Here's what you should know about your homeowner's insurance at this time.

Business at home
If you have had to move your business to your home, you may want to review your homeowner's coverage. The typical homeowner's police have very low limits on business property (usually up to about $2,000), which would likely not be enough if your equipment is damaged or stolen. 

If you are suddenly running your business from home, please call us and we can go through your policy and, if needed, we can work with your insurer to see if they offer a home business endorsement or higher coverage limits for business property.

Also, if you are running an Airbnb out of your home for a room or another property, you should have purchased landlord coverage or home-sharing coverage as a typical homeowner's policy may not cover damage incurred by paying guests.
At this time, you are likely not getting anybody staying at your place, so you should contact your insurance company about pausing or canceling coverage since you will have no need for it for a while.
 
Filing a claim
If you have an incident in your home and need to file a claim, there's a good chance that your insurer will be unable to send an adjuster for an inspection. Most homeowner's insurers now have apps or offer you the ability to file your claim online on their website.  

The procedures for filing a claim using an app or doing it on your insurer's website is pretty straightforward. You can start by taking pictures of the damage and providing receipts or a list of the property that may have been damaged or stolen. If it was stolen, make sure you file a police report and submit that with the claim as well.

However, if you have a high-dollar claim, the insurer may send an adjuster to inspect the damage before they pay the claim. For smaller claims, it's likely they will pay them out.
 
What insurers are doing
Insurers are making adjustments to their operations and policies during this time as well. Their actions will vary from company to company, but there are similarities in some of their responses:

• Some insurers have announced that they won't cancel a policy for a policyholder who is temporarily out of work or has seen their income drastically cut. These carriers are granting premium payment extensions.
• For those people whose policies may be in danger of lapsing because they cannot afford to pay the full premium, some insurers are working with them to reinstate the policies and set up a payment plan. They are often waiving reinstatement fees as well.
• Many insurers are postponing scheduled home inspections.
• If an insurer has asked that certain home repairs be carried out for a policy to renew, and the policyholder can't meet the inspection deadline, some companies are giving more time to finish the repairs.

Insurers are still running their call centers (in some areas, these staff are working from home).

Typical BOP coverage

This article focuses on the typical Insurance Services Office BOP form, and some carriers have created their own with different coverages and limits. First, let's look at what the typical BOP covers:

1. Property insurance (covering buildings, equipment and inventory).
2. Business interruption insurance (covering losses that cause you to shut operations or reduce production for a time). Business interruption insurance can provide funds to offset lost profits or to pay continuing expenses (typically for up to a year for insured losses).
3. Casualty or liability protection (covering harm done by employees or products to other people or their property).
4. Crime insurance (covering loss of money or securities resulting from burglaries or robberies or destruction), as well as losses from employee theft or embezzlement.
5. Liability insurance covering lawsuits arising from accidents (as when someone trips and falls on your business's property), or when you sell a product that damages the customer's property or you are accused of offenses such as slander, copyright or invasion of privacy.
6. Vehicle coverage for rented or borrowed vehicles.

 
The main BOP gaps

Business income protection in a BOP is reasonably extensive for loss of income after an event such as a fire, as the policyholder is fully covered for the period it is closed during restoration, for up to 12 months. However, there are five main gaps in a BOP: 

Payroll protection • A BOP policy will only cover payroll of "ordinary" employees for 60 days, unlike a standard business income policy. Ordinary employees are all of your staff excluding officers, executives, department managers and contract employees, among others.
If you want to extend payroll coverage for your ordinary employees beyond that, you have to purchase an endorsement for the additional period you want. Payroll for non-ordinary employees, as listed above, is covered for the entire period of your business's restoration up to the 12-month maximum.

Restoration period • The period of restoration, during which the policy will cover your business income, is limited to 12 months, and that time can pass quickly when you consider everything that may need to be done to return your firm to "operational capability." It's at that point that business income loss coverage ceases.
Consider that if your business burns to the ground, you will need to draw up new building plans, obtain building permits and make sure your new building is up to code. You also have to factor in the time it will take to rebuild the structure. If all of this takes longer than 12 months, business income loss coverage ceases. The policy will not extend protection beyond this period.

By the way, "operational capability" for the purposes of business income means that the company is operating at or near pre-loss production or sales capacity. It does not mean bringing the business income back to pre-loss levels.

Extended business income • The BOP will pay for lost income for an additional 30 days after the firm has reopened for business. In many cases, this amount of time will not be enough to bring your business income back to the same level as before the incident. You can purchase a policy extension for this coverage.

Seasonal increase limitations • One of the benefits of a BOP is that it will cover loss of business income in periods of seasonal increases. The standard increase limit is 25% for business personal property. The typical limit for most small business purchases is $100,000, but that does not automatically mean that the policy will cover up to $125,000 during the business's peak months.

That's because BOPs state that the business personal property limit must equal 100% of the average monthly values on hand for the 12 months preceding the loss. In other words, it takes into account the seasonal increases from the year before.

Here's an example of how the seasonal increase limit may yield the claims payment short of expectations: Randy's Raft Rental, which carries $100,000 in coverage, experiences an uptick in business in June, July and August. While it enjoys revenues of $100,000 a month in the nine other months, during the peak period revenue jumps to $125,000 per month.
To qualify for receiving the seasonal increase to ensure it is covered for the full $125,000 during the peak season, policy limits would have to be increased to $106,250 (the sum of 9 months x $100,000 + 3 months x $125,000, divided by 12). If you are confused, we can explain.

Electrical damage/system breakdown

​Typical BOP policies specifically exclude losses caused by systems breakdowns, or damage from electrical or steam boiler problems. If you want this coverage, you can pick up the "Equipment Breakdown Protection Coverage" endorsement.

Paid sick leave

Employees are entitled to two weeks (80 hours) of paid sick time for coronavirus-related issues. Eligible workers will receive their regular pay, up to $511 per day and $5,110 total. Those caring for someone subject to quarantine due to COVID-19, and parents of kids who can't go to school or daycare, will receive two-thirds of their regular pay, up to $200 daily with a $2,000 cap.

The emergency sick leave benefit can be used immediately, regardless of how long the worker has been employed with you. It can be used when they cannot work or telecommute for any one of the following reasons:

• The employee is subject to a government quarantine or isolation order related to COVID-19;
• The employee has been advised by a health care provider to self-quarantine due to COVID-19;
• The employee has symptoms of COVID-19 and is seeking a medical diagnosis;
• The employee is caring for an individual subject to quarantine due to COVID-19;
• The employee needs to care for a child whose school or place of care is closed or whose child care provider is unavailable due to coronavirus.

 
The law does not require certification of an order by the government or a health care provider. But employers can require reasonable notice procedures, such as not announcing in the middle of a shift that they take COVID-19 sick leave. But they cannot require the employee to find a replacement worker to cover the shifts they will miss. Employers must post the law's requirements "in conspicuous places."

Employers are not allowed to discipline a worker who takes this sick or FMLA leave for coronavirus purposes and, if an employer refuses to provide the leave, they can be ordered to pay both back pay and statutory damages that are equal to the back pay the employee is owed.

This law provides payroll tax credits to offset all costs of providing these paid leaves.
 
FMLA

The FMLA portion of the law provides for 10 additional weeks of FMLA leave, but only for those who must stay at home to care for a child whose school is closed or their childcare provider is unavailable due to COVID-19-related issues.
These 10 weeks will be paid at two-thirds the employee's regular rate of pay, up to $200 per day with a cap of $10,000. They will also receive 12 weeks of leave with job protection, though employers of health care or emergency care providers can exclude such employees.

The employee would likely use up their two weeks of paid sick leave before applying for FMLA benefits, which unlike traditional FMLA (which is unpaid), are paid leaves after the first 10 days under the new law. 

Employees who have been working for more than 30 days are eligible, and the employer can require them to provide reasonable notice that they are taking leave.
 
A final word

This law only applies to employers with fewer than 500 workers, so it leaves uncovered those people who work for larger companies.

Also, employers need to make financial plans, as the credit cannot be claimed until after the employer pays their payroll taxes.

A bigger issue is that the law requires that workers be paid the sick leave even if they are not sick, but have been ordered to self-isolate. In states that have ordered workers to self-isolate, such as California, employers could be faced with an avalanche of paid sick leave claims all at once.

This law sunsets on Dec. 31, 2020.

If you are concerned about the effect that volatility is having on your investments and retirement funds, you can call us so we can help you devise a strategy that you are comfortable with. In the meantime, here are some tips to consider:

Resist the urge to panic sell

The problem with panic selling is that you will likely plan to get back into the market, and the same stocks you had before, when things settle down.

But most people are terrible at timing the market and, in order to profit from this strategy, you need to make two timely decisions:

1. When to get out of the market.
2. When to get back in.

 
If you get either of these wrong, it can hurt your financial situation rather than improve it.

Most people who choose to get out rarely get back in on time. This results in them missing out on rallies that are often part of a recovery. 

There is another consideration as well: If you have your money in a taxable account, selling will trigger long-term unrealized gains, so you'll take a tax hit that you could have deferred to the future.
 
Plan ahead

The key to successfully riding out stock market volatility or a downturn in retirement is to plan for it ahead of time. Some financial planners recommend allocating a few years of income in bonds, for example.

During market downturns, you can opt to remove the funds from your bond investments, which will not be affected as much by a stock market downturn ― and may even perform better.

So, during the years that stocks are down and recovering, you can sell bonds for your minimum withdrawals. In this way, you are selling investments that are up or down the least to meet your income needs.
 
Use multiple sources

Develop sources of monthly lifetime retirement income that don't drop if the stock market crashes. Use these "retirement paychecks" to cover your basic living expenses, or at least come close to doing so. Basic living expenses include housing, utilities, food, medical insurance premiums, and income and property taxes.

For a good majority of Americans, their Social Security check is the main source of income and fortunately, it's protected from stock market volatility. Try to live a life where this check covers most of your main living expenses. 

If you need additional retirement paychecks to cover your basic living expenses, consider using a portion of your retirement savings to purchase a low-cost immediate fixed-income annuity. Talk to us about what your options are.
 
Dial back on withdrawals

If you need to budget but have many of your funds in stocks, see if you can pay for your living expenses without tapping your 401(K) or IRA account. If you can leave it untouched and wait for the eventual bounce-back, you'll be better off since you won't be depleting your stock holdings.

So, you if you were considering removing a significant portion of your retirement account to cover upcoming expenses, you would lose money. If you can postpone that decision by tapping other funds that are not tied to the stock market, you could ride out the downturn and not be much worse off. 

If you have already started taking out funds from your 401(k) or IRA and are withdrawing more than your required minimum distributions, you may want to cut back to the minimum withdrawal instead in order to reduce the impact.

​In this latest case however, a judge in the U.S. District Court in the Southern District of New York ruled that American International Group must cover $5.9 million that a company had been duped out of by Chinese hackers in 2016. 

AIG had disputed the claim saying that the professional liability policy the business had does not cover "criminal acts," adding that it had never sold the company a cyber policy.  

These disputes are becoming more common and you should pay attention to your policy exclusions, as well as consider cyber insurance, if you have assets that could be exposed through a cyber attack or fraud.
 
How was the business scammed?

SS&C Technologies received spoof e-mails that purported to come from one of the company's clients, Tillage Commodities Fund, a commodities investment firm. The e-mails instructed the company to make six wire transfers to a bank account in Hong Kong.

The scammers masqueraded as Tillage employees with e-mail addresses that spelled "Tillage" as "Tilllage."

But according to court documents, there were telltale warning signs that the e-mails were fishy:

• One e-mail asking SS&C to wire $3 million contained only the words "How was your weekend?" and then the wire transfer details.
• E-mails included grammatical errors and unusual syntax like "Let's round up business today."

Based on the above, staff at SS&C were not too diligent in looking out for possible business e-mail compromise scams involving a third party hacker posing as someone else (a client, a vendor or even a manager or president of the targeted company) via e-mail and requesting a wire transfer into a bank account.

This type of scam, which cost organizations $300 million every month in 2018, according to the U.S. Department of Treasury, is covered by a standard cyber insurance policy.

SS&C did not have a cyber policy, so it sought coverage under its professional liability policy for the losses it sustained when transferring those funds. AIG did pay for SS&C's legal defense costs after Tillage Commodities sued, but refused to cover the $5.9 million in stolen funds. 

According to court documents, AIG's policy included a clause that it would not provide indemnity coverage for losses arising from "dishonest, fraudulent or criminal acts."
 
What this means for your firm?

While this case worked out for the insured party, businesses should not rely on their non-cyber insurance policies to continue paying claims. As costs for cyber attacks like ransomware, malware, stolen data and business e-mail compromise scams grow, insurers are increasingly including clauses that explicitly exclude coverage for those risks.

If you have any important company assets in digital form and/or make or receive payments online, it would be wise to secure a cyber insurance policy. 

If you don't, you can try to seek coverage under other policies. That it may be difficult to obtain, but not impossible.

For example, if your company has D&O liability insurance and/or crime insurance, it may be able to seek coverage for any ransomware events since those policies will typically include coverage for kidnapping and ransom. 

Some insurers are now providing - either deliberately or unintentionally - kidnapping and ransom coverage that applies to ransoms paid in response to cyber extortion. Among the events that these policies may consider cyber extortion are:

• Threats to poison a computer system with malware.
• Threats to change, damage or destroy programs or data stored on a system if the owner does not pay a ransom.

That said, many insurers who provide this coverage likely did not anticipate covering ransomware losses and have started changing their D&O and crime policies to specifically exclude ransomware.

​Other insurers have added deductibles to the coverage, mirroring the terms of cyber policies, while others have capped the amount of business interruption coverage they will provide for cyber-extortion losses.

You can set up some smart sensors as stand-alone units with their own dedicated hub, while others are adaptable and can communicate with brand-name smart home hubs like:

• SmartThings,
• Apple HomeKit, or 
• Wink

The sensors communicate with a central hub using Bluetooth technology, while the hub uses your home Wifi to alert the app on your phone. 

Here are the sensors that can give you the most bang for your buck in terms of safety and preventing damage to your home, its contents, your family - and even pets.

Water sensors
There are a number of smart leak detectors on the market, and depending on the brand, the system can shut off water in about five seconds after detecting a leak in your home. This can save you thousands of dollars in property damage.

You can place these sensors at specific points where leaks are possible, such under sinks, appliances and water heaters. This allows you to customize a leak detection solution based on your needs or concerns. Some sensors can even detect changes in water temperature, which can help you avoid damage from frozen pipes.

These sensor units may also include shut-off valves, which can be installed at strategic locations in your piping. It's best to call a plumber because installing a shut-off valve may require cutting into the water line. Leave that to the pros. 

Freeze sensors
These are typically only necessary in regions that have freezing temperatures and snow for periods of time in the winter. When pipes freeze, they can back up, expand and burst and possibly flood parts of your home.

Many of the systems that detect leaks also can detect if pipes have frozen. Like leak sensors, freeze sensors are small devices that constantly monitor the temperature of the object or area they're in touch with. If a sensor detects frozen pipes, it will notify you via your smart phone app or activate a shut-off valve if it's installed.

Smart smoke alarms
A smart smoke alarm works just like a normal smoke alarm, except it has the added feature of notifying you if there is a fire and you are not home. That gives you the opportunity to call the fire department or a trusted neighbor to ensure a faster response.

If you own an Alexa speaker, it has a feature that will act as a smoke alarm by listening for the sound of your regular smoke alarm then send you an alert. There is also a smart 9V battery on the market that you plug into your smoke alarm and which alerts you in case it goes off.

Temperature sensors
Smart temperature sensors can alert you to changes in areas of your home that need to have steady temperatures, such as wine cabinets, crib rooms, pet enclosures and humidors. 

Window and door sensors
For your home security needs, you may want to consider door and window sensors. They usually come in two parts - one that attaches to the door or window frame, and another that attaches to the door or window itself.

When the door or window is closed, the circuit between the two parts of the sensor is complete and so is marked as 'closed' - but as soon as a door or window is opened, the circuit is 'broken,' which triggers an alert.

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