In the event of an uncovered claim , citing the Abbott and Costello routine to explain your confusion in improperly structuring coverage will amuse no one . Avoid assumptions , identify all of the parties requiring protection , and read the insuring agreement and any prescribed endorsements to identify who and what are being afforded which coverage parts . •
person ( s ) occupying the home as named insured so they and others who reside with them can benefit from the coverage as their insurable interests require . Other solutions serve to expand the definition of “ insured person ” to also include entities and those responsible for the activities of the entity concerning the insured location . The key to any endorsement solution is to secure coverage for the dwelling , other structures , contents , additional living expenses and personal liability / medical payments for the individuals and entities that require protection .
AVOID COMMON PITFALLS
A common but improper approach used to structure coverage for entity-owned residential property is issuing a homeowners policy with the entity as the named insured . Glib “ solutions ” like this neglect to provide for the protection needs of one or more parties . When naming the entity as the named insured , those residing in the home would have no insurance protection for ( a ) liability claims filed by third parties , ( b ) first-party losses to their personal possessions , or ( c ) additional living expenses should a loss to the residence require them to live elsewhere . Even when the individuals residing in the property are provided protection as an “ additional insured ,” they are ineligible to receive the benefit of coverage for their contents or the additional living expenses they would incur after a covered loss . Another common pitfall is neglecting to add the entity owner as an additional insured party on a personal excess liability or umbrella policy . As with homeowners policies , personal excess liability policies cover individuals , not entities . Thus , coverage for the entity must be properly endorsed so that the entity can receive the benefits of this important form of liability coverage .
For a number of reasons , the growth of residential properties owned by entities is becoming increasingly commonplace , and there are no reasons to believe this will change . In the many instances when the home is being occupied as a traditional residential premises , extending homeowners coverage to protect the interests of the entity owner and occupants need not be as problematic as many insurers make it . Solutions are available from more than a few insurers , but many more need to adopt common-sense solutions to entertain these otherwise traditional home owners ’ risks .
Underwriters are entirely correct to entertain only those submissions for entities that own homes used as a personal residence by those the entity was formed to benefit . Any business-related activity by the entity , either at the insured location or elsewhere , creates an unacceptable personal insurance exposure and requires risk advisers to approach the property as a commercial risk .
To address the potentially expanded liability exposure presented by an entity , endorsements limiting such coverage for the entity to the residence premises only represent a reasonable underwriting precaution and should not present the entity an uncovered liability exposure . Risk advisers need to identify the parties to the entity , as well as those who will be occupying and furnishing the residence . Further , risk advisers should only work with those insurers that are comfortable entertaining entity-owned residences , and securing coverage solutions that properly protect the insurable interests of all parties involved .
In the event of an uncovered claim , citing the Abbott and Costello routine to explain your confusion in improperly structuring coverage will amuse no one . Avoid assumptions , identify all of the parties requiring protection , and read the insuring agreement and any prescribed endorsements to identify who and what are being afforded which coverage parts . •
The Insurance Risk Management Institute ( IRMI ) has a primary goal of helping people do a better job of managing risk by giving them reliable , practical knowledge they need to improve the way they do business .
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author ’ s employer or IRMI . Expert Commentary articles and other IRMI Online content do not purport to provide legal , accounting , or other professional advice or opinion .