the exclusions section." The exclusions section then takes away very specific coverages one by one. This is where you will find the language eliminating coverage for flood, power failure, ordinance or law, and the like.

Conditions. The conditions section sets forth routine aspects of coverage and claim handling. It will tell you, for example, how and to go about filing a claim, what responsibilities you have to minimize damage to the insured property, how the insurer will go about adjusting your loss, and what must happen if there is a disagreement between you and your insurer.

Reading the Policy. In order to read your policy, then, it is best to follow this method:

  1. Review the decs page for general information and to ensure that you have your entire policy in hand (be sure to check your files for endorsements and riders to the policy).
  2. Familiarize yourself with the definitions section.
  3. Review the coverages and insuring agreement to see what losses are covered and what perils they are insured against.
  4. Review the exclusions to see which of those coverages are limited or taken away.
  5. Take notes on exactly what conditions you agreed to in terms of notifying the insurer, minimizing damages, and so forth.
Business Coverages

Commercial policies typically include coverages similar to those found in residential policies (such as coverage for the structure and its contents), but frequently include additional business-specific coverages. Some common ones include the following.

Accounts Receivable. This will cover losses incurred due to your inability to collect on accounts receivable because of a covered loss.

Business Interruption. This will cover lost income for a specified period of time if incurred due to a covered loss.

Civil Authority Coverage. This compensates your business for losses due to forced evacuations or other similar declarations by civil authorities.

Contingent Business Income. This covers loss of income due to damages suffered by others, such as your supplier's inability to ship goods into the area (or its inability to ship goods at all) or such as your primary customers' inability to do business with you.

Extra Expense Coverage. This covers operating expenses that would not have been incurred but for the catastrophe, e.g., the cost of temporarily relocating, contracting out your work, and the like.

Utility Services Coverage. This coverage will protect you if you lose business due to the failure of local utilities even if you are otherwise capable of opening your doors to the public.

There are a host of similar coverages, often overlapping, and often subject to "sublimits" that cap your total recovery. Business policies vary from one another far more than residential policies and generally are more complex.

Making a Claim

Reporting the claim is a simple matter. Contact your agent or simply look up your insurer on the internet. Radio and TV spots by insurers routinely follow major catastrophes. They will include 1-800 numbers for reporting losses.

Document, document, document! The single most important thing you can do after a loss is to document your damages (e.g., with photos, video, handwritten itemizations) and document your communications with your insurer. Keep track of every contact you have with your insurer, including the date of the contact, the name of the person whom you contacted, and a brief note on the substance of your conversations, particularly anything you are told about coverages or the causes of your loss. Keep copies of every written correspondence you have with anyone, especially your insurer.

Prepare rough estimates for the replacement value of your property, whether it be your structure, your fence, your tool shed, or your personal contents losses. Contents losses are particularly difficult to itemize after a devastating loss. Experience has taught us that a good method for cataloguing your contents losses is to visit a local department store or browse a department store catalog and take notes on everything you see that you had (from your $5 sugar bowl to your $500 or $5,000 armoire).

Here is some advice provided by the Insurance Information Institute (http://www.iii.org):

Be prepared to give your insurance agent or a representative from the insurance company a description of the damage. The agent will report the loss to the company or to an adjuster. The adjuster will then contact you to inspect the damage.

Take photographs of the damage. This will help you present your claim and will help the adjuster perform his or her investigation.

Make a detailed inventory of any damaged or destroyed personal property. Make two copies of the list - one for you, one for the adjuster. The list should include a description of the items, when you bought them, what they cost when you bought them and what they might cost to replace now. Canceled checks, invoices or receipts may help the adjuster.

Make temporary repairs where possible. This includes covering broken windows, damaged roofs and walls to prevent further damage. Make sure you keep receipts for any supplies and materials you buy. Your insurance company will repay you for any reasonable expenses you incur while making temporary repairs.

Get a detailed estimate for permanent repairs to your home from a reliable contractor and give it to the adjuster. Make sure the estimate includes proposed repairs, the cost of repair and replacement prices.

The most serious losses and hardship cases are given priority by the insurance agents and adjusters.

IF YOU HAVE ANY QUESTIONS REGARDING YOUR INSURANCE CLAIM, CONTACT THE Berniard Law Firm.

State Insurance Contacts

Alabama Dep't of Insurance: 800-433-3966

Contacting a Specific Insurer

Several resources on the internet provide toll-free numbers for virtually every property and casualty insurer, including your own:

For questions regarding NFIP (flood) insurance, call: 800-427-4661.

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