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Do You Have Coverage Wherever Things Go Wrong?

How is this for bad luck?

* Bob goes on vacation to Cancun. While he’s walking on a sidewalk one day, a car jumps the curb. He jumps out of the way and escapes injury, but his $2,000 camera gets run over by the car.

* To cheer himself up, Bob goes to a golf shop to try out some clubs. Forgetting where he is, he takes a practice swing; his back swing breaks the nose of the woman looking at putters next to him.

* Bob cuts his vacation short. He returns home to find snow and ice have accumulated on his driveway. The next day, he also receives an emergency room bill for the broken ankle suffered by a neighbor who slipped on the driveway while attempting to look in on his cat.

* Bob retreats to the hideaway cabin that he owns in the mountains. He chops some trees for firewood on what he thinks is his property. Actually, the trees are five feet on his neighbor’s side of the property line.

Bob has a homeowner’s insurance policy covering his house. Does it cover any of these losses? For three of the four losses, the answer is yes.

A typical policy covers an insured person’s personal property anywhere in the world. It also covers property that person is using, even if he doesn’t own it. The property is covered for losses caused by any of the perils listed in the policy, including fire, lightning, smoke, explosion, vehicles, and others. Therefore, Bob’s policy will pay to repair or replace the camera damaged by the car. However, the insurance company will subtract his deductible from the amount it will pay.

In addition to insuring property, a homeowner’s policy covers an insured person’s legal liability for injuries or damages suffered by others. It covers liability for all of the person’s actions anywhere in the world, except for types of losses that it specifically lists as not covered. Accidentally hitting someone in the face with a golf club is not on the list, so Bob’s policy will pay the amount he owes for the woman’s medical treatment.

Likewise, Bob has coverage for the neighbor’s broken ankle. Since he invited the neighbor to check on his cat, and his driveway was not in a safe condition on which to walk, he is legally liable for the injury. The policy covers liability arising out of an “insured location.” The term “insured location” has many definitions; one of them is the residence listed on the policy. Bob’s policy lists his home, so it covers losses that arise from the home.

Unfortunately, the next loss is where Bob’s luck runs out. His policy lists his home but not his cabin. It does not cover his liability that arises out of premises he owns, rents, or rents to someone else if that premises is not an insured location. Since he owns the cabin and did not list it on his policy, and it does not fit into any of the other definitions of “insured location,” the policy does not cover his liability for accidents that happen there. Consequently, he must either seek coverage under another policy, if there is one, or pay for the damage to the trees out of his own pocket.

It’s a good idea to have a periodic chat with a professional insurance agent about your life circumstances. If you have a place in the mountains, own significant amounts of special property such as jewelry, or conduct business out of your home, you need special insurance coverage. Make sure you have the right coverage before you have a run of luck like Bob’s.