General FAQs

Q: What kinds of questions should I be expected to answer when I am applying for an insurance policy? Why do insurers need so much information?

When you apply for an insurance policy, you will be asked a number of questions. For example, the agent might ask you your name, age, gender, address, etc. In addition, you will be asked a number of other questions which will be used to determine how likely you are to make a claim. When an insurance company is deciding whether or not to offer automobile insurance to a potential customer, it will want to know about the person’s previous driving record, whether they have any recent accidents or tickets, and what type of car is to be insured.

Insurance companies have different programs for different customers. Adults with good driving records will generally pay less for auto insurance than will a young driver with traffic tickets. In order to determine which program you qualify for, an insurance company needs basic information about you.

In addition to your age, gender and driving experience, information about the vehicle you drive, and how you drive it, is also needed to determine a fair price. For example, a large luxury car costs more to repair or replace than a sub-compact; and, someone who commutes 30 miles each way is more likely to be in an accident than someone who rides the bus to work and drives only on weekends.

 Q: What are the advantages to using an agent to purchase insurance?

By using an agent to purchase insurance, the policyholder receives more personal service. An agent with whom there is direct contact can be vital when purchasing a product and absolutely necessary when filing a claim. A local, independent agent is able to deliver quality insurance with competitive pricing and local personalized service.

Auto FAQs

Q: What should I consider when purchasing automobile insurance?

There are a number of factors you should consider when purchasing any product or service, and insurance is no different. Here is a checklist of things you should consider when purchasing automobile insurance. Don’t base your decision on price alone. Base your decision on value – what you get for what you pay. Consider the quality of the company’s claims service and consumer education.

Purchase the amount of liability coverage which makes sense for you.

You should decide which optional coverages you want. For example, do you want optional physical damage coverages or is the market value of your car too low to warrant purchasing them.

Once you have decided what you want in your automobile insurance policy, you can now decide from whom you would like to purchase the insurance. For example, you may decide you like the idea of purchasing insurance from a mutual company rather than a stock company.

Q: What are some practical things I can do to lower my automobile insurance rates?

There are a number of things you can do to lower the cost of your automobile insurance. The easiest thing to do is to shop around. It is not surprising to find quotes on automobile insurance that can vary by hundreds of dollars for the same coverage on the same car. When you shop, be careful to make sure each insurer is offering the same coverage. Many insurers use the ISO policy forms, but this is not always the case.

Another way to lower the cost of your automobile insurance is to look for any discounts that you may qualify for. For example, many insurers will offer you a discount if you insure multiple cars under the same policy, or if you have had a driver education class in the last five years. Be sure to ask your agent or your company about their discount plans.

Another easy way to lower the cost of your automobile insurance is to increase the deductible. Simply raising your deductible from 0 to 0 can lower your premium sometimes by as much as five or ten percent. However, you should be careful to make sure that you have the financial resources necessary to handle the larger deductible.

Q: I have an older car whose current market value is very low – do I really need to purchase automobile insurance?

Most states have enacted compulsory insurance laws that require drivers to have at least some automobile liability insurance. These laws were enacted to ensure that victims of automobile accidents receive compensation when their losses are caused by the actions of another individual who was negligent. Except for the minimum liability coverages that you may be required to purchase, many people with older cars decide not to purchase any of the physical damage coverages. It is often the case that the cost of repairing the damages to an older car is greater than its value. In these cases, your insurer will usually just “total” the car and give you a check for the car’s market value less the deductible.

Q: Suppose I lend my car to a friend, is he/she covered under my automobile insurance policy?

Whenever you knowingly loan your car to a friend or an associate, he or she will be covered under your automobile insurance policy. In fact, even if you do not give explicit permission each time a person borrows your car, they are still covered under your automobile insurance policy as long they had a reasonable belief that you would have given them permission to drive the car.

Q: What is the difference between collision physical damage coverage and comprehensive physical damage coverage?

Collision is defined as losses you incur when your automobile collides with another car or object. For example, if you hit a car in a parking lot, the damages to your car will be paid under your collision coverage. Comprehensive provides coverage for most other direct physical damage losses you could incur. For example, damage to your car from a hailstorm will be covered under your comprehensive coverage.

It is important to know the differences between the collision and comprehensive coverages for a couple of reasons.

In order to make an informed purchasing decision about these optional coverages, you need to know the difference between them.

The deductibles under the collision and comprehensive coverages are often different in amount.

Q: What factors can affect the cost of my automobile insurance?

A number of factors can affect the cost of your automobile insurance – some of which you can control and some which are beyond your control. The type of car you drive, the purpose the car serves, your driving record, and where you live can all affect how much your automobile insurance will cost you.

Even your marital status can affect your cost of insurance. Statistics show that married people tend to have fewer and less costly accidents than do single people.

Homeowner FAQs

Q: What is homeowners insurance and who should buy this type of coverage?

Homeowners insurance is one of the most popular forms of personal lines insurance on the market today. The typical homeowners policy has two main sections: Section I covers the property of the insured and Section II provides personal liability coverage to the insured. Almost anyone who owns, rents or leases property has a need for this type of insurance. And many times, homeowners insurance is required by the lender as part of the requirements in obtaining a mortgage.

Q: What is the difference between “actual cash value” and “replacement cost”?

Covered losses under a homeowners policy can be paid on either an actual cash value basis or on a replacement cost basis. When “actual cash value” is used, the policy owner is entitled to the depreciated value of the damaged property. Under the “replacement cost” coverage, the policy owner is reimbursed an amount necessary to replace the article with one of similar type and quality at current prices.

Q: What factors should I consider when purchasing homeowners insurance?

There are a number of factors you should consider when purchasing any product or service, and insurance is no different. Here is a checklist of things you should consider when you purchase homeowners insurance.

First and foremost, purchase the amount and type of insurance that you need. Remember that if your policy limit is less than 80% of the replacement cost of your home, any loss payment from your insurance company will be subject to a coinsurance penalty. Also, determine the amount of personal property insurance and personal liability coverage that you need.

Second, determine which, if any, additional endorsements you want to add to your policy. For example, do you want the personal property replacement cost endorsement or the earthquake endorsement?

Finally, once you have decided on the coverage you want in your homeowners insurance policy, you can now decide which insurer you would like to purchase the insurance from.

Q: What are some practical things I can do to lower the cost of my homeowners insurance?

There are a number of things you can do to lower the cost of your homeowners insurance. The best thing to do is to shop around. It is not surprising to find quotes on homeowners insurance that vary by hundreds of dollars for the same coverage on the same home. When you shop, be careful to make sure each insurer is offering the same coverage. Many insurers use the ISO policy forms, but this is not always the case.

Another way to lower the cost of your homeowners insurance is to look for any discounts that you may qualify for. For example, many insurers will offer a discount when you place both your automobile and homeowners insurance with the them. Other times, insurers offer discounts if there are deadbolt exterior locks on all your doors, or if your home has a security system. Be sure to ask your agent or company about discounts any that you may qualify for.

Another easy way to lower the cost of your homeowners insurance is to raise your deductible. Increasing your deductible from 0 to 0 will lower your premium, sometimes by as much as five or ten percent. However, be careful to make sure that you have the financial resources necessary to handle the larger deductible.

Q: What are the policy limits (i.e., coverage limits) in the standard homeowners policy?

[Note: this answer is based on the Insurance Services Office’s HO-3 policy.]

Coverages A and B provide protection to the dwelling and other structures on the premises on an “all risks” basis up to the policy limits. The policy limit for Coverage A is set by the policyowner at the time the insurance is purchased. The policy limit for Coverage B is usually equal to 10% of the policy limit on Coverage A. Coverage C covers losses to the insured’s personal property on a named perils basis. The policy limit on Coverage C is equal to 50% of the policy limit on Coverage A. Coverage D covers the additional expenses that the policyowner may incur when the residence cannot be used because of an insured loss. The policy limit for Coverage D is equal to 20% of the policy limit on Coverage A. The coverage limit on Coverage E – Personal Liability – is determined by the policyowner at the time the policy is issued. The coverage limit on Coverage F – Medical Payments to Others – is usually set at 00 per injured person.

Q: Where and when is my personal property covered?

Coverage C, which provides named perils coverage, applies to all your personal property (except property that is specifically excluded) anywhere in the world. For example, suppose that while traveling, you purchased a dresser and you want to ship it home. Your homeowners policy would provide coverage for the named perils while the dresser is in transit – even though the dresser has never been in your home before.

Q: Do I need earthquake coverage? How can I get it?

Direct damages due to earthquakes are not covered under the standard homeowners insurance policy. However, unless you live in an area that is prone to earthquakes, you probably do not need this coverage. If you do live in a part of the country with high earthquake activity you may want to consider adding an earthquake endorsement to your homeowners insurance policy. This endorsement will cover damages due to earthquakes, landslides, volcanic eruptions and other earth movements.

Q: Do I need Flood Coverage?

That depends on whether your properties lies in a flood plain as determined by US Government Flood Maps. We have these maps available and can provide flood coverage should it be required or desirable.

Small Business General FAQs

Q: What is fire legal coverage?

Fire legal coverage provides coverage to for you if you rent a business space and are held responsible for fire damages to that rented space. It does not apply to all business risks.

Q: What is the difference between Replacement Cost (RC) and Actual Cash Value (ACV)?

Replacement Cost is the current cost to replace property. Actual Cash Value is the replacement cost less depreciation.

Q: What does 80% co-insurance mean?

Insurance carriers require that an insured party pay 80% of the replacement cost in order to collect a partial loss in full. This is the way the insurance company encourages all insureds to adequately insure their property in relation to other insureds.

Q: Does my policy cover physical damage to a vehicle I rent?

This damage will be covered only if that type of coverage is purchased.

Q: Can other people drive my business vehicle?

Other people may drive your vehicle with your permission. It is important that they be listed on your policy if they are regular drivers of the vehicle.

Q: How does an audit work?

At the end of the policy term, the insurance company will review the policy and either charge or credit the policyholder based upon an audit of estimated figures. Examples of estimated auditable items include sales and payroll. Audits can be performed onsite by an auditor or via mail or telephone. A premium is charged for audit estimations.

Q: Why do I need certificates of insurance from sub-contractors?

An audit may require you to show proof that sub-contractors had their own insurance coverage. The sub-contractors’ certificates of insurance will prevent you from being charged for their exposure.

Q: What is General Liability?

General Liability provides coverage for other individuals who are on your property and/or exposed to your operations.

Q: What does Products/Completed Operations mean?

Products/Completed Operations refers to the liability coverage for damages caused by your operation or products after the point at which you no longer have control of them.

Q: What is Business Interruption/Extra Expense coverage?

Business Interruption/Extra Expense coverage provides coverage for income loss and the expense of establishing a temporary site during repairs due to damages related to a fire or compensable loss.

Q: What is the difference between “Named Insured”, “First Named Insured” and “Additional Insured?”

Named Insureds are those listed by name in the relevant block of the policy’s declaration page. Although the named insured is commonly one person, partnership, corporation or other entity with insurable interests, multiple named insureds may be included. The First Named Insured is the first “named insured” listed on the policy declarations (front page of the policy). This insured acts as the legal agent for all named insureds in initiating cancellation, requesting policy changes or accepting any return premiums. The first named insured may also be responsible for payment of the premiums.

An additional insured is an entity to which a policy’s coverage is extended. An additional insured must be added to the policy prior to a claim being paid. There must be a tied to relationship between the additional insured and named insured. Being an additional insured on another’s policy does not eliminate the need for someone to have his/her own Commercial General Liability policy.

Small Business Property Insurance FAQs

Q: What is a peril?

A peril is the cause of a possible loss (examples include fires or windstorms).

Q: What is Business Income Coverage (Time Element)?

Business Income Coverage provides coverage for loss of earnings and ongoing expenses when operations are curtailed or suspended due to property damage resulting from a covered cause of loss.

Q: Should I purchase special coverage for my computer equipment?

Electronic Data Processing (EDP) equipment can be covered as unscheduled business personal property in “commercial property” forms such as the building and personal property coverage. An EDP equipment floater can provide added benefits. Many EDP floaters cover special perils such as mechanical or electrical breakdown and typically cover property in transit.

Q: What is co-insurance?

In property insurance, co-insurance is a clause under which the insured shares in losses to the extent that he/she is underinsured at the time of a loss. You may have heard of co-insurance relative to health insurance; this is a provision in which the insured and the insurance company will share covered losses in an agreed proportion.

Small Business General Liability FAQs

Q: What is a third party claim?

A third party claim is a claim brought against you by someone other than an insured.

Q: Does my General Liability Policy provide coverage if my company is sued for pollution?

This insurance does not apply to bodily injury, property damage, advertising injury or personal injury arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollution.

Q: Does my General Liability Policy provide Liquor Liability Coverage?

Yes, your General Liability policy provides liquor liability coverage unless you are in the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages. These types of businesses need to purchase additional coverage specific to liquor liability coverage.

Q: What is Fire Legal Liability coverage?

Fire Legal Liability provides coverage against liability for fire damage to premises rented to the named insured or temporarily occupied by the named insured with the owner’s permission. Most Commercial General Liability policies provide a separate limit of ,000 to cover this exposure.

Q: Will my liability insurance cover me if I am sued in another country?

Most liability policies provide coverage for lawsuits only if they are brought in the United States, its territories and Canada.

Q: What is the difference between Employee Benefits Liability Coverage and a Fiduciary Bond?

The Employee Benefits Liability policy was designed primarily for a variety of benefit plans to provide coverage for administrative errors and omissions. The Fiduciary Bond policy was designed to cover a fiduciary’s ERISA (Employee Retirement Income Security Act) exposures that are caused by a “wrongful act.” Fiduciary coverage responds to claims for damages arising out of improper investments as well as plan and employee advice.

Q: What is an Umbrella Policy?

An umbrella policy provides additional limits of insurance over and above underlying coverages found on a General Liability, Automobile or Workers’ Compensation policy. If there is a claim, the underlying policy will pay its limits of liability and the umbrella policy coverage would then be activated.

Q: When do I need to purchase Workers’ Compensation Insurance?

Most states require an employer to purchase workers’ compensation insurance as soon as they have employees. These states also consider a corporate entity to have employees from the moment the corporation is formed. Workers’ compensation insurance will provide medical expense and disability income for injured employees as required by the laws of each state. In addition, the insurer will defend any claim proceeding or suit against the insured for benefits payable under the policy.

Premium shall be computed on the basis of the total remuneration (payroll) paid or payable by the insured for services covered by the policy.

Q: What should be included in the remuneration?

In addition to ordinary wages or salaries, remuneration includes several other types of compensation. These include:

Bonuses

Extra pay for overtime work except as provided in Rule V-E

Pay for holidays, vacations or periods of sickness

Payment by an employer of amounts otherwise required by law to be paid by employees to statutory insurance or pension plans

Payment to employees on any basis other than time worked, such as piece work, profit sharing or incentive plans

Payment or allowance for hand tools or power tools used by hand and provided by employees and used in their work operations for the insured

The rental value of an apartment or house provided for an employee based on comparable accommodations

The value of lodging received by employees as part of their pay

The value of meals received by employees as part of their pay to the extent shown in the insured’s records

The value of store certificates, merchandise, credits or any other substitute for money received by employees as part of their pay

Items not included are:

Tips and other gratuities received by employees

Payments by an employer to group insurance or group pension plans for employees other than payment covered by Rule V-B.2e

The value of special rewards for individual invention or discovery

Dismissal or severance payments except for the time worked or accrued vacations

Life FAQs

Q: How much life insurance should an individual own?

Rough “rules of thumb” suggest an amount of life insurance equal to 6 to 8 times annual earnings. However, many factors should be taken into account in determining a more precise estimate of the amount of life insurance needed. Important factors include:

Income sources (and amounts) other than salary/earnings

Whether or not the individual is married and, if so, what is the spouse’s earning capacity

The number of individuals who are financially dependent on the insured

The amount of death benefits payable from Social Security and from an employer sponsored life insurance plan

Whether any special life insurance needs exist (e.g., mortgage repayment, education fund, estate planning need), etc.

It is recommended that a person’s insurance advisor be contacted for a precise calculation of how much life insurance is needed.

Q: What about purchasing life insurance on a spouse and on children?

In certain circumstances, it may be advisable to purchase life insurance on children; generally, however, such purchases should not be made in lieu of purchasing appropriate amounts of life insurance on the family breadwinner(s). It is of utmost importance that the income earning capacity of the primary breadwinner be fully protected, if possible, through the purchase of the required amount of life insurance before contemplating the purchase of life insurance on children or on a non-wage earning spouse. In a dual-earning household, it is important to protect the income earning capacity of both spouses. Life insurance on a non-wage earning spouse is often recommended for the purpose of paying for household services lost at this individual’s death.

 Q: Should term insurance or cash value life insurance be purchased?

Although a difficult question–one whose answer will vary depending on circumstances–several principles should be followed in addressing this issue. It must first be recognized that in any life insurance purchasing decision, there are at least two basic questions that must be answered:

“How much life insurance should I buy?” and

“What type of life insurance policy should I buy?”

The question contained in (1) involves an “insurance” decision and the question contained in (2) requires a “financial” decision.

The “insurance” question should always be resolved first. For example, the amount of life insurance that you need may be so large that the only way in which this needed amount of insurance can be afforded is through the purchase of term insurance with its lower premium.

If your ability (and willingness) to pay life insurance premiums is such that you can afford the desired amount of life insurance under either type of policy, it is then appropriate to consider the “financial” decision–which type of policy to buy. Important factors affecting the “financial” decision include your income tax bracket, whether the need for life insurance is short-term or long-term (e.g., 20 years or longer), and the rate of return on alternative investments possessing similar risk.

 Q: How does mortgage protection term insurance differ from other types of term life insurance?

The face amount under mortgage protection term insurance decreases over time, consistent with the projected annual decreases in the outstanding balance of a mortgage loan. Mortgage protection policies are generally available to cover a range of mortgage repayment periods, e.g., 15, 20, 25 or 30 years. Although the face amount decreases over time, the premium is usually level in amount. Further, the premium payment period often is shorter than the maximum period of insurance coverage–for example, a 20-year mortgage protection policy might require that level premiums be paid over the first 17 years.

 Q: Can an existing life insurance policy be used to provide for the repayment of an outstanding mortgage loan?

Yes; the purchase of a new mortgage protection term insurance policy is usually not required by the lender. An existing policy, either term or cash-value life insurance, can be used for many purposes, including paying off an outstanding mortgage loan balance in the event of the insured’s death. Credit life insurance is frequently recommended in conjunction with the taking out of an installment loan when purchasing expensive appliances or a new car, or for debt consolidation. Is credit life insurance a good buy?

Credit life insurance is frequently more expensive than traditional term life insurance. Further, if you already own a sufficient amount of life insurance to cover your financial needs, including debt repayment, the purchase of credit life insurance is normally not advisable due to its relatively high cost.

Umbrella FAQs

Q: What is a personal umbrella liability policy?

The personal umbrella liability policy is an insurance contract designed to accomplish two goals. First, it increases the liability protection beyond what the policy owner already has in his or her homeowners and automobile insurance policies.

Second, the personal umbrella policy is designed to fill in the gaps in a policy owner’s liability coverage since several types of liability exposures exist that are not covered by automobile and homeowners policies.

Together with homeowners and automobile insurance policies, broad personal liability protection is attained through the purchase of a personal umbrella policy.

Q: How do I know if I need a personal umbrella liability policy?

It used to be that the only people who needed personal umbrella liability policies were wealthy individuals who had sizable amounts of personal assets that would be at risk in a lawsuit. However, in our very litigious society, many people are realizing that they have a need for more liability insurance than what is provided under their homeowners and automobile insurance policies. The personal umbrella policy is ideally suited to provide this protection.