If you’ve ever watched "National Lampoon’s Christmas Vacation," you probably laughed as one disaster after another wreaked havoc on the Griswold family’s holiday. Unfortunately, mishaps during the holidays are all too common in the real world and are no laughing matter. But if you have the proper insurance coverage, you can minimize the financial damage of most disasters. (See also on Kiplinger.com: "Insurance Quiz: Are You Covered")
Here are several holiday mishap scenarios that may – or may not – be covered under your homeowners insurance.
You attempt to roast chestnuts on an open fire and accidentally burn down the house – COVERED. Standard homeowners policies cover damage due to fire. Make sure, though, that your policy will cover the cost of rebuilding your home and replacing all of your belongings, says Jeanne Salvatore, a spokesperson for the Insurance Information Institute. If your policy limit is based on your mortgage amount, it might not be enough. (See “Check Up on Your Home Insurance” on Kiplinger.com to make sure you have adequate coverage.) Salvatore recommends creating a home inventory of all your possessions and the estimated cost of each to know whether you have enough coverage and to make filing a claim easier. You can use the Insurance Information Institute’s Know Your Stuff app or the National Association of Insurance Commissioners’ inventory app.
Your outdoor light display sets your trees and bushes aflame – COVERED. Trees, plants and shrubs are covered under standard homeowners insurance when damaged by fire. However, most policies limit coverage to 5% of your dwelling coverage -- up to about $500 per item, according to I.I.I.
Your sewer backs up because you pour grease from your fried turkey down the drain – NOT COVERED. It actually doesn’t matter how your sewer backs up. Most homeowners policies do not cover damage caused by sewage backup, says Kate Hollcraft, a spokesperson for Allstate Insurance. You typically have to purchase this coverage separately for an additional $40 to $50 a year, she says. See I.I.I.’s “Insure Against the Risk of Sewer Backup” fact sheet for more information.
A squirrel jumps out of your Christmas tree, then your dog chases it and destroys your belongings -- NOT COVERED. If you've seen the aforementioned "National Lampoon's Christmas Vacation," then surely you remember this scene from the movie. But Clark Griswold (Chevy Chase) would not have been protected by his homeowners insurance for the damage. Hollcraft says that a standard policy won't cover damage caused by rodents (which is what a squirrel is) and domestic animals such as dogs and cats. However, it will provide protection if a wild animal – let's say a reindeer – gets into your house and causes damage.
Thieves snatch all the gifts Santa left under the tree – COVERED. Most homeowners policies provide coverage for possessions at 50% to 70% of the dwelling’s coverage. So if your home is insured for $200,000, you’ll have $100,000 to $140,000 worth of coverage for your belongings. However, there are limits on some luxury items (more details below), so be sure to talk to your insurance agent about supplemental coverage for certain expensive gifts.
The fur coat you wanted to surprise your wife with disappears from the back seat of your car -- MAYBE. Whether you’re covered depends on the value of the coat and whether you elected to have off-premises coverage for your belongings. Your policy should provide coverage if your belongings are stolen from some place other than your home -- unless you opted not to have off-premises coverage. However, some insurance companies limit off-premises coverage to 10% of the amount of insurance you have for your possessions, according to I.I.I. Standard homeowners policies also typically limit coverage for expensive luxury items such as furs, art, jewelry and silverware to a total of $1,000 to $2,000 unless you buy extra coverage in the form of a floater or endorsement, according to I.I.I.
The delivery man slips on your icy walkway and breaks his arm – COVERED. Most homeowners policies provide about $100,000 worth of liability coverage, Salvatore says, which can protect you against lawsuits for bodily injury or property damage. Your policy also should provide no-fault medical coverage to pay the medical bills of someone injured on your property. However, it’s typically limited to $1,000 to $5,000. Salvatore recommends spending a little more (about $200 to $300 a year) for $1 million worth of umbrella liability protection. (See “Why You Should Have Umbrella Liability Insurance” on Kiplinger.com for more information.)
Things get out of hand at your holiday party and you punch a guest – NOT COVERED. Salvatore says your homeowners liability coverage won’t protect you if you intend to hurt somebody. Also be aware that 37 states have laws that allow social hosts to be held liable if a guest drinks too much, gets in an accident and injures others. Homeowners insurance usually provides some liquor liability coverage, but it is typically limited to $100,000 to $300,000, according to I.I.I. Regardless, hosts should ensure that their guests don’t consume too much alcohol then drive.
TIPS TO AVOID HOLIDAY MISHAPS
There are several steps you should take to avoid the scenarios listed above (or any other mishaps), so you can spend your holidays enjoying time with friends and family rather than filing a claim with your insurer.
Prevent fires. Claims tied to fires at homes increase 15% during the holiday season, according to Allstate. And candles are often the culprit. Hollcraft of Allstate recommends keeping lighted candles away from children and pets, and walking through the house at night to make sure all candles are extinguished. Never use candles to decorate a Christmas tree, and don’t use lights on your tree that are broken. Keep the tree watered so it won’t dry out and become a fire hazard, and keep it away from the fireplace.
When decorating outside, only use lights and extension cords specified for the outdoors. And don’t overload outlets when creating your holiday display.
And before you start baking holiday goodies, Hollcraft says that you should check your smoke and carbon monoxide detectors to make sure they are working. Also know where your fire extinguisher is and how to use it. If you do plan to fry a turkey, make sure you do it outside several feet away from your home or any structures, she says. Allstate sees three times more turkey-fryer claims during the holidays than at other times of the year. Never put a frozen turkey into a fryer – it will shoot off like a missile, warns Hollcraft.
Avoid sewage backups. When cooking your holiday meals, don’t pour grease or dispose of waste in the sink to avoid clogging the drain, which can lead to sewer problems. Sewage-backup claims increase 19% during the holidays, according to Allstate.
Deter theft. Insurance claims for theft increase 7% during the holidays, according to Allstate. So don’t leave gifts under the Christmas tree in plain view because it’s an invitation to burglars. Keep the shades closed, put your tree in a room that doesn’t face the street, or keep gifts hidden until you actually give them.
When shopping, don’t advertise purchases on social media or announce that you’re away from home at a store by using a check-in service. Thieves take advantage of such information on social media sites to find victims. And don’t leave purchases in the passenger compartment of an unattended vehicle. Keep them locked in your trunk.
Reduce liability risks. Keep your walkway clear of ice and snow so that guests don’t slip and injure themselves. Keep your pet confined so that it can’t hurt anyone delivering packages to your home or guests at a party (see “Protect Your Finances From Dog Bites” on Kiplinger.com). And, most important, be a responsible host if you have a holiday gathering. Encourage guest to have a designated driver and stop serving alcohol toward the end of the evening.
If disaster does strike, click here for Kiplinger’s tips to get insurance companies to pay your claims.