If your policy includes a ‘Single Inclusive Limit’ clause, it basically means that the amount of money associated to each of the categories in the insurance policy (i.e. Dwelling, Personal Property, Outbuildings, or Additional Living Expenses), can be combined in the event that any category exceeds, the amount stated for a loss in that area.
Insurance companies may explain this term to mean the upper ‘limit’ of your insurance policy, or the total amount you may claim or be indeminfied should you suffer a loss caused by an ‘insured peril’. We’ve put ‘limit’ in quotes to underline the fact that this does NOT actually mean your total limit, and it may be higher, depending on your specific policy or policy wordings. When thinking of this term, it is best to ignore what you think the term may mean based on its component words, because everyday terms have different meanings in legally binding documents and agreements (what your policy is!).
Okay, so what does the single limit mean for me or you ? Let’s do an example to put this into real terms:
HYPOTHETICAL HOME INSURANCE POLICY
1. COVERAGE A – DWELLING – $240,000 – GUARANTEED REPLACEMENT COST
2. COVERAGE B – PRIVATE STRUCTURES – $40,0000
3. COVERAGE C – PERSONAL PROPERTY – $190,000 – REPLACEMENT COST
4. COVERAGE D – ADDITIONAL LIVING EXPENSES – $50,000
*ADDITIONAL COVERAGES – SINGLE INCLUSIVE LIMIT – $520,000
Say you bought your home in 2012 and paid 100K at that time. Looking at the hypothetical policy above, we see that you’re insured for 240K under dwelling, 190K under personal property, 40K for private structures, and 50K for Additional Living Expenses. Assuming you paid the extra (let’s say $5 per month) for the single limit option to be added, we see that your SIL is 520K. This is just all of the figures combined; you will find that if you add up all the coverage amounts you will arrive at the SIL figure.
Okay, we have our coverage. Now let’s say the worst happens. A freak fire erupts and destroys your home. Everyone is okay and manages to get out unscathed (thank God), but your house and all your personal possessions are unsalvageable. This is what is called a ‘total loss’.
If, like in my case, you are placed by the Red Cross or similar organization into a motel/hotel temporarily, after the initial period and once the insurance company takes over the file, this will account for part of the additional living expenses allocated for in your policy. Since you have subscribed to the single limit of insurance, you would be able to claim more than the 50K alloted, should this amount exceeds the amount listed (learn more about living expenses here). What we are demonstrating here, is that you can shift money from one category to another with the single limit. For this reason we highly recommend you have this policy element. Many insurance companies include it in a comprehensive home insurance policy, but if you don’t know if it’s there, it’s best to ask. If it’s not, it’s not an issue to quickly add it.
If you also have a stipulation in your policy for Guaranteed Replacement Cost, click the link below to see how it interacts with single limits of insurance. These two elements work with each other. We’ve used the same example here to explain that situation to make it easy to follow along and compare it to your own policy. Read on to become an insurance guru. It is advisable should you need to file a claim now or in the future.