Many people don’t know what an umbrella is or why you would need one. Let me offer a short explanation. Let’s say you’re driving down the East Beltline and you are involved in an accident in which you are at fault and the other person is seriously injured. In this situation you could be sued. It’s very possible that the settlement could be more than your auto policy liability limits (what if you hit a doctor and he’s no longer able to work?). In that situation your personal umbrella would pick up the amount above and beyond your auto policy limits (up to your limit, of course).

The same goes for your home insurance. If someone is injured on your property and they sue you for more than your policy limits, without an umbrella you could be stuck holding the bag (think: assets, future wages, etc). With a $1,000,000 umbrella policy starting at around $125 per year in West Michigan its really amazing that most people don’t carry this policy. It’s almost inexcusable!

I came across a great umbrella article recently that explains the coverage much more elegantly than I can:

The New York Times

There’s a lot of really great information in the article. Take a look!

MCCA stands for Michigan Catastrophic Claims Association. This association reimburses insurance companies for auto accident related medical claims that exceed $440,000 (as of July 1st, 2008). In the state of Michigan your medical benefits are unlimited if you’re injured in an auto accident and the MCCA makes sure that insurance companies don’t have to pay more than $440,000 of the damages.

The MCCA fee is the portion that you pay per vehicle to keep this association going. It’s required on every vehicle in Michigan and the rate is set by the MCCA and periodically adjusted to cover expenses. Vehicles registered as Historic in Michigan are subject to a reduced MCCA fee.

Each policy and each company is different, so you should always talk to your independent agent regarding your specific coverage, but essentially there are two options available for your personal property coverage.

The first is the coverage available on the standard HO-3 policy. With this coverage your personal property coverage is limited to the listed perils in the policy. If your loss is on that list you’re set, if not you have no coverage.

The second option is available with the HO-5 policy, or by adding the special personal property endorsement to your standard policy. This coverage expands your personal property coverage so that you are covered for anything that could happen EXCEPT a short list of exclusions. If you have a loss to your personal property you simply consult your policy, if the loss is not excluded you have coverage. Clearly this is the better coverage because there are so few exclusions.

A couple of examples:

• Lets say you spill bleach on your couch and it has to be replaced. If you had a standard un-endorsed home policy you would look at your policy and see that spilling bleach is not one of the listed perils, so you would have no coverage. If you had the HO-5 policy or the special personal property coverage endorsement you would look at your policy and see that spilling bleach is not excluded so you would have coverage!
• Lets say the power company sends a power surge through the lines and it fries your T.V. and stereo. If you had a standard un-endorsed home policy you would look at your policy and see that your electronics are not covered for that type of peril so you would have no coverage. If you had an HO-5 policy or the special personal property endorsement you would look at your policy and notice there is no exclusion for such an act, so you would have coverage!
• Let’s say you are carrying your brand new flat screen TV down the stairs and you drop it. If you have a standard policy you’ll see dropping is not a listed peril, so there’d be no coverage. If you had the special personal property endorsement or the HO-5 policy you would be covered.

As you can see there is greater potential for an uncovered loss if you have a policy without the special personal property endorsement. The good news is that it’s easily remediated by calling your independent insurance agent.

At The Brouwers Agency we’re readily available to discuss your homeowners insurance needs. Give us a call, toll-free: 1.866.359.0970.