Mind the Gap
Londoners and anyone who has ridden the Tube (the city’s underground railway system) know the phrase. “Mind the gap,” says a calm, collected voice before every stop, referring to the space between the train car and the station platform. Most passengers get on and off with no problem. But for those who might otherwise be careless with their keys or trip when their toes catch on the edge, it’s a helpful reminder.
In insurance, there is an analogous situation—coverage gaps. A coverage gap is any opening in your insurance protection that leaves you exposed. This kind of situation can exist for many reasons:
The insurance landscape can change as law evolves. Here’s an example. Ridesharing services like Uber and Lyft are based on a simple proposition. One person has a car and the willingness to give another a ride, the other person needs a ride and is willing to pay for it. It seems like a straightforward transaction—until an accident occurs.
State-to-state, there is currently no agreement about what type of auto insurance the driver must carry (personal or commercial) and how much coverage limits need to be. A driver who is covered by himself in his car may no longer have coverage once he accepts money to drive someone else. Until these laws are standardized, this means that both drivers and passengers are at risk of not be fully covered in the event of a claim.
Even if we know that bad things happen, it’s hard to wrap our minds around the fact that they might happen to us. According to a 2015 study by scientists at the NOAA’s National Climatic Data Center, only 20% of homes at risk for flood in the U.S. are covered by flood insurance. Because flooding can be such a rare occurrence, many homeowners don’t anticipate that possibility, even if their home is located in floodplain.
The phrase “cash value” sounds like a fair deal—you get the full value of an item that is ruined or destroyed. But let’s say your teenager is driving the old family car when he backs into a pole and damages the rear end of the vehicle. The cost to fix the car is more than its cash value, so the insurance company totals it and pays you a couple thousand dollars. Good luck finding a reliable used car for that amount.
Taking out a policy that offers replacement cost is often a better choice than one that offers cash value. But many consumers don’t know the difference.
Ever work from home? You’re not alone. Estimates are that between 24 and 36 million households have an active home office. Many don’t realize that homeowners policies exclude business-related lawsuits. This may play out in unexpected ways. For example, if a colleague slips on your walk while dropping off work materials, your insurance company may refuse to pay medical bills and damages.
If you use your car for both work and personal purposes, it’s important to be sure your auto is properly covered, too. A car insured only for business use may not cover an accident that happens on personal time and vice versa.
The Fine Print
An umbrella policy added onto a homeowners policy can be a smart way to fill in coverage gaps. But you may not realize that umbrella policies require that you take out particular coverage amounts on your primary policy.
Let’s say your umbrella policy requires you to carry $500,000 in liability on your homeowners policy. You didn’t notice that clause and instead have only $200,000 on your homeowner’s policy. Then you have a $1,000,000 claim. You will have to pay the $300,000 gap between where your primary policy stops paying and your umbrella starts.
These are just a few of the ways that you can find yourself stuck in a coverage gap. The best way to avoid these pitfalls is to work with an expert who will ‘mind the gap’ for you. The agents at Kelly Klee have years of experience and knowledge, especially working with successful individuals. Give us a call at (844) 885-1600 or email us at email@example.com, and we’ll help you identify and close the gaps that could put your lifestyle at risk.