Coverages & Endorsements

There are many various coverages and policy ‘endorsements’ involved in insuring investment and commercial property, and most people who are uninvolved in daily insurance operations are probably unfamiliar with what these terms really mean or how that affect their investments.  Below are some of the most common endorsements (ie: changes or additions in coverage)

Dwelling Coverage – Dwelling coverage is the amount of money available by an insurance policy to replace the main property and any attached structures such as an attached garage.The amount of coverage that you need depends on what it would cost to replace the property in the event of a total loss. This amount is usually determined by the insurance carrier based upon the physical features of the property as well as local labor and material costs.

Extended Coverages (EC9) – Extended coverage is a term used to describe the additional nine coverages (beyond basic fire and lightening) in a ‘named peril’ insurance policy. Extended coverage adds insurance against loss by the perils of (1) windstorm (2) hail (3) explosion (4) explosion (5) riot (6) civil commotion (7) aircraft damage (8) vehicle damage, and (9) smoke damage.

Loss of Use – Coverage which provides money to pay for expenses incurred while staying in other lodging because the property is temporarily uninhabitable due to a covered loss.  Such expenses include lodging, food, laundry, extra commuting expense, etc.

Loss of Rental Income – ‘Loss of Rents’ coverage provides 6 to 12 month’s (depending upon the policy) worth of regular monthly rental income if the property becomes uninhabitable and needs repair due to a covered loss.  This coverage is designed to maintain your income stream while the property is under repair so that you can continue to make regular mortgage payments and maintain your overhead.  This is not designed to provide for lost rental income if a tenant simply moves out and the property is vacant.

Vandalism and Malicious Mischief - Vandalism and malicious mischief are generally cited as a single peril meaning willful or malicious physical injury to or destruction of property. Malicious Mischief has been added to vandalism to identify the covered peril because it has a special meaning by definition, and because it embraces a number of situations that are not technically covered by “vandalism.”  “Vandalism” means willful destruction or defacement of property while ”Malicious Mischief” implies damage to property motivated by hatred or spite.

Accidental Discharge of Water – Provides coverage against damage caused by accidental discharge or overflow of water or steam from within a plumbing, heating, air-conditioning or automatic fire protective sprinkler system or household appliance. Coverage includes the cost of tearing out and replacing any part of the building necessary to repair the system or appliance from which the water or steam escaped.  Damage caused by continuous or repeated seepage or leakage to the insured property is not covered; the cause must be sudden and unforeseen. Further, this type of loss is not covered if the dwelling has been vacant for more than 30 days immediately before the loss.

Backup of Sewers and Drains – Provides coverage against the backup (reverse flow of water) from sewers or drains located on or in the property.  Such backups are often caused by clogged sewage lines and the resulting backup of waste can cost thousands of dollars to remediate and clean up.

Personal Liability – This coverage is designed to provide protection against situations where legal actions result and defense and settlement costs become payable.  This coverage provides protection if you are sued for false imprisonment, wrongful eviction, libel, slander, defamation of character or invasion of privacy. Personal Liability

Premises Liability – Premises liability provides protection for the liability exposure that develops from the normal ownership, maintenance, and use of a premises, including (possibly) the tenant’s actions.  Claims may arise from such things as bodily injury occurring on the property, animal attacks, etc.

Additional Insured – There are many variations of Additional Insured endorsements, depending upon how the company has written their policy, and additional insured coverage is different than “additional named insured” coverage, and the two should not be confused. An “additional named insured” usually is an affiliate of the primary insured, such as a spouse or business partner in the property. An additional named insured may be liable for premium payments, and some exclusions from coverage apply to an additional named insured but not to an additional insured. An Additionally Insured party listed in an insurance party is usually only covered with respect to liability claims arising out of the ongoing operations performed for that insured.

If you would like to speak with us regarding your insurance needs or your investing situation, please contact us at (512) 501-4010 or (800) 299-8994 and we will discuss your situation and let you know how we can help.  You may also request a quote by clicking here.