The ABCs of Summer Insurance Here's how to protect your home, your car, your boat, and your other valuables--so that you can stop obsessing about them on vacation.
(FORTUNE Magazine) – It was a Friday night in Budapest, and Pat Musser and a friend were taking in the sights. The vacationers had just arrived after an 18-hour journey and wanted to stretch their legs. They'd bought some souvenirs and were headed back to their hotel for dinner when Musser discovered her wallet had been swiped from her securely clasped purse, along with more than $400 cash.
Unfortunately, this wasn't the first time Musser, a Damariscotta, Me., travel agent, had been robbed on vacation. Years earlier, she'd had a gold ring stolen from a friend's house in Bermuda. Fortunately, she learned a valuable lesson then. Her homeowner's insurance company had refused to cover her loss because she hadn't reported the theft to the local police.
This time she knew better. The day after her wallet was stolen, Musser got a police report that (though written in Hungarian) enabled her insurer to reimburse her for the lost cash and wallet.
If it can happen to a travel agent like Musser, it can happen to you. So before you start your summer vacation, give yourself an insurance checkup: Read your homeowner's policy; call your insurance company or agent; verify what coverage you have and what proof of loss you'd need, if any, to get a claim paid; and add to your coverage if you find it lacking. You should go through this drill once a year anyway, so now's as good a time as any.
First, if you're going on a trip, make sure any personal property you take with you will be covered. Most policies insure your belongings for such things as theft, fire, and vandalism both at home and away, but in some parts of the country (notably, in higher-crime big cities) you'll need to pay extra for "off-premises" coverage.
Pay attention to coverage limits. The off-premises portion of your policy is typically capped at 10% of your personal property limit. So if your possessions are insured for $250,000, you'll get only $25,000 max (after deductibles, of course) for any losses incurred while vacationing--unless you purchase additional coverage.
Certain valuable items (cash, jewelry, electronics) carry their own limits. To get full value for your Rolex, you'll probably have to buy a "personal articles floater," says Towson, Md., insurance agent Clint Gillespie, head of the personal insurance section of the Chartered Property Casualty Underwriters Society. This insures the watch for its appraised value and provides broader coverage than most homeowner's policies. For example, the watch would be covered even if it were simply lost; no police report is required.
Renting a car? Your own auto policy probably covers you for liability and for damage to or theft of the rental, says New Orleans insurance agent Don Beery, president of the Independent Insurance Agents of Louisiana. If you don't have auto insurance, or if you have an old car and have dropped the theft and/or collision coverage, you might be able to get the insurance you need by charging the rental to a major credit card. But beware: Most credit card companies exclude coverage for such things as liability, cars rented outside the U.S., and expensive or exotic cars.
As a last resort, you can fill in any blanks in your coverage by purchasing insurance through the rental car company. There's "collision damage waiver" insurance (which relieves you of financial responsibility for damage to or theft of the rental), liability insurance, personal accident insurance (unnecessary if you have adequate health insurance), and personal effects coverage for theft (unnecessary if you have off-premises coverage under your homeowner's policy). Don't arrive at the rental counter without knowing exactly what you need or don't need. Rental agents usually get commissions for peddling this insurance, "a system that has fueled hard selling, especially during the busy summer season," according to Consumer Reports Travel Letter.
Boat owners generally need a special policy to cover the vessel and any liability resulting from its use. Homeowner's policies cover only small crafts--typically those under 26 feet and with less than 35 horsepower.
Be careful if you usually sail in a lake and decide to head out into open seas. You won't be covered if you're "rated" for inland use only. (Saltwater policies cost more.) Also, some policies won't cover accidents if a minor was skippering the boat.
Speaking of accidents, the liability limit on a standard homeowner's policy is $100,000, says the Insurance Information Institute. So, if you hit someone or something with a golf ball, your homeowner's policy will cover up to $100,000 for any property damage incurred or, if necessary, for the cost of defending you in court. In addition, the no-fault medical portion of your policy allows someone who is injured by you or on your property to submit medical bills to your insurer.
To insure against "wealth-destroying lawsuits," says Charlie Kline, CEO of Homesite Insurance, get yourself a personal umbrella policy. One that ups your liability limit to $1 million, for instance, costs about $250 a year.
There's almost no policy that will protect you, though, if you deliberately wreck property or hurt someone out of frustration or anger. So keep cool. And have a great summer.
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