HOMEOWNER LIMITATIONS & EXCLUSIONS - Part One
What's Not Covered?
The traditional method of underwriting insurance protection for your home involves a focus on the type, and the amount of coverage that you need. To be certain that you have comprehensive coverage, specific to your needs, it is appropriate to conduct "secondary underwriting". This two-step method of underwriting begins with the traditional approach, but it also includes a thorough review of your home

insurance contract to identify the policy limitations and exclusions, that are included in your policy.

In this edition of Shepard on Insurance we will examine those limitations, to be followed by a review of policy exclusions in our next edition.
Limitations

All home insurance policies include special clauses designed to limit the insurance companies exposure to the unknown, primarily undocumented valuable articles. Those clauses set limits in two different forms, "dollar limits" and limits by "specific language."

Dollar Limits are set for different categories of valuable property. The limits are not the same for all insurers, but the limits are found in all policies. Below we have listed some of the typical categories and stated dollar amounts found in a home insurance policy.

If you are in possession of some of the items listed above, with values in excess of the "dollar limit" for a particular category, you should discuss with your agent about developing a schedule of those items to be certain that you have comprehensive coverage.
Language Limits: a homeowner policy normally insures the contents of a home for replacement cost. In other words if an item is damaged or stolen you are reimbursed
for the cost to replace that item (subject to your deductible). But what.if it's a Picasso? Home policies come with "special wording" to deal with items that are rare, antique, or a one-of-a-kind; to limit the coverage if they are lost or damaged. That special language covers those items on an "actual cash value" (ACV) basis, which in insurance terms is "replacement cost minus depreciation". In brief, if you have these items, call your agent to make sure they are insured properly.
There are a few companies, such as Chubb and AIG, that issue a deluxe contract that intends to provide full replacement cost coverage, including antiques and fine art. But a word to the wise, ask if you are properly covered. You'll be glad you did.

In our next edition of Shepard On Insurance, we will address the policy exclusions to complete the second stage of underwriting.
  Estate Planning

Should you be using a Life Insurance Trust????
.............................................................................to hold the ownership of your life insurance? Most definitely. A life insurance trust is the single most effective resource in sheltering assets from taxes. But more important, the trust, and it's trustee will provide critical financial direction to the beneficiaries when they need it most.
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