Panhandle Farmers Mutual Insurance Company

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HOME SYSTEMS PROTECTION (HSP) FAQ

FREQUENTLY ASKED QUESTIONS:

 

  1. What are the three most frequently repaired/replaced types of equipment in order?

The most frequently repaired or replaced equipment are:

  1. Central Air Conditioning;
  2. Furnace;
  3. Water Heaters.
  1. What is the average repair cost for a mechanical breakdown claim? 

The repair cost varies significantly depending upon the type of equipment, its size and any extraneous issues involved in making the repair or replacement. A key concern is the availability of repair parts. Where repairs can be made, typically the cost will be 50% to 67% of a new replacement unit. There can also be issues where structural alterations are necessary to remove and reinstall the damaged equipment; there may also be disposal costs. Currently there is a major issue surrounding the availability of HCFC refrigerant which most home air conditioning units use and this is starting to significantly impact AC repair costs. It is very common for repair costs to be impacted by economic, environmental or safety considerations. Following are typical repair/ replacement ranges for different types of equipment covered by HSP. These costs are before deductible:

  • Central air conditioning – $1,500 to $12,000
  • Furnaces, Boilers, Heat Pumps – $1,000 to $10,000+
  • Conventional and Solar Hot Water Heaters – $500 to $3,000
  • Radiant Floor Heating – $5,000+
  • Electrical Service Panels – $5,000- $20,000
  • Well pumps – $2,500 to $10,000
  • Pool pumps and filtration systems – $2,500 to $5,000
  • Permanently Installed Emergency Generators – $1,500 to $15,000
  • Solar installations – $3,000 to $25,000+
  • Laundry and Kitchen Appliances – $500 to $10,000+
  • Home Security Monitoring Systems – $500 to $2,000+
  • Chair lifts and elevators – $1,500 to $5,000+
  • Home Entertainment Equipment – $500 – $5,000+
  • Computers and Peripherals – $500 to $1,500+
  • Mobile Medical Equipment – $1,000 – $10,000+ 
  1. Start to finish, what is the claim process? 

The insured should report the claim as quickly as possible to Panhandle Farmers Mutual who will forward it to Hartford Steam Boiler (HSB) once it’s verified that the insured has the endorsement on their policy. The insured should also have the equipment inspected by a contractor. If it’s an emergency, they should commence the repairs as needed but save parts for possible inspection, photos, etc.

  1. What happens if there is need for an emergency repair? Must the customer wait until they hear from the vendor? 

The insured should always take action to help prevent further damage. For the HSP coverage, if emergency repairs are needed, the repairs should be documented as much as possible to assist HSB’s investigation to determine if coverage can be afforded. Photographs can be very helpful, especially if the damaged parts have been discarded.

  1. Does the insured use the service people that are sent out by HSB or does he/she call on their own service people if something needs repair or replacement?

The insured will hire and use the contractor they select to conduct the repair or replacement of any covered home equipment that is damaged. If the insured is unable to find a contractor, HSB can help locate a firm.

  1. If replacement is necessary, will the item be replaced using the same name brand, like kind and quality, or is it the choice of Harford Steam Boiler?

Replacement equipment is valued on like kind, quality and capacity. In addition, the HSP form allows up to an additional 50% of what the cost would have been to replace with like kind and quality for the installation of equipment that is replaced with equipment that is more efficient, better for the environment, or safer.

  1. Is there an age limitation on systems covered under HSP?

There is no age limitation on the equipment – it just needs to be covered home equipment under the HSP endorsement.

  1. Please provide the most common situations when coverage is denied. Where is the most customer confusion about when they thought they had coverage?

The most common reason for denying an HSP claim is rust, corrosion, erosion, deterioration or gradual loss of efficiency or functionality. The most common source of confusion among insureds is a belief that we will pay to replace a piece of equipment when it is repairable. Very likely this is the same type of issue an Insurance Company faces where an insured who has been involved in a “fender bender” wants the car “totaled” and not repaired.

  1. Would the HSP endorsement be excess after Panhandle Farmers Mutual’s homeowners policy or primary if there is duplicate coverage?

HSP provides coverage for certain equipment related losses that are not covered by the HO policy. HSP does not duplicate the HO coverage, nor is it designed to provide excess HO coverage. HSP provides coverage for equipment breakdown losses that the HO policy excludes. (See loss scenarios immediately below.)

 

Simply stated, HSP covers equipment breakdown losses – a part broke and it requires repair or replacement.

Key elements of the coverage include:

  • A broad array of home equipment is covered.
  • The insured can use any repair contractor they choose; they do not need to pre-authorize the repair.
  • There are relatively few exclusions as to what constitutes a covered breakdown loss:
  • Rust, corrosion, erosion, deterioration or gradual loss of efficiency or functionality;
    • Leakage or seepage;
    • Programming error, virus, malicious code, loss of data;
    • Interruption of power, fuel or water supply;
    • Conditions corrected by resetting, recalibrating or performing maintenance;
    • Cosmetic defects that do not impair functionality.

 

Loss Scenarios:

The following illustrates HSP coverage and how it responds to electrical losses that are neither lightning nor power surge. Coverage is subject to the terms, conditions and exclusions in the HSP endorsement and applicable provisions of the HO policy.  

On a hot summer day, the home’s central air conditioning unit suddenly stopped working. The unit had worked satisfactorily all summer, but on this day there was no cooling. A contractor was called and a quick check indicated that electrical power was coming to the unit, the refrigerant levels were satisfactory and there appeared to be no problem with the controls. A diagnostic test was then done on the electric motor/ compressor. From this test, it was determined that the electric windings of the motor had short circuited. Because of this, the motor/compressor would not turn, meaning the refrigeration cycle couldn’t complete and there was no cooling for the house. To restore cooling, the entire motor compressor unit had to be replaced at a cost of $3,000+.

On verification of a contractor’s report of damage to the motor/compressor unit, the HSP endorsement will cover this loss subject to the applicable deductible. The insured can choose whatever contractor they want to make the repair and they do not have to pre-authorize the repair. To get reimbursement for their loss, the insured must submit a the repair invoice.

Contrast this to how a typical HO policy would respond to this loss scenario. At the time of the loss, there wasn’t lightning in the area or any evidence of a past lightning strike to the home. There was also no evidence of a power surge. Without the HSP endorsement, most HO policies would deny coverage for this $3,000+ loss event.

At this juncture, it might be useful to review what the HSP endorsement would not have covered in this loss scenario. Suppose that when the contractor arrived and checked the power supply, a “tripped” circuit breaker was found. When this was reset, power was restored to the AC unit and it resumed normal operation. HSP is a breakdown and not a maintenance coverage. It specifically excludes loss of power.

Now let’s assume there was no problem with the power supply to the AC unit, but the refrigerant levels were low. Once the contractor restored the refrigerant, the air conditioner began working in a normal manner. Again, HSP excludes this normal maintenance activity. Finally, let’s assume that both the power supply and the refrigerants are OK, but when the AC’s controls were examined, they were dirty and out of adjustment. Once the contractor cleaned and adjusted the contacts, the air conditioning unit began operating in a normal manner. This, too, is a maintenance item that is specifically excluded by HSP.

 

What triggered the HSP coverage was the discovery of a broken part – the electric motor that drives the AC’s compressor had short circuited and required replacement.

Many other electric motors are used throughout the home – refrigerators, dish washers, washing machines, dryers, garage door openers, sump pumps, well pumps, swimming pool motors and many more applications. For a variety of different reasons, the electrical windings in these motors can short circuit (burnout), totally unrelated to lightning or power surge, causing a machine to breakdown. These are the type of loss events HSP covers.

Within the home there are miles of electrical wiring leading to and from the circuit breaker panel to connect dozens of power outlets, light switches and other electrical items. Over time, any connection of the cables can loosen, creating a gap over which the electric current may arc (spark), wreaking havoc on the home’s electrical system. Again, there are many reasons as to what may cause the loosening of the cable such as improper installation, defects in the device, dirt or moisture, vibration, chronic under or over voltage conditions. HSP responds to this type of electrical arcing that is not caused by lightning or power surge. However it is highly probable that most HO policies would exclude this type of loss event.

It goes without saying that electricity and water do not mix and can lead to a serious breakdown or arcing. Any wiring or device exposed to extended damp conditions can ultimately fail in a manner that would be covered by HSP but does not involve either lightning or power surge. Again this type of loss event would be excluded by most HO policies.

Hurricanes and tornados can down power lines, creating very unstable power conditions in the entire electrical system often impacting many different homes. In some homes, a power surge may be strong enough that it will cause the windings in electrical motors to immediately fail. In other situations, the surges may “weaken” the insulation which will lead to a breakdown at a future date. Many HO policies will cover power surge, but relatively few HO policies will respond to a breakdown of an electrical motor that was the indirect result of an over voltage condition that occurred during a tornado six months earlier.

This product has its own $500 deductible.