How to Make the Most of an Underinsured Loss

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The two most common errors people make are that they assume debris removal only applies if the building is being demolished, and they calculate the amount solely as a percentage of the building limit.

...operative word“structure” is not defined. Thus, any man-made item that is not connected to the house fits in this coverage. This may include such items as driveways and sidewalks, which commonly need replacement as a result of repair efforts. For additional support regarding this argument, as well as other arguments and questions concerning coverage, a great resource is the FC&S Bulletin. 1

“Additional Coverage”

After reviewing the declarations page for potential changes to the stated limits, it is important to look through the entire policy. There are a few sections in the policy where you can anticipate finding extra insurance to help cover the loss. Most policies have sections titled, “Additional Coverage” and/or “Extensions of Coverage.”“Additional Coverage”generally refers to coverage items that are added to the policy with a sublimit, but which do not increase the policy limits. “Extended Coverage,”on the other hand, generally refers to coverage for specific items or types of losses with sublimits that are in addition to the policy limit.

Thus, an itemclaimed under Extended Coverage could be paid up to the specific amount listed, even if policy limits were previously exhausted. Today, many policies use these terms interchangeably, as is done throughout this article. Therefore, it is critical to read these sections carefully to determine if the sublimit is within the policy limit, or if it increases it. Also, many commercial policies have special endorsements unique to the type of business insured, such as a restaurant package. These industry-specific packages typically have several excellent additional coverages in these special endorsements.

Examples of Extensions

Some policies contain only a few extensions of coverage, while others may have as many as 15 or 20. Some typical examples of these extended coverages are debris removal, landscaping, electronic data processing (computers), code upgrade, fine arts, valuable papers, landscaping, and newly acquired property. There are two very common extensions of coverage that insureds often fail to fully utilize.


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