Boat Insurance Rental Article

INSURANCE | Pinpoint the WEAKEST LINKS in your homeowners and auto coverage.

THE PUTRID odor assault Richter the moment they Opened the front door of their home in Heath, Ohio, The stench came from the basement, where a three-inch pipe that was supposed to drain water from the air-conditioning system into a sewer line was instead spewing raw sewage fro throughout their neighborhood. About an inch of this foul mess had already oozed across the floor.

It was easy enough to pinpoint the cause: a clog in a sewer line about 150 feet from the house. The Richters house sits lower than all their neighbors', so when everyone else's gunk stopped at the clog, the backup dutifully retreated, ending up in the Richters, basement.

Rodger spent about six hours on preliminary cleanup, then called in a firm that specializes in heavy,duty jobs. He eventually paid more than $1,100 to have the basement cleaned and sterilized and the carpeting replaced. Then he called his insurance company to submit a claim.

Most homeowners are in the same boat. Standard policies don't cover damage from sewage and water backups. To get that protection, you need to buy special coverage--which is exactly what Rodger did. For $50 a year, he added a rider that will pay up to $10,000 if the gross stuff ever invades his basement again. Unfortunately, a repeat is not out of the question. "In the past five years, some of our biggest homeowners-insurance claims have been caused by water and sewer backup, "says Tom Schneider, the Richters' agent.

Sewage backup is one of several hazards that people widely assume is covered by their homeowners insurance--until they file a claim and are turned down. We hate to say it, but it actually does make sense to read those densely packed pages of your policy to see what's covered and what's not. If you discover a gap, it's usually easy and inexpensive to fill it.

Holes in homeowners policies

AS THE RICHTERS discovered, a backed-up sewer can send waste spewing into your house. So it's essential to buy sewage and drain backup coverage if you have a finished basement that contains valuable furniture or equipment that could be destroyed. But damage isn't always limited to the basement. When a sewer line leading to Perry Pappas's 150-year-old Victorian home in Columbus, Ohio, broke last fall, it caused an upstairs toilet to overflow, resulting in nearly $3,000 of damage.

Fortunately, Pappas had a $ 50-a-year rider on his homeowners policy, which entitles him to up to $10,000 for sewage-backup damage, after a $500 deductible. The same rider would also pay for damage if a sump pump stopped working during a power outage--which could leave your basement soaked.

Most people who live near a river or coastline know homeowners policies don't cover flood damage, and they buy flood insurance through the National Flood Insurance Program. But flooding can be a problem even if you don't live near water.

Jack Blair, an independent insurance agent in Hamilton Square, ., notes that heavy rains can cause big problems. "We had a town that got buried in a foot of water last year, and most residents had never seen water in their town before," he says. "That was a real tragedy when a lot of people turned to their homeowners insurance and found out flooding was excluded."

Flood insurance is sold by private insurance agents at set prices, depending on your proximity to a flood zone; you could pay more than $800 a year for $100,000 coverage if you're in a flood plain, or as little as $230 if you're in a low-risk area. For more information about the program, the cost of flood insurance and how to buy it, see the NFIP's Web site (.gov/nfip), or call 888-225-5356.

Protect your homework

IF YOU HAVE a home office, don't assume that your equipment is protected by the personal-possession coverage in your homeowners policy. Homeowners and renters policies typically cap coverage for business property at $2,500. The coverage drops even more if you take any of the property out of your house for

example, it pays only $250 if your laptop is stolen while you're on a business trip.

A typical policy provides no liability coverage for business-related claims, either. If, say, the UPS guy slips on your front stoop while delivering a business package and ends up suing, your homeowners company may leave you high and dry.

For a low-risk home business, a rider that would hike business-property and liability coverage to the same amounts as stated in your homeowners policy would probably cost $100 per year or less, says Scott Hauge, an independent insurance agent in San Francisco. For bigger and riskier businesses--if, say, you are a computer consultant with expensive equipment--you may have to buy a standalone business insurance policy for $ 350 a year or more.

Homeowners policies typically cover only $1,000 to $2,000 for theft of jewelry. And they offer no protection in case of a mysterious disappearance--for example, if a ring falls down the drain or the tines separate and a diamond falls out and is lost.

"If it wasn't stolen and you don't have a police report, it may not be covered," warns Lynn Knauf, a policy manager with the Alliance of American Insurers, who had plenty of experience denying claims in her previous job as an insurance adjuster. You can buy a rider to cover such losses and tie the coverage level to your jewelry's appraised value. The cost: about $15 per $1,000 of the jewelry's value.

Coverage for everything

SOME POLICIES are called "all risk," which means they cover damages caused by almost any situation, except those specifically excluded in the policy. But others are "named perils" policies, which cover only damages caused by particular situations--such as fire, theft, vandalism, a plane crashing into your house and more than a dozen other circumstances. The laundry list seems to include everything, but inevitably leaves out some scenarios.

When a truck hit a power pole in Renae Cannon's Antioch, Cal., neighborhood, a power surge destroyed her home alarm system and two TVs. The damages wouldn't have been covered under a standard policy--as many of her neighbors discovered--but she had a rider that transformed her named-perils policy into an all-risk one. The insurance company paid Cannon about $3,000 to replace the TVs and alarm system. Getting an all-perils rider typically adds about 20% to your annual premium.

If you own a one-of-a-kind house, it's easy to underestimate the amount of insurance you need. People typically calculate their coverage amount by multiplying the square footage by local building costs. But if you have marble mantels, mahogany trim, odd-size 19th-century windowpanes and chandeliers in every room, the generic calculation will leave you far short of the cost to rebuild your home.

Kevin Daly, an account executive with PLI Brokerage, in Boston, recently upped the coverage on a historic townhouse with many of these special features. The owner had originally insured the home for about $400,000, based on its square footage. When Daly and an appraiser visited and added up the specifics, they found that it would cost more than $950,000 to rebuild. Some companies, such as Chubb, will pay the entire cost to rebuild, regardless of the amount of insurance you've bought (although they appraise it themselves to make sure the value is close). Others cap the payment at 125% of the insured amount, or 100% for homes built before 1925. Yes, buying the right amount of insurance costs more--doubling coverage could raise premiums by 75% to 100%--but too little insurance is a fool's bargain.

You may also fall short if you have valuable antiques or artwork. Homeowners policies typically cover furniture and most possessions at 50% of your dwelling limit--a $200,000 cap on the dwelling would mean a $100,000 cap on property. If that isn't enough, consider covering some valuable items separately, at a rate of about $ per $1,000 of value.

Catches in car insurance

WHEN SOMEBODY drives your car with your permission, he or she is typically covered by your insurance. But if the extra driver lives in your house and isn't listed on the policy, that general rule may not apply. If, say, your son is home for the summer from college and drives a family car to work every day, check with your insurer to make sure he is covered. Chances are the answer is yes, even if you took his name off the policy. But some companies require that a child be named on the policy for the summer months, and they boost your premiums. This is most likely if you are with a high-risk insurer, or your child has a lousy driving record. The key is to ask.

Blair recommends that you keep your children on your policy even if they're away at school, so they are covered when they come home and if they drive anyone else's car while away.

Also tell your insurer if a nanny or housekeeper will be using your car regularly. If the worker lives in your home, he or she may not be covered. "Many plans will exclude unlisted residents of your household," says Gene Nelson, an agent in Fort Smith, Ark. You may need to add the nanny to your policy, at an extra cost based on her age and driving record.

Notify your insurance company if you or your kids use your car for any kind of business driving--whether it's delivering pizzas, driving carpool for a little extra cash or running errands for your company. Otherwise, you might not be covered for accidents that occur during business use. "Even if you're delivering newspapers, some contracts have specific exclusions for delivery use," says Knauf. "Any time you're going to use your car for a new type of use, call your agent" to see whether you're covered, she recommends.

Many people choose not to buy the expensive insurance offered for rental cars because they assume their own policy will cover them. In many cases that's a wise decision, but not always.

American auto-insurance policies typically cover damages only in the . and Canada. If you're traveling abroad, consider the rental-car insurance, or charge the rental to a credit card that offers protection. Even in the States, you should consider those options if you have an old car and have dropped collision and comprehensive coverage on your policy.

Check with your insurer if you plan to rent a car for longer than a month, because lengthy rentals may not be covered. You can buy "extended nonowned coverage" at a likely cost of $100 a year or less for the same coverage you have under your auto policy.

If you've made a small down payment and taken out a bio loan on a new car, you could owe the bank more than the car is worth in the early years. If the car is totaled in an accident, insurance usually pays no more than the car's actual cash value. "You could be stuck with $3,000 more on the note than what the insurance company will pay you for the car," says Mike McCartin, an agent in College Park, Md. For $30 to 40 a year, you can buy a "lease loan" rider to make up the difference until the loan balance is less than the car's value. --Reporter: COURTNEY MCGRATH

THE COST OF FILLING THE GAPS

The following riders can be added to policies to fill gaps in homeowners and auto coverage. The premiums shown are estimates; prices will vary depending on your personal situation.

Home office: $100 for basic consultant's office with computer system, to raise property and liability coverage to the same levels as personal coverage in homeowners policy.

Sewer backup: $50 to $80 for $10,000 coverage.

Flood: From about $230 if you're in a low-risk area to $800 or more in a flood plain for $100,000 coverage.

Jewelry and silver: About $15 per $1,000 of value.

Separate coverage for antiques, artwork and valuable furniture: $ per $1,000 of value.

Extended nonowned auto coverage (if you plan to rent a car for longer than a month): $100 or less per year to extend the coverage of your auto policy.