Everybody's singing the praises of the new compact fluorescent light bulb (CFL). And for good reason...they save tons of electricity.
But what happens if one breaks inside your house or business?
My opinion is that most people will simply sweep up the mess and not give it much thought. But there is a BIG, dangerous component in a bulb called Mercury, and mercury is one of the most toxic substances known to man.
If you break a CFL bulb, you'll likely find that the proper cleanup could be very costly. And you'll likely find that there is NO COVERAGE in your property insurance policy. Most policies have environmental cleanup exclusions. Even if your home is damaged by a tornado, hurricane or fire, the broken bulbs could cause you to incur thousands of dollars in environmental cleanup costs that your insurance policy will EXCLUDE.
Because CFLs contain a small amount of mercury, the Environmental Protection Agency (EPA) recommends the following clean-up and disposal guidelines:(1)
1. Before Clean-up: Ventilate the Room
* Have people and pets leave the room, and don't let anyone walk through the breakage area on their way out.
* Open a window and leave the room for 15 minutes or more.
* Shut off the central forced-air heating/air conditioning system, if you have one.
2. Clean-Up Steps for Hard Surfaces
* Carefully scoop up glass fragments and powder using stiff paper or cardboard and place them in a glass jar with metal lid (such as a canning jar) or in a sealed plastic bag.
* Use sticky tape, such as duct tape, to pick up any remaining small glass fragments and powder.
* Wipe the area clean with damp paper towels or disposable wet wipes and place them in the glass jar or plastic bag.
* Do not use a vacuum or broom to clean up the broken bulb on hard surfaces.
3. Clean-up Steps for Carpeting or Rug:
* Carefully pick up glass fragments and place them in a glass jar with metal lid (such as a canning jar) or in a sealed plastic bag.
* Use sticky tape, such as duct tape, to pick up any remaining small glass fragments and powder.
* If vacuuming is needed after all visible materials are removed, vacuum the area where the bulb was broken.
* Remove the vacuum bag (or empty and wipe the canister), and put the bag or vacuum debris in a sealed plastic bag.
4. Clean-up Steps for Clothing, Bedding, etc.:
* If clothing or bedding materials come in direct contact with broken glass or mercury-containing powder from inside the bulb that may stick to the fabric, the clothing or bedding should be discarded. Do not wash such clothing or bedding because mercury fragments in the clothing may contaminate the machine and/or pollute sewage.
* You can, however, wash clothing or other materials that have been exposed to the mercury vapor from a broken CFL, such as the clothing you happened to be wearing when you cleaned up the broken CFL, as long as that clothing has not come into direct contact with the materials from the broken bulb.
* If shoes come into direct contact with broken glass or mercury-containing powder from the bulb, wipe them off with damp paper towels or disposable wet wipes. Place the towels or wipes in a glass jar or plastic bag for disposal.
5. Disposal of Clean-up Materials
* Immediately place all cleanup materials outdoors in a trash container or protected area for the next normal trash pickup.
* Wash your hands after disposing of the jars or plastic bags containing clean-up materials.
* Check with your local or state government about disposal requirements in your specific area. Some states prohibit such trash disposal and require that broken and unbroken mercury-containing bulbs be taken to a local recycling center.
6. Future Cleaning of Carpeting or Rug: Ventilate the Room During and After Vacuuming
* The next several times you vacuum, shut off the central forced-air heating/air conditioning system and open a window prior to vacuuming.
* Keep the central heating/air conditioning system shut off and the window open for at least 15 minutes after vacuuming is completed.
Man, they are serious, aren't they?
(1) Environmental Protection Agency, www.energystar.com
Saturday, July 12, 2008
Saturday, July 5, 2008
Wildfires, Depreciation and Coinsurance in Contents Claims
If you don’t understand this part of the insurance contract, it can cost you thousands of dollars at claim time.
In a Homeowner policy, there is not usually a section entitled “Co-insurance.” But the clause is listed in the Section I, Conditions, of the standard Homeowners HO-3 form. It's also in the Loss Conditions portion of any Business Insurance policy.
Go find your policy and turn to the Conditions section, and read the part labeled “Loss Settlement.” I thought about putting a copy of the section in the book to make it easy for you. But the reason I wrote the book is to shake you up and get you more involved in your own claim. You’re going to get paid hundreds or thousands of dollars more because of the stuff in the book, and you’re not going to give me any of it. So, get busy and read your policy.
Let me at least translate the legalese: The insurance company requires you to carry policy limits on the Dwelling equal to no less than 80% of the full replacement cost of the building (not including foundations or underground pipes, wires or drains). If you do not carry 80% of the full replacement cost, the insurance company will penalize you when you have a claim.
Simple. But dangerous for your cash flow.
If you have a home that has a replacement cost of $100,000, and your policy limit for the Dwelling is $100,000...no penalty! You’re insured 100% to value. You really should be insured 100% to value all the time.
Please remember that being insured to value does NOT mean that you insure your dwelling or building for its market value or sale price. Insure the dwelling or building for the amount of money it will take to rebuild the dwelling or building completely. Don’t include the cost of the land your dwelling or building sits on. Insurance companies don’t insure dirt.
In this example, you could be insured for as low as $80,000, and receive 100% of any claim with no penalty. However, you’d still be technically underinsured. In the case of a large loss, you would not collect all you should to make you whole again.
Insure your property for anything less than the percentage shown in your policy and there could be a coinsurance penalty.
There’s a simple formula to figure co-insurance:
What you DID buy divided by what you SHOULD have bought.
DID x loss minus deductible = claim amount
SHOULD
Here’s a quick example:
The value of the property $150,000
Coinsurance percentage 80%
The limit of insurance is $100,000
The deductible amount is $250
The amount of the loss is $20,000
Step 1: $150,000 x 80% = $120,000 (the minimum amount of insurance to meet your coinsurance requirement)
Step 2: $100,000 (what you did) divided by $120,000 (should have done) = .67, or 67%
Step 3: $20,000 x 67% = $13,400
Step 4: $13,400 - $250 = $13,150
You see? It really is quite simple to figure out.
Sometimes, there is a coinsurance requirement on the Contents portion of the coverage, too. The same rule applies, and the same method of figuring out if there’s a penalty applies.
The BIG problem is that most people don’t figure out that there is a coinsurance problem until AFTER they have a loss of some kind.
There are a few obvious reasons that property is under-insured:
1. When you filled out your insurance application, you used a figure that is too low for replacement cost of your house. This could come from:
A. Ignorance…meaning you don’t really know how much it would actually cost to replace your home.
B. Simply using the same policy limits on your new policy as you had on your old policy.
C. Being too cheap, and buying a policy with lower limits to save premium dollars.
2. Your agent doesn’t know what it would cost to replace your house when he submits the application.
3. The agent was bidding low price to get your business, and made some cuts to get the premium down.
About the only thing that you can do to minimize a coinsurance penalty is to challenge it.
If your adjuster tells you that you will have a coinsurance penalty assessed against your claim, make him provide his calculations of the coinsurance penalty.
The first thing that the adjuster has to do to calculate coinsurance is to calculate the valuation of your property. EVERYTHING ELSE he does is based on that calculation. If it’s too high, your coinsurance penalty will be too high.
He will calculate either the Replacement Cost Valuation (RCV) or he will calculate the Actual Cash Valuation (ACV). The policy will tell him which valuation to use. He doesn’t get to choose on his own. Most Homeowners policies are RCV on the dwelling. Most commercial property is ACV, although an endorsement for RCV is available for a small extra premium.
To calculate the property valuation, the adjuster can use:
1. A Wild A** Guess (often done)
2. His estimating software. Some estimating software has valuation built in, so all he has to do is enter data about the age and condition, the size of the building, the features, etc., and that software will do the work for him.
3. Marshall and Swift (M&S). The absolute standard in the insurance industry for building valuation is a company called Marshall and Swift. All adjusters know about M&S, even if they don’t know how to use their database. (If your adjuster doesn’t know about M&S, or how to use it, get another adjuster FAST.) Even if the adjuster uses M&S, you need to review the data he entered to obtain the valuation. If he entered wrong data, the valuation will be wrong, too. For example, if he used the area of your house at 2,000 square feet, and your house is only 1,600 square feet, the entire valuation will be wrong.
There are a bunch of variables that are entered into a valuation software program that have a DIRECT bearing on your valuation. Things like:
Age
Condition
Size
Number of rooms
Maintenance
Finishes and extras
Basement or slab foundation
SUPER HOT TIP!!!
YOU can now use the Marshall and Swift valuation program, just like an adjuster. They have built a website where any person can go and calculate their own property valuation. They charge about $8-$15 for each valuation. There is a tutorial on the home page of the website, which will tell you exactly how to use the program. It’s super easy and very accurate.
Go to: http://www.swiftestimator.com
*************
Remember, require your adjuster to furnish a copy of his valuation calculations for your property. Compare it with the Marshall and Swift valuation to make sure it’s accurate. If you don’t have the ability to get your own valuation, take the adjuster’s valuation and show it to a real estate broker. Not just an agent, but a broker. The broker will likely be able to look at your property and the valuation, and tell you if it’s accurate.
If you have calculated a lower valuation than the adjuster, insist that he use your valuation for his coinsurance calculations.
If you’re read my book BEFORE you have a claim, call your agent and make sure that you are insured to value.
If you’re read my book AFTER you have a claim, call your agent and ask him why you’re NOT insured to value. If your agent messed up, and you can prove it, you could have grounds to make a claim against the Errors and Omissions Liability coverage of your agent.
If you’re reading this book to figure out how to collect every dollar you’re entitled to collect, then…
FIGHT FOR EVERY PERCENTAGE POINT!! Every percentage point of a coinsurance penalty is worth hundreds or thousands of dollars. Don’t allow yourself to be cheated out of all of the money you are entitled to collect!
In a Homeowner policy, there is not usually a section entitled “Co-insurance.” But the clause is listed in the Section I, Conditions, of the standard Homeowners HO-3 form. It's also in the Loss Conditions portion of any Business Insurance policy.
Go find your policy and turn to the Conditions section, and read the part labeled “Loss Settlement.” I thought about putting a copy of the section in the book to make it easy for you. But the reason I wrote the book is to shake you up and get you more involved in your own claim. You’re going to get paid hundreds or thousands of dollars more because of the stuff in the book, and you’re not going to give me any of it. So, get busy and read your policy.
Let me at least translate the legalese: The insurance company requires you to carry policy limits on the Dwelling equal to no less than 80% of the full replacement cost of the building (not including foundations or underground pipes, wires or drains). If you do not carry 80% of the full replacement cost, the insurance company will penalize you when you have a claim.
Simple. But dangerous for your cash flow.
If you have a home that has a replacement cost of $100,000, and your policy limit for the Dwelling is $100,000...no penalty! You’re insured 100% to value. You really should be insured 100% to value all the time.
Please remember that being insured to value does NOT mean that you insure your dwelling or building for its market value or sale price. Insure the dwelling or building for the amount of money it will take to rebuild the dwelling or building completely. Don’t include the cost of the land your dwelling or building sits on. Insurance companies don’t insure dirt.
In this example, you could be insured for as low as $80,000, and receive 100% of any claim with no penalty. However, you’d still be technically underinsured. In the case of a large loss, you would not collect all you should to make you whole again.
Insure your property for anything less than the percentage shown in your policy and there could be a coinsurance penalty.
There’s a simple formula to figure co-insurance:
What you DID buy divided by what you SHOULD have bought.
DID x loss minus deductible = claim amount
SHOULD
Here’s a quick example:
The value of the property $150,000
Coinsurance percentage 80%
The limit of insurance is $100,000
The deductible amount is $250
The amount of the loss is $20,000
Step 1: $150,000 x 80% = $120,000 (the minimum amount of insurance to meet your coinsurance requirement)
Step 2: $100,000 (what you did) divided by $120,000 (should have done) = .67, or 67%
Step 3: $20,000 x 67% = $13,400
Step 4: $13,400 - $250 = $13,150
You see? It really is quite simple to figure out.
Sometimes, there is a coinsurance requirement on the Contents portion of the coverage, too. The same rule applies, and the same method of figuring out if there’s a penalty applies.
The BIG problem is that most people don’t figure out that there is a coinsurance problem until AFTER they have a loss of some kind.
There are a few obvious reasons that property is under-insured:
1. When you filled out your insurance application, you used a figure that is too low for replacement cost of your house. This could come from:
A. Ignorance…meaning you don’t really know how much it would actually cost to replace your home.
B. Simply using the same policy limits on your new policy as you had on your old policy.
C. Being too cheap, and buying a policy with lower limits to save premium dollars.
2. Your agent doesn’t know what it would cost to replace your house when he submits the application.
3. The agent was bidding low price to get your business, and made some cuts to get the premium down.
About the only thing that you can do to minimize a coinsurance penalty is to challenge it.
If your adjuster tells you that you will have a coinsurance penalty assessed against your claim, make him provide his calculations of the coinsurance penalty.
The first thing that the adjuster has to do to calculate coinsurance is to calculate the valuation of your property. EVERYTHING ELSE he does is based on that calculation. If it’s too high, your coinsurance penalty will be too high.
He will calculate either the Replacement Cost Valuation (RCV) or he will calculate the Actual Cash Valuation (ACV). The policy will tell him which valuation to use. He doesn’t get to choose on his own. Most Homeowners policies are RCV on the dwelling. Most commercial property is ACV, although an endorsement for RCV is available for a small extra premium.
To calculate the property valuation, the adjuster can use:
1. A Wild A** Guess (often done)
2. His estimating software. Some estimating software has valuation built in, so all he has to do is enter data about the age and condition, the size of the building, the features, etc., and that software will do the work for him.
3. Marshall and Swift (M&S). The absolute standard in the insurance industry for building valuation is a company called Marshall and Swift. All adjusters know about M&S, even if they don’t know how to use their database. (If your adjuster doesn’t know about M&S, or how to use it, get another adjuster FAST.) Even if the adjuster uses M&S, you need to review the data he entered to obtain the valuation. If he entered wrong data, the valuation will be wrong, too. For example, if he used the area of your house at 2,000 square feet, and your house is only 1,600 square feet, the entire valuation will be wrong.
There are a bunch of variables that are entered into a valuation software program that have a DIRECT bearing on your valuation. Things like:
Age
Condition
Size
Number of rooms
Maintenance
Finishes and extras
Basement or slab foundation
SUPER HOT TIP!!!
YOU can now use the Marshall and Swift valuation program, just like an adjuster. They have built a website where any person can go and calculate their own property valuation. They charge about $8-$15 for each valuation. There is a tutorial on the home page of the website, which will tell you exactly how to use the program. It’s super easy and very accurate.
Go to: http://www.swiftestimator.com
*************
Remember, require your adjuster to furnish a copy of his valuation calculations for your property. Compare it with the Marshall and Swift valuation to make sure it’s accurate. If you don’t have the ability to get your own valuation, take the adjuster’s valuation and show it to a real estate broker. Not just an agent, but a broker. The broker will likely be able to look at your property and the valuation, and tell you if it’s accurate.
If you have calculated a lower valuation than the adjuster, insist that he use your valuation for his coinsurance calculations.
If you’re read my book BEFORE you have a claim, call your agent and make sure that you are insured to value.
If you’re read my book AFTER you have a claim, call your agent and ask him why you’re NOT insured to value. If your agent messed up, and you can prove it, you could have grounds to make a claim against the Errors and Omissions Liability coverage of your agent.
If you’re reading this book to figure out how to collect every dollar you’re entitled to collect, then…
FIGHT FOR EVERY PERCENTAGE POINT!! Every percentage point of a coinsurance penalty is worth hundreds or thousands of dollars. Don’t allow yourself to be cheated out of all of the money you are entitled to collect!
Wildfires, Depreciation and Contents Claims
Next are the most important two questions that exist concerning depreciation:
ARE YOU READY??
HERE THEY COME!!!
1. Who determines the correct amount of depreciation?
2. What method is used in determining depreciation?
Answer to Question 1:
The insurance company will determine the amount of depreciation that is subtracted from the replacement cost of your property UNLESS YOU CHALLENGE THEIR FIGURES.
Answer to Question 2:
A. Insurance companies and insurance adjusters use published depreciation tables to determine the useful life and depreciation of a vast assortment of property. I have posted depreciation tables in the Resources Section on my website that you can print off for yourself. I’ve also listed links that you can click on to see other depreciation tables.
B. Most adjusters and claims departments these days have sophisticated estimating software that has the depreciation tables built right into it. So, when the adjuster writes his estimate, he will enter certain data, like the age and condition of the property, and the estimating program automatically depreciates the property.
C. Lots of times, an adjuster will use his experience and just take a wild guess. This is sometimes known as “Gut Depreciation“. It’s a wild guess based on past experience in calculating claims. You might have heard this sort of guessing called a WAG (wild-a** guess) or a SWAG (scientific wild-a** guess) or an EWAG (educated wild a** guess). You would be very surprised how often a WAG, EWAG or SWAG is used in an insurance adjuster’s life. You’d also likely be surprised how often adjusters’ WAGs are accurate.
But now, let’s consider how this depreciation, RCV, and ACV stuff affects YOU in your claims.
A standard Homeowner’s Policy settles the Dwelling loss on RCV. However, it settles the Contents loss (sometimes referred to as Unscheduled Personal Property, or UPP) on ACV. Read your policy carefully to determine what kind of coverage you have.
Most insurance companies have an endorsement that you can buy that provides replacement cost valuation on your Contents. The premium is only a few dollars more, and you should NEVER be without this endorsement on your policy. If you find that you do not have this Replacement Cost (RC) coverage on your Contents, DO NOT LET ANOTHER 24 HOURS PASS BEFORE YOU ADD IT TO YOUR POLICY.
So, if you have a Homeowners loss, and you don’t have the RC endorsement, the adjuster is going to depreciate ALL of your contents. ALL OF THEM.
If you have a policy that has the Replacement Cost Valuation endorsement for Contents, the adjuster and insurance company is going to use depreciation to create something called a “holdback of recoverable depreciation.”
Remember Chapter One, “Water, Water Everywhere?” In that chapter, I told you about recoverable depreciation. My homeowners insurance company used this process in my water claim. They will use the same process in your Contents claim.
Our Homeowner Policy had a Replacement Cost Value (RCV) clause. Here’s what the policy says about RCV at the time of a loss:
“Conditions, How losses are settled.
2. Under Unscheduled Personal Property Coverages:
We will pay only the actual cash value of the damaged property until actual repair or replacement is completed.”
So, even if you have the RC Endorsement on your policy, the insurance company will hold back the recoverable depreciation until you replace your damaged property. If the adjuster doesn’t calculate depreciation correctly, the insurance company could withhold hundreds or thousands of dollars from you that you need to replace your damaged property.
Remember the reason I wrote the book? To show you how to collect hundreds or thousands of dollars MORE in settlement that you are entitled to collect?
Well, you are entitled to a VERY ACCURATE calculation of your CONTENTS loss.
Here are the things that YOU MUST DO.
1. Require the adjuster or the insurance company to provide you with a copy or copies of the exact depreciation tables that they used to determine the depreciation on every item of your Inventory list. Once you have the tables, you can compare each item to the tables to make sure that you are paid exactly what each item is worth.
2.. What if you find that your adjuster or insurance company has used the WAG/SWAG method? DO NOT ACCEPT IT. There are depreciation tables for nearly everything. Insist on receiving the depreciation tables that the adjuster or insurance company used on your claim.
You need to have access to depreciation tables that are industry accepted tables. So, here’s another resource for anyone with a computer and the ability to go to a website.
Go to: http://www.claimstar.net
At the top of the homepage is a horizontal bar that has words in it. Move your cursor to the far right until it is over the words “Tool Chest.” A drop-down menu will appear. Move your cursor down to “Depreciation Calculator.” Click on it.
Now, a page will open that allows you to find a depreciation schedule either by keyword search, or on another drop down menu that lists every type of property from different categories.
This is a SUPER tool! This tool will get you hundreds…possibly thousands of dollars more in your Contents claim, because the depreciation will be accurately calculated.
Once you prove that you’ve replaced the damaged property, the insurance company will release the holdback amount to you.
You see, it’s simple…but not easy!
ARE YOU READY??
HERE THEY COME!!!
1. Who determines the correct amount of depreciation?
2. What method is used in determining depreciation?
Answer to Question 1:
The insurance company will determine the amount of depreciation that is subtracted from the replacement cost of your property UNLESS YOU CHALLENGE THEIR FIGURES.
Answer to Question 2:
A. Insurance companies and insurance adjusters use published depreciation tables to determine the useful life and depreciation of a vast assortment of property. I have posted depreciation tables in the Resources Section on my website that you can print off for yourself. I’ve also listed links that you can click on to see other depreciation tables.
B. Most adjusters and claims departments these days have sophisticated estimating software that has the depreciation tables built right into it. So, when the adjuster writes his estimate, he will enter certain data, like the age and condition of the property, and the estimating program automatically depreciates the property.
C. Lots of times, an adjuster will use his experience and just take a wild guess. This is sometimes known as “Gut Depreciation“. It’s a wild guess based on past experience in calculating claims. You might have heard this sort of guessing called a WAG (wild-a** guess) or a SWAG (scientific wild-a** guess) or an EWAG (educated wild a** guess). You would be very surprised how often a WAG, EWAG or SWAG is used in an insurance adjuster’s life. You’d also likely be surprised how often adjusters’ WAGs are accurate.
But now, let’s consider how this depreciation, RCV, and ACV stuff affects YOU in your claims.
A standard Homeowner’s Policy settles the Dwelling loss on RCV. However, it settles the Contents loss (sometimes referred to as Unscheduled Personal Property, or UPP) on ACV. Read your policy carefully to determine what kind of coverage you have.
Most insurance companies have an endorsement that you can buy that provides replacement cost valuation on your Contents. The premium is only a few dollars more, and you should NEVER be without this endorsement on your policy. If you find that you do not have this Replacement Cost (RC) coverage on your Contents, DO NOT LET ANOTHER 24 HOURS PASS BEFORE YOU ADD IT TO YOUR POLICY.
So, if you have a Homeowners loss, and you don’t have the RC endorsement, the adjuster is going to depreciate ALL of your contents. ALL OF THEM.
If you have a policy that has the Replacement Cost Valuation endorsement for Contents, the adjuster and insurance company is going to use depreciation to create something called a “holdback of recoverable depreciation.”
Remember Chapter One, “Water, Water Everywhere?” In that chapter, I told you about recoverable depreciation. My homeowners insurance company used this process in my water claim. They will use the same process in your Contents claim.
Our Homeowner Policy had a Replacement Cost Value (RCV) clause. Here’s what the policy says about RCV at the time of a loss:
“Conditions, How losses are settled.
2. Under Unscheduled Personal Property Coverages:
We will pay only the actual cash value of the damaged property until actual repair or replacement is completed.”
So, even if you have the RC Endorsement on your policy, the insurance company will hold back the recoverable depreciation until you replace your damaged property. If the adjuster doesn’t calculate depreciation correctly, the insurance company could withhold hundreds or thousands of dollars from you that you need to replace your damaged property.
Remember the reason I wrote the book? To show you how to collect hundreds or thousands of dollars MORE in settlement that you are entitled to collect?
Well, you are entitled to a VERY ACCURATE calculation of your CONTENTS loss.
Here are the things that YOU MUST DO.
1. Require the adjuster or the insurance company to provide you with a copy or copies of the exact depreciation tables that they used to determine the depreciation on every item of your Inventory list. Once you have the tables, you can compare each item to the tables to make sure that you are paid exactly what each item is worth.
2.. What if you find that your adjuster or insurance company has used the WAG/SWAG method? DO NOT ACCEPT IT. There are depreciation tables for nearly everything. Insist on receiving the depreciation tables that the adjuster or insurance company used on your claim.
You need to have access to depreciation tables that are industry accepted tables. So, here’s another resource for anyone with a computer and the ability to go to a website.
Go to: http://www.claimstar.net
At the top of the homepage is a horizontal bar that has words in it. Move your cursor to the far right until it is over the words “Tool Chest.” A drop-down menu will appear. Move your cursor down to “Depreciation Calculator.” Click on it.
Now, a page will open that allows you to find a depreciation schedule either by keyword search, or on another drop down menu that lists every type of property from different categories.
This is a SUPER tool! This tool will get you hundreds…possibly thousands of dollars more in your Contents claim, because the depreciation will be accurately calculated.
Once you prove that you’ve replaced the damaged property, the insurance company will release the holdback amount to you.
You see, it’s simple…but not easy!
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