Welcome to that most wonderful time of the year, built up to formonths by the sound of carols and other traditional songs of theseason that no doubt arrived at your favorite retailer in tandemwith Christmas decorations and the latest plethora of "must have"gifts and gizmos.

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In my area of Northern Virginia, the first sights and sounds ofChristmas arrived at the local Costco the last week of September,and what an arrival it was!

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Entire aisles once dedicated to wholesale club staples such assnacks by the pound, energy bars by the gross, and five-gallondrums of yellow mustard were now crowded with massive wreaths,mega-rolls of wrapping paper and motorized yard decorations. Andthere, looming over the blinking lights and chirpy tunes like theStatue of Liberty over New York Harbor, was the crowning glory: a12-foot artificial, pre-wired, thousand-light Christmas tree.

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Not a single shopper wandered by that wasn't momentarilytransfixed by the twinkling tower. You could almost hear the myriadreactions popping up in their brains. Children were in awe — orperhaps it was the herd of blinking, nodding electrical deer andsnowmen surrounding the scene. The adults also appeared to beawestruck — but whether because of the height, the multitude oflights or the price tag ($600), it was hard to discern. Or perhapsit was the herd of blinking, flashing, big-screen televisions,computers, home theater systems, iPads and other tabletssurrounding the Christmas decoration store area.

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As for me — well, I'm in insurance. You know what I wasthinking: Homeowners', more specifically, ISO Homeowners HO 00 0305 11, Coverage C — Personal Property, Peril #15. To wit:

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15. Sudden And AccidentalDamage From Artificially Generated Electrical Current

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This peril does not include loss totubes, transistors, electronic components or circuitry that are apart of appliances, fixtures, computers, home entertainment unitsor other types of electronic apparatus.

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Judging by the retail world, the key reason for the season isadding to the accumulation of tangible assets often referred to as"personal possessions," or just "stuff."

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Smart homes

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What were once ordinary appliances are now electronicdevices. (Photo: Thinkstock)

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And for the last several years, the vast majority of the stuffof dreams is digital.

  • Our Christmas trees now come pre-wired and multi-lighted.

  • Dolls that once amazed by merely walking and talking now carryon full conversations with your tots, while interacting with theiriPads.

  • Televisions that once impressed by being "big box" now vie forwidest/thinnest/curviest. Plus, they are now "smart," morphing froma passive screen upon which to view the latest offerings oftraditional broadcasters into key portals to the online universe ofweb sites, on-demand, widgets and "cord-cutting" mainstays such asNetflix, Hulu and Amazon.

  • Desktop computers have evolved into complete networks of modems,routers, Wi-Fi access, tablets, connected sound and video systems,and an increasing array of digital devices implanted in once "dumb"appliances such as refrigerators, garage door openers, securitylights and AC/Heating systems.

  • "Smart home" devices are growing in number and ability. From mysmartphone, I now have the options to control my lighting, securitysystem, thermostats, garage door status, and whether my doors arelocked or unlocked. Don't forget you now can access video camerasallowing you to monitor — and listen in on — babysitters, childrenor pets.

It's certainly a brave, new world. Now how about some brave, newinsurance for all these new wonders?

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For example, check out Peril #15, and note the exceptionwording. Every one of these new technological wonders we now fill —and operate — our homes with qualifies as "appliances, fixtures,computers, home entertainment units or other types of electronicapparatus." Brownouts, blackouts, power surges or other powerproblems other than natural (see "Lightning") are all more commonthese days (see "Power Grid" or other overloaded electricalgeneration issues), particularly at times of huge demand surges dueto summer and winter weather extremes.

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The irony is that for ISO, this is an easy fix. Substitute an HO5 for the HO 3 (or add the appropriate Special Coverage endorsementto the HO 4 or HO 6) and voilà!— Exception eliminated. Joy to theworld, indeed!

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Related: Smartest house on the block: Home telematics andtheir window for insurers

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Then why in a world — in which homes are increasingly dominatedwith digital devices — is named perils for personal property stillthe common choice? Let me make it a simple formula:

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People are steadily adding to their digital households, both innumber and expense; PLUS

  • Their standard Homeowners' policy (unless Special Coverage isprovided for personal property) excludes a major potential sourceof damage or loss to those very items; EQUALS

  • Potential financial disaster come claims time.

Home theater

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If this home theater is in a basement, would it be coveredby Flood insurance? (Photo: Thinkstock)

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Can you say 'E&O'?

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Holiday bonus: Don't overlook the fact many of these digitalwonderlands, home theaters, "man caves" or other rooms dedicated todigital toys are in basements. You might want to see just how muchfun is going to arise if homeowners need to turn to their NationalFlood Insurance Program policy for that personal property comeclaim time.

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Although I believe Peril No. 15's exception (which for ISO canonly be overcome for unscheduled personal property by using an HO5) is a key coverage gap, there are numerous potential troublespots in current property forms when addressing coverage fordigital devices. Permit me to mention one more: losssettlement.

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This should not be a problem for recent purchases. But many ofthese relatively expensive devices are rendered virtually worthlesswithin a few short months or years by ongoing advancements intechnology. The device may be functioning perfectly prior to theloss, but what is the "full replacement cost" of an already behindthe curve or obsolete item? And if the device in its currentconfiguration is no longer available in the marketplace, what isthe replacement cost of an item that cannot be replaced? Or what ifthe damaged or destroyed item is available at a much discountedprice (such as older versions of smartphones or computers) but theinsured realistically prefers the latest and greatest version thatactually costs the same or less than the original cost new of theformer item?

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Which value is the more valid claim settlement? The formlanguage provides no guidance. Better add that to your "check withcarrier before making coverage promises to insureds" list.

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So this December, while humming your favorite holiday tune andgazing lovingly upon the latest wondrous buying temptations, don'tforget as insurance folks we are blessed with a gift that keeps ongiving: Doing what we love provides our clients with properinsurance protection for what they love.

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Merry Christmas! And as Tiny Tim would say, "God bless us, everyone."

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Chris Amrhein, AAI, is an insurance educator and speakerwith more than 30 years in the industry. He also is the chief funofficer at insuranceisfun.com, and author of "Yes Virginia, Thereis Insurance."

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Related: Flood insurance policy puts Missouri agent in hotwater

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