What is Water Backup?

Water damage is one of the most common reasons for homeowners insurance claims here in the Triad, including water backup, damaged plumbing and, although not covered by standard homeowners insurance policies, flooding. In addition to water damage being a common cause of homeowner problems, it’s also one of the most misunderstood portions of a homeowner policy as to what’s covered and what’s excluded. We’ll try to shed some light here on this sometimes confusing area.

Water Backup Defined

 

Under normal conditions, when you run a water faucet or flush a toilet in your home, the water travels down and away from the home either to a sewer pipe or septic tank. If something happens that causes the water to stop flowing, usually involving some type of blockage, it will cause a water backup. The water that’s supposed to run down the drain has been prevented from doing so and, instead, travels back up through the drain and into your home. Often, this water will cause damage to the building structure and/or the personal belongings located therein.

As long as the water that has backed up into your home originated on your home’s premises, it’s likely covered by your standard homeowner insurance policy. Examples of this include:

• The drain for your sink, toilet or shower becomes obstructed and the water overflows onto the floor

• Your house drain becomes obstructed by a tree root out in the yard and the blockage causes water to back up through a toilet or an inside drain 

Many insurance companies offer optional, expanded coverage called Water Back Up & Sump Pump Overflow coverage as an endorsement on your standard policy. Suppose you have a sump pump in your basement designed to remove sub-surface water accumulation from around your home’s foundation and this pump becomes overwhelmed by the volume of water it is having to deal with. If the water backs up into your basement, this optional coverage may help pay for the losses incurred. If a sewer backup from the city’s pipe out in the street becomes obstructed and causes water to overflow through your household drains, this should also be covered.

Water that comes into your home and causes damage will generally not be covered in your standard policy if it originates from anywhere outside the home. This includes flood water or any other water coming in from outside the home, including surface or sub-surface water.   

What Does Flood Insurance Cover?

The City of Greensboro and surrounding areas within Guilford County have a number of waterways that may be subject to flooding during and after heavy rains, as can be seen here on this local area regulated flood plain map. Floods represent some of the most damaging and costly disasters to which property owners can be exposed. Being aware of potential risk areas and having proper protection in the way of flood insurance are important aspects of having a home or business in affected areas. Here’s an informative map put out by the NC Flood Risk Info System that lets you click on your county and enter any address to determine specific flood risk levels.

How Flood Insurance Works

Flood damage is a peril not covered within a general homeowner’s insurance policy. Flood insurance coverage must be purchased separately from your homeowner's policy. While this type of insurance is sold through your insurance agent, it’s actually made available only through the federal government’s National Flood Insurance Program (NFIP). It cannot, however, be purchased directly from the government, but must be obtained through an insurance company. Premiums do not change from one company to the next, and the specific rates are determined by the NFIP in accordance with certain factors such as flood risk level for a specific area plus the date and type of building construction involved. In most cases, there’s a 30-day waiting period after issuance before the coverage is active and premium payments must be made for an entire year.

What’s Covered

Coverage provided by flood insurance is spelled out on several government websites, including here. Coverage is applied to both buildings, and the personal possessions found within them, with certain exclusions such as currency, most valuable papers (such as stock certificates) and precious metals. Building and personal possession coverage is treated separately, with each having its own deductible amount.

Detached garages are covered (up to 10% of building coverage), however, other detached structures require a separate policy. Building coverage includes electrical, plumbing, major appliances, window blinds and permanently installed carpets, paneling, cabinets and bookcases.

Personal possessions coverage includes:

• Clothing
• Furniture
• Electronic equipment
• Washers and dryers
• Portable appliances
• Carpets not covered under building coverage
• Freezers (including food stored within)
• Original artwork, up to a maximum value of $2,500

Items not covered include most vehicles, items located outside the insured building like pools, fences, decks, landscaping, etc.        

 

Term vs. Whole Life Insurance: How to Choose

There are plenty of valid reasons for purchasing life insurance, all of which relate directly to providing funds in the event of premature death of the insured. All that’s required in order to obtain a policy is to be the named insured or have an “insurable interest” in that person and have the ability to pay the premium.

Term vs Whole Life

There are two main types of life insurance: term and whole life. Term insurance has one single benefit, derived should the insured die during the term of the policy. At this point, the beneficiary is paid the face amount stated in the policy. Term insurance is issued for a specific time period, or term, after which point it expires and must be renewed to obtain continuing coverage. It is relatively inexpensive and easy to purchase. Terms generally last between one and thirty years, during which time the premium charged for the coverage remains level. At subsequent renewals, premium amounts increase due to the increased age of the insured, which means higher risk that the insurer will pay out on the policy.

Whole Life

Whole life coverage is usually more difficult to obtain, requiring a medical examination, and it's also more expensive initially. Its coverage is meant to last the insured his/her lifetime, during which premium payments remain level. In addition to the death benefit, whole life also has a cash accumulation feature that slowly builds up over the years. This accumulation may be used to lower premiums, to increase face value or as a source for borrowing. Some whole life policies may also pay annual dividends.

Which is Better?

Term life insurance is what’s typically sold to cover the risk assumed when buying a vehicle or a home. In the event of premature death, funds would be available to pay off the loans, leaving the family of the insured unencumbered by these debts. Policies would be written to cover the time frame (term) the loans are active. Because term life insurance usually costs a fraction of what whole life costs initially, it allows young families on a tight budget to obtain maximum coverage for an affordable monthly premium.

For those able to afford higher premium amounts, whole life insurance is worth considering because of the lifetime coverage and the built-in cash accumulation feature. Your best bet is to discuss the benefits of each with your professional life insurance agent.      

5 Mistakes to Avoid When Purchasing Business Insurance

If you have a business here in the Triad area and you’re not carrying an adequate amount of quality business insurance, you’re running a huge risk. No matter what your business, whether it’s a small, home-based, one-person operation or a large enterprise employing lots of people, obtaining the proper level of business insurance should be first and foremost on your list of required items to ensure the health and success of your business. The reason is simple.

A single, unfortunate occurrence involving your business could literally wipe you out tomorrow and severely affect your financial well-being for the rest of your life. This is especially true for incidents involving a liability claim against your business, one of your employees or against you personally. Even something as seemingly innocuous as a slip-and-fall accident that ends up seriously injuring one of your customers – even someone who's simply visiting your home office for a consultation – could end up costing hundreds of thousands of dollars. Without adequate business insurance coverage in force, your business and even all of your personal assets are at risk.

Things to Consider

The first mistake you should avoid regarding the purchase of business insurance, as already mentioned, is to think you don’t need it or can’t afford it. Every business owner needs business insurance, without exception, and affording it is a small price to pay in exchange for the amount of protection against risk it provides. Here are some additional mistakes to avoid:

1. Don’t pick the wrong carrier. The best coverage will come from a top-name, A-rated company with a history of financial stability and fair claims payoffs..
2. Get the right type of protection for your type of business. Your business has unique needs and your policy should be custom designed to fit these. A dentist, for example, has different risk priorities than a retailer, although a certain overlap in some requirements will be present.
3. Too much protection is better than not enough. Your protection needs to cover all of your assets. An umbrella policy is a good option to ensure adequate protection.
4. Once a policy is in place don’t make the mistake of just leaving it as is forever. Coverage needs to be re-evaluated every year or two, or whenever major changes occur in the business.

Business insurance is incredibly important to have in place before something happens. If you wait, you’ll have waited too long.