F.A.Q.’s

Auto Insurance F.A.Q.

Q :    When purchasing automobile insurance what should I consider?
A :    There are several things you should consider when purchasing automobile insurance that your independent agent will help you with. Here are a few:

• Purchase the amount of liability coverage which makes sense for you.
• Select the optional coverages you want.
• Decide which company to purchase insurance from.
• Don’t base your decision solely on price. Other factors like service and claim response are extremely important in selecting the right insurance.

Q :    Does my insurance policy cover a friend if I loan him/her my car?
A :    When you loan your car to a friend or an associate, he or she will be covered under your automobile insurance policy. If your friend lives with you be sure to notify your agent as eliminations/exclusions may apply.

Q :    What is collision physical damage coverage?
A :    Collision is the loss you incur when your automobile collides with another vehicle or object like a telephone pole. Hit and run accidents are also covered under collision coverage.

Q :    What is comprehensive physical damage coverage?
A :    Comprehensive provides coverage for direct physical damage losses you could incur to your car from something like a hailstorm, fire, theft, vandalism or hitting a deer.

Q :    How can I lower my automobile insurance rates?
A :    There are several things you can do to lower the cost of your automobile insurance.

One way is to look for competitive pricing. An independent agent works with many companies and can provide you comparative rates and insure that your are getting the same coverage.

Another way to lower the cost is to change your deductible. By raising your deductible you may lower the cost of your automobile insurance almost 10% You must be able to pay the deductible amount in case of a claim. You can also look for discounts that you may be entitled to. Some examples of discounts that may be available are: multiple cars under the same policy, carrying a homeowners policy with the same insurance company, different groups or associations, paperless options, good student discounts for youthful drivers and paid in full discounts.

Q :    I am renting a car, do I need to purchase insurance from the rental company?
A :    I recommend that you buy the insurance through the rental car company. With regards to rental car coverage, you have the same coverage when you rent a car as you do for the best coverage you have on a car that you own. Your liability limits are the same as the limits on the vehicles that you own. If you have comprehensive and collision coverages, they are the same on the vehicle you rent as the vehicle with the lowest deductibles on your policy.

There are several reasons you should consider taking the insurance offered by the rental car company.

1. Many rental car companies are implementing a diminution in value clause (sometimes referred to as the “before and after” clause).  When a rental car is damaged, the rental company no longer repairs the vehicle.  They are concerned about potential liability if they put the vehicle back in their fleet.  They determine the value of the vehicle at the time it was rented.  Then they sell the damaged car at a salvage sale and that determines the “after” value.  The renter is billed the difference.  This difference could be several thousand dollars. This would NOT be covered under your auto insurance policy.
2. If you do not have collision or comprehensive coverage on any vehicles, you do NOT have that coverage on a rental vehicle.
3. The car rental companies have a right to make a claim for the loss of income they incur as a result of their vehicle being out of service due to the accident.  No personal or commercial auto policy, that we are aware of, provides for this type of coverage.
4. Rental companies may not wait for an insurance adjustor to come out and view the vehicle before they make repairs – this could void coverage on your auto policy.  Rental companies do not have any incentive to work with the insurance companies since they put the repair charges right on the person’s credit card.
5. Repair bills could be inflated (many rental companies do their own repairs and charge what THEY feel is the proper amount)
6. When there are multiple individuals renting the vehicle (example: four friends go on Spring Break_ it could be very unclear as to which insurance company will pay the claim.  This could lead to a long, drawn out claim process…meanwhile; someone is sitting with a large repair charge on their credit card.

Other important concerns when renting a vehicle:

Be sure to read the rental contracts carefully!!!  Some of the possible things to watch for are:

• Some void coverage if the driver has been drinking (even if under the legal limit).
• Some void coverage off a paved road (there are lots of gravel roads in small towns).
• Most contracts allow only certain people to drive (usually just those listed on the contract) – even if they were given permission (i.e. a valet)!

Certain credit card companies offer coverage for some of these types of risks; however, unless you have documentation that you have coverage for the risks mentioned here, I highly recommend that you purchase the coverage offered by the car rental company.  The circumstances outlined here are for short-term rental agreements only.  Long-term agreements need to be treated differently.

Homeowner Insurance F.A.Q.

Q :    What is homeowners insurance?
A :    Homeowners insurance is a form of personal lines insurance. The typical homeowners policy has two main sections: 1) covers the property of the insured and 2) provides personal liability coverage to the insured.

Q :    What do I need to know when purchasing homeowners insurance?
A :    Here are a few things you should know:

• Get the amount and type of insurance that you need.
• Determine the amount of personal property insurance and personal liability coverage that you need.
• Select any additional endorsements you want to add to your policy. For example, do you want the personal property replacement cost endorsement?

Q :    What is “actual cash value”?
A :    When “actual cash value” is used in a policy, a policy owner is entitled to the depreciated value of the damaged property.

Q :    What is replacement cost?
A :    When “replacement cost” coverage is used in a policy, a policy owner is reimbursed an amount necessary to replace the article with one of similar type and quality at current prices.

Q :    Should I purchase earthquake coverage?
A :    Direct damages due to earthquakes are not covered under the standard homeowners insurance policy. If you live in an area that is prone to earthquakes, 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.

Commercial Insurance F.A.Q.

Q :    What is the difference between Replacement Cost (RC) and Actual Cash Value (ACV)?
A :    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?
A :    Typically, insurance carriers require that an insured party insure at least 80% of the property’s value in order to collect a partial loss in full. This is the way the insurance company encourages all insurers to adequately insure their property.

Q :    How does an audit work?
A :    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.

Q :    What does Products/Completed Operations mean?
A :    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?
A :    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?”
A :    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, partnerships, corporations or other entities with insurable interests, or multiple named insureds may be included.

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 insurers in initiating cancellation, requesting policy changes or accepting any return premiums. The first named insured may also be responsible for payment of the premiums.

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. Many policies require a written contract between parties in order for “additional insured” coverage to be active.

Life Insurance F.A.Q.

Q :    How much life insurance should an individual own?
A :    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 :    What about purchasing life insurance on a spouse and on children?
A :    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?
A :    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?
A :    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.

Q :    Is credit life insurance a good buy?
A :    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.

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.