Table of Contents

General Insurance Topics

What’s Wrong With Insurance Information On The ‘Net?

Am I Protected Against Insurance Fraud?

Unfair Claim Practices? Part – 1

Unfair Claim Practices? Part – 2

Who Regulates Insurance?

Managing your Losses

Watch What You Waive

Telecommuters and Insurance

How Does Your Insurer Defend You?

What If I Don’t Agree With My Insurer?

Professional Insurance Designations

Can You Give Me An Example?

Are Your Grown Kids Properly Covered?

Do I Have To Sue?

Did I Notify My Insurer?

Insurance, War and Terror

Credit Based Scoring And Insurance

A Safer Prom

Insurance Perils - Part 1

Insurance Perils - Part 2

Personal Injury

Commercial Insurance Topics

The Businessowners Policy

Certificates of Insurance

Joint Ventures

Commercial Umbrella Liability

Office Functions and Alcohol

Umbrella Liability and Uninsured Motorist

Business Insurance Costs

Discontinued Operations

Loss (Reporting) Control

A Look At Lloyd’s

Contractual Liability

Insurance – A Matter Of Trust

The Silica Problem

Commercial Property

The Commercial Property Program

Vacancy Provision

Commercial Output Policy

Functionally Valuing Older Business Property

Additional Insured – Lessor of Leased Equipment

Dealing With Indirect Loss

The Standard Property Policy

Inland And Ocean Marine

Commercial Automobile

Commercial Auto Symbols

Non-Owned Auto Coverage

Coverage for Business Autos

Commercial Drivers and Drug Testing-Pt.1

Commercial Drivers and Drug Testing-Pt.2

Commercial Specialty

Employment Related Practices Liability

Directors and Officers Coverage

Workers Compensation Coverage

Professional Liability

Personal Insurance Topics

Isn’t Insurance Discriminatory?

Are You Liable For Summer Fun?

Hobby Or Business – Pt. 1

Hobby Or Business – Pt. 2

Website Liability, Anyone? Part 1

Website Liability, Anyone? Part 2

Contractors or Cons?

Personal Auto

Controlling Car In$urance

Can I Make My New Driver Affordable?

Can I Make My New Driver Safer?

Youthful Operator Driver Safety Agreement

Custom and Electronic Property

Is Your Car Worth Less Than Your Loan?

Personal Auto Coverages – Part 1

Personal Auto Coverages – Part 2

The Loss Is Only the Beginning

Auto Policy Exclusions

Does Car Pooling Affect My Personal Auto Coverage?

Avoiding Road Rage

A Fresh Look At SUVs

What Is Diminished Value?

Is Diminished Value Covered?

Driving Through A Winter Wonderland? – pt 1

Driving Through A Winter Wonderland? – pt 2

What Are Auto Symbols?

How Do I Protect My Classic Car?

Why Does My SUV Cost More Or Less To Insure?

Are Your Child Passengers Safe?

Avoiding Flooded Vehicles

Does That Car Have A History?

Treating Young Drivers Equally

Exchange Students – Automobile Coverage

Become A Better Driver

Senior Drivers

Special Personal Property

Does Special Property Need Special Protection?-Part 1

Does Special Property Need Special Protection?-Part 2

Covering Coins Collections

Have Any Tips On Insuring Jewelry?

Antiques

Umbrella Insurance Topics

Umbrella Coverages – Part 1

Umbrella Coverages – Part 2

Homeowners

In-Home Businesses

Is Your Home Winter Ready? – pt 1

Is Your Home Winter Ready? – pt 2

Is Your Home Winter Ready? – pt 3

Renters Insurance Needs

Insuring a Condo or Co-op?

Homeowners Coverage – Part 1

Homeowners Coverage – Part 2

Which Homeowner’s Policy is Right for Me?

Insuring A Mobile/Manufactured Home

Insuring A Timeshare Residence

Any Advice On Domestic and Personal Service Workers?

Insuring Roommates And Domestic Partners

Exchange Students – Homeowners Coverage

What Are Your Possessions Worth?

Special Form vs. Named Peril

How Much For That Doggie In The Lawsuit?

Claims By Candlelight?

Are These Tragedies Insurable?

What If My Home Is Vacant Or Unoccupied?

Who Cares About Attractive Nuisances?

Do Renters Need Insurance?

A Moldy Question

Be A Common Sense Host

Insuring A Trust

Are Fireworks Covered?

Homes And Underground Storage Tanks

Fortified Homes

A Construction Coverage Gap

Homeowners – Hurricane Tips

Farm/Ranch

Weather Insurance

Flood

Hey, Who Needs Flood Insurance?

How Do I Save Water-Damaged Property?

Life and Health

Term Life Insurance…The Basics

Cash Value Life Insurance, The Basics

How Can I Preserve My Smaller Business?

Are All Beneficiaries Alike?

Disability Insurance…The Basics

Disability Insurance: How Much Do You Need?

What Does Medicare Cover?

What Does Medicare Part B Cover?

Long Term Care Policies…The Basics

Should I Contribute to my 401(k) Plan at Work?

Charitable Giving through Life Insurance

How to Insure a Valuable Employee

What’s Wrong With Insurance Information On The ‘Net?

Let The Buyer Beware

The Internet continues to be an explosive and revolutionary player in the Age Of Information. Many different types of business use this medium, with its connection to savvy, technologically astute consumers, as a way to promote insurance products. As we make our way in the 21st century, we should remember ancient advice - "Let the buyer beware."

What Is The Danger?

In some respects, the 'Net may be no more dangerous than business transacted via any other medium such as in person, via phone, catalog, wholesale club, etc. BUT, the need for being a careful consumer is critical to whatever medium is used. A large problem is that seeing information published gives the information a high level of credibility; this includes the information you're currently reading. Our advice is to be certain of the information before acting on it. Although it's true that ten sources of information can give you ten different answers, it's preferable to seek and sort out different grains of truth than to have blind faith in a single source.

Why Is There Danger?

The 'Net holds many wonders, but it also provides many opportunities for acquiring information that may be useless and even harmful. Any 'Net user should remember the following:

  • it is often impossible to verify who has posted the information and whether the source has any expertise in the subject matter
  • material that appears on the net may be presented as facts when they are actually opinions or ads
  • the information may be accurate for one purpose or set of circumstances, but it doesn't tell you how the information applies to other situations; at the very least, it should contain a disclaimer
  • no credible party may have taken responsibility for keeping the information accurate and current
  • the person or organization that posted the information may possibly have a criminal intent
  • 'Net publishers forget that their audience is global and the information is for a specific group or geographic location

So Is This Information Any Good?

That depends upon what you do next. When seeking information to meet your insurance needs, it's important to discuss your concerns with a knowledgeable source. A professional insurance agent is a good source for getting the answers you need to fit your unique coverage situation.

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Revised 04/02


COPYRIGHT: Insurance Publishing Plus, Inc. 1998, 2002

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc..

Am I Protected Against Insurance Fraud?

What Is Fraud?

Every person who assumes the responsibility of carrying insurance to protect against their liability to other and to protect their property is affected by insurance fraud. While you and your insurer may disagree about a number of issues; when it comes to fraud; you are both victims. But you are not helpless victims. As an insurance consumer, it is important for you to know some basic information that may protect you from becoming a victim of insurance fraud.

The American Heritage College dictionary defines fraud as:

a deception deliberately practiced to secure unlawful gain.

In common terms, insurance fraud is lying to or deceiving an insurer in order to make money or to become insured. Some common fraud schemes include:

  • "padding" (inflating the true amount of) a claim
  • lying or hiding (concealing) important information when applying for insurance
  • submitting false claims
  • "staging" accidents
  • faking theft claims
  • engaging in arson for profit

As a consumer, fraud should concern you since the cost is passed directly on to you in the form of higher insurance rates. You can play an important role in reducing fraud. Fighting Auto Insurance Fraud

Persons attempting to commit insurance fraud often do so by deceiving innocent drivers during actual accidents or by involving innocent drivers in "staged" accidents. Do the following in order to minimize this risk:

  • Drive defensively, keeping space between you and surrounding cars,
  • When traffic slows, begin braking before the car in front of you does,
  • Be careful when turning into a lane that allows two or more autos to turn left at the same time. Victims of insurance fraud are often people who float across the line when turning and then are intentionally sideswiped by a person who is "staging" an accident.
  • If you are in an accident, write down license numbers of all cars involved in the accident, get the names and contact information of all persons involved and their insurers. Count the number of passengers in the other cars and get their names, addresses and any other pertinent information.
  • Call the police and get a police report even if the damage is minimal. DO NOT let another driver talk you out of calling the police.
  • Carry a disposable camera in your glove compartment and take pictures of the damage to the vehicles and of all drivers and passengers in the cars.
Fighting Homeowners Insurance Fraud

It is far more difficult to involve an innocent party in homeowner fraud. However a homeowner can help himself and help deter fraudulent claims by properly maintaining their home; removing or repairing items that could present trip hazards to outside parties. Also, if someone is hurt in your home or premises, be certain that you get full information and make certain that a person gets any needed treatment. Carefully document any incident, including all impressions about likely injury. Have a healthy skepticism over any information on medical bills or claims.

Report suspicious actions such as a friend who asks you to store valuable property and you then find that the person has reported a theft to his insurer or a fire has occured at their home.

Think of insurance fraud as money out of your pocket-because it is. According to the US Chamber of Commerce, fraud adds 25% to property and casualty insurance rates.

If you are involved in an accident and you are suspicious that fraud may be involved, call the National Insurance Crime Bureau at 1-800-835-6423.

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Revised 01/00


COPYRIGHT: Insurance Publishing Plus, Inc. 1996, 2000

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Unfair Claim Practices? Part –1

The complexity of an insurance policy can cause problems when it is time to file a claim. Requesting payment for a loss under your home, auto, boat or other policy is what insurance is supposed to be about. You've paid your premium with the assurance that, should an eligible loss occur, you or your property will be protected. Faithfully handling your premium payments gives you the expectation that your insurance company will perform. "Performance" of the insurance contract refers to the insurance company's obligation to investigate and, if applicable, pay for a loss. Loss payment includes taking care of expenses associated with settling a loss or handling the defense costs of a lawsuit.

It is unfortunate, but sometimes an insurance company may have an attitude toward paying claims that fails to meet your expectations. In fact, a company may actually deal with you unfairly. Your right to fair treatment is protected by the efforts of individual state governments. States agencies, typically via a special insurance or commerce division, are responsible for seeing that insurance companies and agents are true to the commitment represented by the insurance policy.

Most states actively enforce the requirement that insurers fairly settle valid claims against their policies. Insurance companies and agents operating within a state are also provided with complete information regarding unacceptable claims practices. A state's rules on settling claims are based on the National Association of Insurance Commissioners (NAIC) Unfair Trade Practices Model Act. The guidelines, developed from the original act and other regulations (which vary by state) are meant to shield you from practices that are misleading, unfair or deceptive.

For more information on such practices, please see part two of this article.


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COPYRIGHT: Insurance Publishing Plus, Inc. 2001, 2004

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Unfair Claim Practice? Part – 2

In part one of this article, we explained that policyholders have the right to expect their insurers to handle valid claims in a fair manner. We also explained that most states have rules that prohibit unfair claim practices. Here are some examples of such practices:

  • Attempting to settle a claim based on an application which the company has changed without the insured's knowledge or permission
  • Delaying a claim investigation by requiring unnecessary reports or documents
  • Failing to act promptly after receiving information concerning an insurance claim
  • Failing to comply with prompt claims investigation standards
  • When applicable, failing to pay a claim quickly, fairly and equitably
  • Failing to promptly settle claims where liability is reasonably clear under one portion of the policy to influence settlement under any other portion of the insurance policy coverage
  • Failing to promptly and clearly explain the basis in the policy or the law for either denying a claim or offering a compromise settlement
  • Discouraging a policyholder from using arbitration
  • Misrepresenting significant facts or insurance policy provisions
  • Refusing to keep an insured informed of claim developments within a reasonable time after receiving a completed proof of loss statement
  • Denying claims without a reasonable loss investigation
  • Offering very low settlements to encourage insureds to sue
  • Settling claims for amounts that are lower than a reasonable person would expect

The best way to avoid problems is to deal with reputable agents and companies who are committed to properly serving their customers. Your insurance agent would be happy to discuss your concerns and/or expectations about making an insurance claim. Take advantage of his or her expertise.

For more information on claims practices, please see part one of this article.


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COPYRIGHT: Insurance Publishing Plus, Inc. 2001

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Who Regulates Insurance?

Insurance regulation is dominated by state laws due to insurance not considered to be a tangible good. If it were, it would be commerce which is regulated by the federal government. Since insurance was defined as an intangible good, its regulation fell to the individual states. Following are some key events that helped create the regulatory status of the insurance industry.

Paul vs. Virginia

In the 1860s, a New York insurance agent extended his dealings to Virginia. Legal action was filed against the agent for failing to comply with Virginia law. The case made it to the U.S. Supreme Court, which had to address whether individual states maintained the right to regulate insurance. The court preserved the assumption that insurance was not interstate commerce and should stay under each state's jurisdiction.

South-Eastern Underwriters

In 1943, the Department of Justice sued a group of insurers known as the SouthEastern Underwriters Association (SEUA) for violating the Sherman Anti-trust Act. The SEUA members' agreement to use uniform insurance rates amounted to price fixing, a violation of federal law. The association’s defense contended that insurance was not commerce, so it was not subject to federal law. The case was appealed to the U.S. Supreme Court and in June of 1944, the Court reversed itself and ruled that insurance was commerce and, therefore, subject to federal regulation.

McCarran-Ferguson Act

This act was passed In 1945. Through this law, Congress reaffirmed the power of individual states by permitting the states to continue to regulate insurance. However, in order to maintain regulatory control after July 1, 1948, each state had to enact the same type of anti-trust laws used by the federal. All of the states eventually passed their own anti-trust laws, keeping insurance regulation at the state level.

Gramm-Leach-Bliley

A recent law’s impact on insurance regulation is currently evolving. In late 1999, President Clinton signed the Gramm-Leach-Bliley Financial Services Modernization Act. This law removed long-standing distinctions that existed between insurance companies, banks, and investment services. The law was in response to marketplace and technological developments that blurred the traditional roles of different financial service providers. The law’s primary goal is to allow players in the financial services market to offer more complete services to consumers more efficiently and at less cost. The act also has created serious obligations on the use of information gathered on financial service consumers. The impact of this important act will likely be more insurance regulation at the federal level.

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Revised 04/01


COPYRIGHT: Insurance Publishing Plus, Inc. 1998, 2001

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Managing Your Losses

What Is Loss Control?

Do you know that insurance is just one of a variety of methods for controlling the chance that you'll suffer from accidental losses? Insurance is a method of loss control. Loss control is important because your personal environment is filled with opportunities where losses can occur. Most folks would like to minimize their chance of suffering a significant loss. The process of identifying and acting upon situations which may lead to losses is called "loss control."

Loss control may involve both simple and complex ways to reduce the likelihood of facing a loss. Besides insurance, you can choose to use protective devices, oral or written contracts to shift the responsibility for a loss to someone else, avoid ownership of items that may cause a loss (such as large pets), avoid dangerous hobbies and activities, or change your environment. Let's look at some areas where you might exercise loss control.

Loss Control With Your Automobile

  • Use a bike or public transportation instead of owning your own car
  • Borrow or rent a car when needed
  • Take a defensive or advanced driving skills course
  • Practice defensive driving
  • Obey traffic laws
  • Adjust driving habits according to driving conditions
  • Park or store your car where there is greater security
  • Install security alarm and/or other anti-theft devices
  • Properly maintain the car in good condition, especially safety devices such as brakes
  • Purchase or use cars that have higher safety ratings
  • Don't lend your car to inexperienced or inconsiderate drivers
  • Have an emergency kit available, including first aid

Loss Control In Your Home

  • Keep the inside and outside of the home in good repair
  • Carefully store flammable liquids
  • Install security alarm and/or other anti-theft devices
  • Consider an apartment or condo which avoids certain risks of home ownership
  • Warn visitors about any known hazards in your home
  • Avoid running a business from your home
  • Take precautions when your premises includes attractive nuisances such as playsets and swimming pools
  • Keep dangerous objects out of the reach of children
  • Carefully scrutinize activities that may create a bigger exposure to loss such as dangerous hobbies or highly visible activities (volunteer work for organizations that may create extra chances for losses)
  • If you are involved in high risk hobbies or activities, get the training and/or take precautions to be sure that your participation is as safe and responsible as possible
  • Take care with heating and electrical devices and systems (such as portable heaters, loads on electrical circuits, etc.)
  • Keep first aid kit available
  • Have a fire escape plan, including any needed safety devices (such as escape ladders from 2nd floor exits)

Miscellaneous Loss Control

  • Store important papers in a secure, fire-resistance box or even in the corner of a freezer.
  • Keep all the negatives of photos, so they can be reproduced
  • Make videotapes of personal property as a record of your possessions
  • Make copies of personal videos
  • Be sure to carefully read contracts or agreeements before accepting them
  • Arrange to exchange and keep important papers and mementos such as copies of videos and photos with friends so they're easier to access and less expensive than storing in a safety deposit box

Of course the help of an expert is invaluable and your insurance agent is a very helpful source for reviewing any actions you're considering to reduce your chances of facing a loss. So contact your agent for his or her expert assistance.

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COPYRIGHT: Insurance Publishing Plus, Inc. 1998, 2003

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Watch What You’re Waiving

What's A Waiver?

To "waive" something is to intentionally give up some right or interest. Given that fact, it makes perfect sense that "waive" rhymes with "wave". Whether you're waiving or waving, you're saying goodbye. In the case of a waiver, you may be "saying" farewell to a right to hold another party accountable for their acts.

Waivers are being used more often and they benefit the person or organization that asks you to sign one. A popular reason for using a waiver is to avoid the legal consequences of sponsoring an activity or event such as the following:

  • playing school or community league sports
  • church related sports groups
  • intramural sports
  • sports clinics
  • field days
  • bicycle races
  • sky-diving classes
  • motorcycle training
  • horse riding
  • school, church or other association field trips
  • joining an aerobics class.

What Happened to Permission Slips?

The use of permission slips has decreased along with the willingness to assume responsibility for a given activity. Permission slips are ineffective when faced with a chance of being sued. Therefore, parties sponsoring events experienced a type of evolution in the forms they used to protect themselves:

1. Permission slips allowing participation in an activity or event

2. Permission slips including authority to act in emergencies (but the party may still be accountable for their action)

3. Permission slips waiving any right to sue for actions occurring during an emergency

4. Waivers for suing over any accident arising from both routine and emergency aspects of an activity

6. Waivers for suing over any accident arising from both the routine and emergency aspects of an activity AND

agreeing to assume the sponsor's legal responsibility for the event.

Better Waived Than Sorry?

Sometimes, waivers are like advertising...they're only effective when you believe in them. For instance, the person signing the waiver may add a comment that he or she has only signed the waiver as a formality, or under duress or protest. Often there are flaws connected with the waiver, such as incorrect or even illegal wording. For instance, a parent is required to sign a waiver for possible injuries to a child when some law doesn't permit a parent to waive a minor's rights. Another example is when state law may hold someone liable for certain acts, regardless of any waiver or agreement. Other things affect the enforceability of waivers such as:

  • who is sponsoring the activity (profit or non-profit organization)
  • the age of the persons being required to waive their rights (minors, adults, seniors)
  • the nature of the activity (short trip to museum or horseback riding)
  • the ability of the person waiving their rights to understand their actions
  • the details surrounding any injury
  • whether the parties affected by the waiver benefit equally from its use (for instance, a dangerous team-building exercise where an employee is required to participate or face termination)
  • the qualifications of the staff holding the event

Read Before Waiving

Waivers are sometimes unavoidable, unless you choose to skip the event or activity. Other times, waivers are used when they are unnecessary. The problem is in that wide, fuzzy, middle-ground. It's in such instances that you should take the time to read and understand a waiver before signing. It may even make sense to get competent, professional legal advice. Perhaps you can't avoid assuming some risk or giving up your rights, but at the minimum, read before you sign so that you understand what could happen.

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(revised 11/03)


COPYRIGHT: Insurance Publishing Plus, Inc. 1998, 2003

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Telecommuters and Insurance

Do you work from your home for either part or all of your work week? Is it an on-going arrangement with your employer? Yes? Congratulations, you are a telecommuter. The increased flexibility you enjoy by not having to fight commuter traffic or squeeze into a cubicle is accompanied by special insurance considerations. Consider the following if you haven't already adjusted your coverage to handle your telecommuting situation.

Property Considerations

You may have gaps in coverage caused by your employer's business property that is kept in your home or your own property that is used to perform your job. In either case, your home or tenant's policy severely restricts or excludes coverage for property related to business use. This situation has a further complication. Business property usually consists of high-valued items that are vulnerable to damage and/or to theft. Such property includes fax machines, copiers, computers, computer peripherals (monitors, printers, scanner, modems) and phones, answering machines, PDAs, etc.

Liability Considerations

While your home or tenant's policy protects you against most instances in which you cause others injury or damage others' property, the situation is changed when the loss has a business connection. Personal insurance policies that include liability protection typically exclude business-related losses. Further, different policies can be quite broad in interpreting how a loss is connected to "business." Liability Policies A and B would routinely respond to handling an insured who spilled hot coffee on a guest in his home. What if, instead of being a social guest, the visitor was your employer's client? Policy A may still offer coverage because it considers the coffee spill to be a common home hazard. But Policy B may flat-out exclude the loss because the injured person was in the home for a business reason.

Vehicle Liability

Instead of using your personal vehicle for going to and from work, more of your vehicle use may be related to your job. Many instances of job related use might be excluded from your personal auto coverage.

Home Accidents

Simple events may be complicated when they occur in the course of performing your job at home. Coverage for injuries suffered while going up the stairs or experiencing a prolonged illness may cause coverage questions for your employer. Individual company or state-mandated coverage for employees may not apply to work-related accidents that occur at home.

Document What You Do

In order to determine what insurance coverage needs you have to address, you must clearly identify your exposure to business losses. Document the following:

  • What routine job duties do you perform in your home?
  • Are any tasks hazardous?
  • Who visits your home because of your job (clients, vendors, repair personnel, suppliers, others). Be Specific.
  • How often do such persons visit?
  • Is a certain part of your home dedicated as a work area/office?
  • What equipment is used in your job? (Is the equipment used only for your job? Who owns each piece of equipment?)

Once you have a good idea of the loss exposures from performing your job at home, you need to discuss your situation with an insurance professional. An insurance pro can help you find additional coverage options as well as help to identify what coverage gaps must be addressed by your employer. While it can be liberating to telecommute, you must make sure that you haven't given up important protection along with your cubicle.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2000, 2005

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

How Does Your Insurer Defend You?

Two Distinct Obligations

Consumers who have any significant experience with buying insurance protection for their auto, home and other property are likely to understand how coverage is provided for their liability and/or their property. Conversely, few may be aware of the role that an indirect coverage plays in the obligation owed by an insurer to its customers.

A liability insurance policy, either vehicle or personal liability, is designed to protect you against your legal obligation to pay others because you have caused them personal injury, damaged their property, or have done both. Further, such insurance policies also promise to defend you against claims or lawsuits that are filed against a policyholder. In other words, besides paying for claims or suits, a liability policy also pays for the legal costs and fees associated with liability losses. What Is Covered Under Defense Costs?

The defense costs generally include:

  • attorney fees (including cost of legal staff and expenses)
  • court costs of the applicable jurisdiction
  • costs of filing necessary legal papers
  • if applicable, costs of expert witnesses
  • costs associated with investigation, etc.
Is Defense Provided Within The Insurance Limits?

Defense Coverage can be offered in two ways. It can be provided as part of the insurance policy's liability limit or as a separate coverage. You must read your policy's insuring agreement(s) carefully because the method has a huge impact on the amount of your insurance protection. Let's say that Policy A and Policy B both provide liability insurance limits of $100,000; Policy A provides defense coverage as part of the insurance limits while Policy B gives separate protection. Now let's see what can happen:

Example: Jay Lowcare is sued by his son's teacher, who came to his home to deliver some homework for Valiant Lowcare (who's suffering from strep throat). When the teacher started down the wooden stairs of the Lowcare's front porch, the second stair broke. The teacher suffered cuts and compound fractures to his left leg. Jay Lowcare knew that the stairs had been weakened by termites, but hadn't bothered to replace the stairs or warn anyone. The damages (medical and rehab costs) totaled $95,000 and the defense costs were $18,000. Here's how each policy would handle the costs:

Expense Policy A Policy B

Defense Cost $18,000 $18,000

Damages $95,000 $95,000

Total Paid $100,000 $113,000

If Jay Lowcare's protection worked like Policy A, Jay would be personally responsible for paying the remainder of the damages because the defense costs ate into his insurance limits. Policy B's method of providing coverage offers the most protection.

If you're not sure how your policy handles the cost of your legal defense, talk to an insurance professional and make sure you get the coverage you need.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2000

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

What If I Don’t Agree With My Insurer?

You've Got A Contract

Ownership of an insurance policy means that you have a contractual relationship. Paying a premium to an insurance company obligates it to provide coverage. Most companies try to be clear about what you can expect for your premium dollars. It's up to you to understand the critical points of your policy, such as the following:

  • Who or what is protected?
  • How does coverage take place?
  • When is coverage effective?
  • How much coverage is provided?
  • What are the responsibilities for reporting losses?

Under an insurance contract, you the policy owner (or insured) and the insurer are partners. Partners often learn to understand and work with each other quite well. However, sometimes disagreements occur and you should be aware of how you may look to your policy for help.

Arbitration And Appraisal

Two common areas of disagreement are over whether coverage exists and how much should be paid for a covered loss. Arbitration is a tool for addressing the former issue, while the latter is frequently handled by appraisal.

A policy owner may have a claim rejected. The insurer, in most cases, should offer an explanation for declining coverage. (Of course, if no explanation was given, the policy owner's first step should be to request this information). The insured and insurer may discuss their viewpoints and, failing to reach either an understanding or a compromise may choose arbitration. This process typically requires each party to:

  • select their own qualified arbitrator
  • permit the two arbitrators to select a third arbitrator to act as a judge
  • allow that agreement among any two of the three parties stands as the decision
  • each party pays for its arbitrator and share the expense of the judge

The appraisal process is often similar or even identical as both parities usually:

  • select their own qualified appraiser
  • permit the two arbitrators to select a third appraiser to act as a judge
  • allow that agreement among any two of the three parties stands as the decision
  • each party pays for its appraiser and share the expense of the judge

Items that can have a big impact on either process are any local or state laws, the actual policy wording and the arbitration/appraisal procedure that may vary by locale.

Last Resort

Of course, sometimes arbitration or appraisal fail to settle differences, so legal action may be the last resort. However, many policies also have provisions on lawsuits. Typically an insured is prohibited from filing a suit unless it's done within a certain time period. Further, the insured has to use all the other options for resolving the conflict. While lawsuits are sometimes inevitable, it's important that insurance consumers be aware of alternatives. It's even more important to take advantage of discussing your insurance coverage with a qualified insurance professional. Their expertise can be invaluable in dealing with complex insurance situations.

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(revised 11/03)


COPYRIGHT: Insurance Publishing Plus, Inc. 1998, 2003

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc

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Professional Insurance Designations

Are you confused by seeing an insurance agent's name towing a long string of letters? Well, that's understandable. The public is familiar with the abbreviations used by lawyers, professors, scientists and doctors. Although not as well-known as M.D. or PhD, Insurance Land has its share of such abbreviations, called professional designations. These designations indicate that the individual has completed different courses or programs. The insurance business is complex and full of changes, so it's very important that agents try to keep up to date on subjects that affect their business.

The need to keep current is so important that an agent's pursuit of knowledge is mandatory. Most states require that an agent be licensed in order to sell insurance policies or even to give insurance advice. Different states also require that its licensed agents maintain a long-term commitment to learning. In such states, agents must complete a number of hours of training or education in order to have their licenses renewed.

Another incentive for continued learning is provided by certain insurance programs. Once a participant qualifies for a designation, he or she may also be required to pursue continuing education in order to remain in good standing. Finally, many agents are personally motivated to keep current in their insurance knowledge. Naturally, these factors result in agents who have completed programs that award designations.

The following is a short reference of the more common insurance designations.

Designation

Description

ACSR

Accredited Customer Service Representative

AIC

Associate In Claims

AIM

Associate In Management

ARM

Associate in Risk Management

AU

Associate in Underwriting

CFP

Chartered Financial Planner

ChFC

Chartered Financial Consultant

CIC

Certified Insurance Consultant

CLU

Chartered Life Underwriter

CPCU

Chartered Property Casualty Underwriter

CPIW

Certified Professional Insurance Woman

While a designation MAY indicate a greater level of expertise, the bottom line is experience. Designations are not nearly as important as whether that person helps you with your insurance needs. So talk to your agent, ask plenty of questions and listen to the responses. If the agent has helped you understand something about insurance or has helped you get affordable protection against losses....then you have had contact with an insurance professional.

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COPYRIGHT: Insurance Publishing Plus, Inc. 1999, 2004

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Can You Give Me An Example?

Today, communication can be performed faster, more efficiently and more conveniently than ever before…but we all still struggle with communicating effectively. In many respects our true accomplishment has been to spread confusion at cyber speed. One thing that remains the same, regardless of technology, is the need to be sure that the people who receive our message understand it as well. However, when people get together, the speaker often takes it for granted that the listener understands, even when the topic is complex. Fortunately there is a technique that we can borrow from early mankind to aid our communication efforts…storytelling.

While it's common to see short stories or examples used in training, schools and textbooks; examples are rarely used in important business discussions; particularly insurance discussions. Any person who wants to understand their policy needs, coverages and exclusions, should just ask for examples. Insurance policies are contracts and, like other legal documents, can be complex and confusing. Often an illustration is more useful than an overly detailed discussion of policy language. Instead of trying to dissect how one clause modifies or makes exception to another, ask the speaker if they can demonstrate their point.

A person who can create a good example is someone who has a thorough understanding of his subject and that understanding can be passed along to the listener. The listener often appreciates the work it takes to create examples and this can ease future communication. So take an active role whenever you communicate with an insurance professional and ask: Can you give me an example?

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COPYRIGHT: Insurance Publishing Plus, Inc. 2000

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Are Your Grown Kids Properly Covered?

Who Are Insureds?

A pivotal point in every mature parents' life is the time that their children leave to start their own households. Among the items that may be overlooked during this time is whether your grown children have bought their own insurance.

Most personal insurance policies define insureds to include the following:

  • The person named (shown) on the policy
  • The named person's spouse (who lives in the same residence)
  • The other relatives of the named insured who live at the same residence

The problem with coverage begins when the living arrangements change. Related, But Not Residents

Blood is often perceived to be thicker than insurance contracts, but policy wording prevails. An adult son or daughter may think that, when a loss happens, coverage is available from mom or dad's homeowners or auto policy, but it isn't. Policies are typically clear. A relative is covered, but only if the relative is a full-time resident of the named insured's household. Even if the nonresident child lives next door, her parents' policy is not going to spread its coverage to take care of her belongings.

If this fact appears harsh, know that insurance contracts are meant to handle sources of loss that can be easily identified. Person A's cars or home is protected by Person A's auto or homeowner policy. Imagine if that weren't the case.

Example: The Rabbitfield's home and cars have been insured by Plausible Fire & Casualty for 20 years. In the last five years, the Rabbitfield's children have grown and started their own households. Per the Plausible home and auto policies, the insurance premiums and two policies that covered the original family's two cars and one home, now cover the original home and cars PLUS the following:

  • Son Jimmy Rabbitfield's apartment and car
  • Daughter Chana Rabbitfield's home and two cars
  • Other son Perry's home, seasonal home and two cars
  • Other daughter Bonnie's apartment and car.

Besides covering all of the property, the Rabbitfield parents' policies ALSO cover everyone's personal legal liability.

While it might be a bargain for insurance consumers if a single auto or homeowner policy could be stretched this far, it's not likely that the insurance industry could survive the flexibility. Being Independently Insured

Understandably, insurance is not always a priority for adult children who are now on their own. In the beginning, there's often a phase where the kids commute between "home base" and their new apartment or home and their property is at both locations. The new grown-ups typically have few possessions, especially possessions of high value, and this adds to the likelihood that insurance is overlooked or seen as unnecessary. However, even when possessions are few, EVERYONE has a legal responsibility to handle the damage they accidentally cause to other people and/or other people's property. When a child reaches adulthood, they've also reached the point where they need to get their own insurance.

If an adult child asks you for insurance advice, give them the name of an insurance professional you trust to help them get the exact protection they need. Back to General Insurance Topics


COPYRIGHT: Insurance Publishing Plus, Inc. 2000

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Do I Have To Sue?

This is a brief discussion on mediation and arbitration, alternatives to resolving insurance policy disputes. It's Still A Contract

The insurance policy may cover your home, car, boat, life, airplane, jewelry or business, but one element remains the same, the policy is a contract. This written agreement is, at the core, a promise from the insurance company to pay you if a covered loss occurs. But, even when the promise is fulfilled, there may be a serious dispute over the amount of payment. Quite often the method used to resolve the problem is a courtroom. Need For Alternatives To Lawsuits

In many instances, filing a lawsuit is unavoidable. For instance, when a person seeking coverage has his claim denied, a lawsuit may be the only action that is available. However, looking for satisfaction in court can be its own problem. Court calendars (dockets) are often backed up so it could take months or even years before a hearing can take place. When the trial begins, it can take a long time, possibly involving one or more appeals. The legal costs can be staggering. Depending upon the case's complexity, it will involve court costs, filing fees, attorney costs, research costs, fees for expert witnesses and a host of other expenses. These factors increasingly act as incentives for finding other methods to resolve disputes. Alternative Dispute Resolution

When disagreeing about the amount that should be paid for a loss, there are a couple of popular alternatives to suing your insurance company: mediation and arbitration. Each is a form of Alternative Dispute Resolution (ADR) since they can be tried as an alternative to going to court.

Mediation - This process involves the two parties meeting to discuss their situation with the help of a mediator. The mediator typically has special training and a legal, financial or similar background. As a disinterested party, the mediator studies information from both parties concerning the dispute. Once familiar with the situation, he arranges to meet with the parties. A mediation session often starts with each party having a chance to fully explain their position to the other party and the mediator. The facilitator then takes time to discuss each party's position in private. Afterwards, the mediator shuttles between the parties and, probing and using the information he gains, he tries to reach a point where both parties can agree on a settlement. The most important features of mediation is that the process is voluntary and the disputing parties are actively involved in reaching a solution.

Arbitration - This is a method that is frequently required by a condition of an insurance policy. With arbitration, you and the insurer each select a representative (arbitrator). Once the arbitrators are selected, they agree on another arbitrator who acts as the arbitration judge. The three persons discuss the merits of the situation and, once any two of the three persons agree on a settlement amount, the process ends. Arbitration differs from mediation in two important respects. First, the disputing parties are bystanders, awaiting for a decision to be made. Second, arbitration is binding on both parties.

Is any course of action perfect? No, but sometimes it is good to know that, when a disagreement occurs, you have more than one option to get it settled. If you need more information, an insurance professional is an excellent source.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2000

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Did I Notify My Insurer?

You take the time and money to identify what you need to insure, what company you wish to protect, reading and understanding the various policies that cover you and your possessions. Isn't the importance of telling your agent or insurance company about a loss obvious? Surprisingly, no, it isn't. The Notification Obligation

Fulfilling the coverage promise of an insurance policy is all about communication. An insurer makes a promise to protect you against certain types of loss, but it can't follow-through unless it knows about a loss. Prompt notification is so important that it is a formal policy provision and your failing to meet its requirements could result in you losing the protection you paid for.

Depending upon the policy, items having to do with notification may be under a separate policy part or spread among several areas. However, a policy typically requires you to do the following:

Contact the agent or insurer as quickly as practical - the practical requirement replaced the previous use of "possible," since some companies unreasonably denied coverage because notification was not instantaneous. The difference between words may seem minor, but it gives you some consideration for circumstances that could affect how quickly you contact your agent or insurer about a loss.

Identify Yourself - Perhaps one day your insurer will be able to recognize your voice over the phone and immediately pull up your file. Until then, be prepared to at least tell your insurer your full name (or, if different, the name the insurance policy is under) and the policy number.

Give adequate details - What, When Where, Why and How. It's important that the insurer has enough information to take proper action, including giving you instructions on how to have your loss handled. This information forms the basis of opening a claim file, assigning the loss to a claims person and beginning investigation of the claim.

Give the insurer copies of any communications regarding a loss or possible loss (such as a threat of a lawsuit) - You should not guess about whether a legal notice or request to be paid for damages is important, even when an actual lawsuit has yet to be filed. Send a copy of the information to your insurer and let them decide. Prompt Notification helps Everyone

Complete and quick communication about losses gives you the best chance to get needed coverage and gives your insurer an opportunity to handle a possible claim efficiently. It also allows the insurer to control issues that could let lawsuits get out of control, such as the ability to offer payment for medical expenses or to contact and question witnesses.

Don't hesitate! Contact your agent or insurer and get your loss handled. Back to General Insurance Topics


COPYRIGHT: Insurance Publishing Plus, Inc., 2001

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Insurance, War and Terror

If you are an American citizen, your attention has been riveted by the events from September 11, 2001. You also likely have several concerns that are also shared by a great many fellow Americans such as:

  • How do the events affect my insurance protection?
  • Are war and terrorist acts the same?
  • Exactly what is excluded by my policies?
  • Do I have to buy special coverage to protect my belongings?

It is understandable to be concerned and confused over the above issues, especially since everyone is being inundated with news and other information. Insurance related to personal lines (any coverage that protects personal property rather than business) is more standardized than commercial insurance, so the coverage concept in policies for cars, homes, and personal liability are similar.

Most policies prohibit coverage for causes of loss considered "uninsurable." Not surprisingly, coverage for war is one cause of loss that is excluded. Typically auto and homeowner policy wording not only excludes war, but any military actions similar to war such as rebellions, large-scale civil disturbances, and revolutions. Further, coverage is excluded regardless whether the government has formally declared a state of war. On the other hand, acts of terrorism are distinct from war and, as we have learned to our sorrow, involve individuals committing acts against other individuals rather than against governments or military personnel. Generally speaking, loss caused by such acts would be covered. However, it is always in your best interest to look at exactly what appears in your policies. It would also be helpful to contact an insurance professional to discuss any of your concerns in enough detail so that you understand your situation and your coverage needs.

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COPYRIGHT: Insurance Publishing Plus, Inc., 2001

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Credit Based Scoring And Insurance

Insurance companies use other important sources of information besides an application to determine if a person qualifies for a policy. For auto coverage, motor vehicle reports are ordered. For home coverage, physical inspections may be needed. Another tool that is widely used for underwriting is credit-based scoring. Use of this item is currently controversial and its origin lies in the commercial use of credit histories.

Banks and other lenders have long used credit history in their lending process. In recent years, it has been found that certain elements of a person’s credit history can be used as an indicator of whether that person is likely to suffer insurance claims. Credit-based scoring is a process that creates a numerical score that is developed from information such as amount of debt, number of credit cards held, pattern of payments, defaults, etc. A benchmark score is established and is then used to help determine the acceptability of insurance applicants. Credit-based scores are also used by insurers to help decide what should happen with current customers. For instance, a company may choose to increase or decrease the premium charged for current coverage or change the level of coverage provided.

In credit-based scoring, the higher the score, the less likely the chance that a person will experience insurance losses. Therefore, if your credit history, such as outstanding losses, bill payment history and type of credit results in a high score, it is much more likely that your insurance application will be approved. Credit-based scoring is controversial. There is much information that proves a strong relationship between a credit-based score and a person’s likelihood of being a profitable customer. In other words, there is a high correlation. However, insurance consumers and regulators have demanded more information that demonstrates cause and effect.

Insurers are enthusiastic about the use of credit-based scoring. It is hailed as an aide to improve their pricing and profitability. However, there is a reluctance to provide details on how scores are developed. Companies have claimed that the information is considered confidential. Insurers fear that revealing details on credit-based scores would result in losing valuable information to competitors. Currently, while some states have approved the use of credit-based scoring, other states are either challenging its use or granting approval after establishing guidelines for its use.

If you have been affected by a credit-based score, you’re entitled to know. You can also get information on how to be sure that your credit history is accurate. An insurance professional is a good source to help you with questions on how your credit may be affecting your insurability.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2002, 2003

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc

Identity Theft – Part 1

Part 1 is a brief explanation of ID Theft and its consequences. Please see Part 2 for information on what can be done to prevent it.

While "identity theft" may seem like a trendy new, crime category, the truth is the opposite. ID theft is another form of fraud that has been around for as long as there have been dishonest people. It is shining under a media spotlight because technology has recently opened many more opportunities for this sort of crime. Credit cards, funds transfer cards, ATMs, and the Internet have all combined to make identity theft a major problem for individuals and businesses.

ID theft is a general term that describes any dishonest and unauthorized use of private information. In the past the term rightfully described forgery or passing oneself off as another person to trick someone out of a payment or property. Today, consider it as any act where an unauthorized party secures goods, services, or other financial benefits by the fraudulent use of another person’s confidential information.

The favorite piece of information is a social security number. This information has routinely been used for so many reasons that it can unlock many doors to other private information such as driver’s history, credit information, bank accounts, loan information, credit cards, occupational history, military records, mortgage information, investment accounts and so on. Having this critical bit of information can allow a criminal to use another party’s accounts, secure loans, charge a host of goods or services; the list is only limited by the criminal’s resources and imagination.

A complication of ID Theft is that it is a by-product of modern commercial life. Lenders, retailers, supermarkets, gas stations, airlines, travel clubs and everyone else has elevated charge accounts into the premiere way to do business; either live or electronically. This "ease" comes at great cost. As naïve as it sounds, business still operates on the assumption that everyone is honest. Few businesses have adequate safeguards to protect the information they collect on customers. Many businesses commonly mail out charge cards and other solicitations that include private account information. Further, since businesses are often embarrassed that information has been stolen or compromised by hackers, many businesses keep such invasions secret or substantially delay reporting incidents to authorities and to their customers.

In light of business practices and attitudes, it’s basically up to the individual consumer to guard against ID theft. See Part 2 for tips on guarding against it.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2002

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Identity Theft – Part 2

Part 2 is a brief explanation of what can be done to prevent ID Theft. Please see Part 1 for an explanation of what is meant by ID Theft.

While "identity theft" may seem like a trendy new, crime category, the truth is the opposite. ID theft is another form of fraud

To date, personal insurance is not a particularly important tool for protecting against ID theft. The type of loss is not something to which an auto, home or similar policy responds. While homeowner policies do typically protect against credit card loss, coverage is usually just for the modest amount that falls below the minimum liability imposed by federal law (currently $50 per card). The true damage to individuals from ID theft are the costs associated with clearing up the after-effects, such as correcting one’s credit history and straightening out various accounts and records. This effort may take years and hundreds to thousands of dollars in legal fees.

Insurance companies may soon develop coverage for ID theft, such as assisting with legal fees or paying costs related to dealing with third parties to correct records. Right now, preventing falling victim to this loss is up to Jane or Joe Insured. What can be done? Here are some suggestions:

  • Keep your account information and Social Security Number (SSN) safe. One idea: keep home records in a locked file.
  • Keep details about your various account numbers in a safe place so you can act faster to take care of stolen or lost cards.
  • Be very careful with on-line transactions. Is the Website you use secure?
  • Find out the privacy guidelines and safeguards of the businesses and parties you deal with.
  • Challenge those who request an SSN. Why is that information needed? Can some other information be used as an alternative?
  • Think about buying and using a paper shredder. Many who steal information do so by going through garbage.
  • Write companies who send unsolicited charge cards and get off their lists.
  • Check bank and business statements thoroughly for irregularities. Track down the reason for any unusual transactions or entries.
  • Ask stores that use credit cards if they transmit the information with a wireless network. If yes, ask what safeguards do they have against airwave theft.
  • If you ever have a charge card transaction involving an imprinter that uses a carbon set for copies, ask for the carbon or watch the clerk destroy the carbon before it’s thrown away.
  • Collect mail from mailboxes quickly and don’t put outgoing mail in your own mailbox for collection by a mail carrier. These practices give thieves an opportunity to fish for checks and private information.

Remember that these are just a few suggestions. Taking steps to minimize the chance of ID theft is a lot of work. That is a major reason that ID theft will continue to be a problem to individuals and businesses.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2002

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

A Safer Prom

Most young men and women point to their high school prom as being a particularly important point in their lives. For many, it represents their first chance to participate in a formal event. It is also considered a chance to act as a full-fledged adult. The event involves arranging companionship, dining, dancing and socialization. However, not as much time is usually devoted to making the event as safe as possible.

It is almost inevitable that a prom will involve serious exposure to alcohol or other intoxicants. The evening also involves many young, inexperienced drivers who are excited about making their way to different destinations such as pre and post prom activities. Sadly, all of these factors have combined to make prom season both dangerous and deadly. Serious traffic accidents often become the main feature of what should be a night of joy.

Potential prom-goers and their parents need to create a strategy to help make prom night both memorable and safe. Here are some tips:

  • Parents should get the details of all activities, including dinner and pre and post prom events
  • Confirm the night’s events with school officials and other parents
  • Clearly lay out your expectations to your son or daughter about how they are to enjoy their evening
  • Discuss all details about transportation, whether they are drivers or passengers
  • Be sure that communications are set up. If the child does not have a cell phone available, find out the numbers where he or she can be reached during different phases of the evening
  • If practical, consider arranging for a third party to handle transportation (limo or taxi service)
  • Consider an amnesty arrangement. In other words, let your child know that they can contact a parent for emergency transportation should something go wrong and, for that evening, they’ll be no lectures or punishments

Help your son or daughter make prom night a bright memory rather than a tragedy. Plan on making safe fun everyone’s priority.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2003

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc

Insurance perils - Part 1

Insurance Perils - Part 1 If you ever had to look at your insurance policy for a home, seasonal home or rental property, you probably ran head-first into the terms "hazard," "peril," or "cause of loss." In any instance, the reference is to any number of events that could create damage that the policy covers. While some events are commonly understood, others aren't. Further, the term that appears in an insurance policy may not mean the same as it does in the dictionary.

This is part one of a two-part discussion on different causes of loss. After reviewing the information below, please be sure to read part two.

"Click" below for more information

Fire
Lightning
Explosion
Windstorm
Hail
Riot or Civil Commotion
Aircraft

Fire

Fire has been defined by the courts as "combustion sufficient enough to produce a spark, flame or glow." By definition, a fire is not smoke. A fire is not charring. A fire must produce a spark, flame or glow. And not all fires are covered under the fire peril. Over the years, the courts have distinguished between "friendly" and "hostile" fire. A friendly fire is one that burns where it was intended to burn: a flame on a gas stove; a fire in a fireplace; fire in an outdoor grill.

A hostile fire is one that burns where it was not intended to burn: the kitchen drapes; the rug by the fireplace; a tree near the outdoor grill. Only direct damage caused by hostile fire (including smoke from a hostile fire) is covered by the fire peril. Back to More Information

Lightning

Lightning is "naturally generated electricity from the atmosphere." Damage covered by the lightning peril may be the result of lightning itself or the result of a fire caused by the lightning.

With regard to lightning, there is rarely a coverage problem when there has been a direct strike. The other common cause of lightning loss is the surge of electricity, typically caused by lightning striking power company equipment. Appliances in a house can be damaged by the electrical surge. The cause must be established for coverage to apply. A surge from malfunction of power company equipment, or a short circuit, would not qualify. Back to More Information

Explosion

In basic or stripped-down policies, explosion refers to any explosion that occurs within a structure that is covered by a given policy. However, several types of explosive events are usually excluded such as:

  • bursting of water pipes
  • electrical arcing
  • explosions of steam boilers or pipes owned, leased or operated by the insured
  • rupture or bursting of pressure relief devices

In more comprehensive polices, explosion also applies to events that originate externally. Back to More Information

Windstorm

The peril of windstorm involves damage caused by direct action of the wind, including high winds, cyclones, tornadoes and hurricanes. Windstorm coverage primarily covers wind damage to a building's exterior, but will also cover interior damage if the wind breaches the exterior (causes a hole or opening in a wall or roof).

Note that the wind must reach sufficient velocity to have caused direct damage at more than one location to establish a "windstorm" loss. However, leakage through an aging roof during heavy rain is not a basis for a windstorm claim. The windstorm peril does not cover loss to the following property when located outside of the insured building: awnings, signs, radio or television antennas or aerials including wiring, masts or towers; canoes and rowboats; lawns, plants, shrubs or trees. Back to More Information

Hail

Hail damage is just that: damage caused by the direct action of hail to insured property. As with windstorm, the hail or some other covered peril must cause damage to the outside of the insured dwelling allowing hail to enter the premises in order for interior hail damage to be covered. As a result, if a window were left open, allowing hail to enter a building, that damage would not be covered.

Similarly, the hail peril does not cover loss to awnings, signs, radio or television antennas or aerials including wiring, masts or towers; canoes and rowboats; lawns, plants, shrubs or trees when located outside of the insured building. Back to More Information

Riot or Civil Commotion

Riot usually refers to a gathering of three or more people that results in the use of force or violence against individuals or property. Damage caused to the insured property due to riot is covered under this peril. Coverage includes direct loss caused by striking employees whether a riot occurs or not. Civil commotion can be defined as an uprising or disturbance by a large number of people. As with riot, damage caused to the insured property due to such an uprising would be covered under this peril.

Bouvier's Law Dictionary summarizes five necessary elements of a riot: At least three persons must be involved; there must be a common purpose; there must be actual inception or execution of that purpose; there must be an attempt to help one another or to cooperate by force if necessary; there must be display of force or violence in such manner as to alarm a person of reasonable courage.

There may be no valid distinction between riot and civil commotion. "Civil commotion" has been described in courtrooms as "an uprising among a mass of people which occasions a serious and prolonged disturbance and an infraction of civil order, not attaining the status of war or armed insurrection. It requires the wild or irregular action of many persons assembled together. Back to More Information

Aircraft

The aircraft peril provides coverage from damage caused by aircraft, including self-propelled missiles and spacecraft.

Webster's New World Dictionary of the American Language defines "aircraft" as "any machine or machines for flying, whether heavier or lighter than air; airplane, dirigible, balloon, helicopter, etc."

This peril would apply to damage caused by the falling of an aircraft or any of its parts, on a covered dwelling and its contents. Back to More Information

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COPYRIGHT: Insurance Publishing Plus, Inc. 2004

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc

Insurance perils - Part 2

Various insurance property policies refer use the terms "hazard," "peril," or "cause of loss." In any instance, the reference is to any number of events that could create damage that the policy covers. While some events are commonly understood, others aren't. Further, the term that appears in an insurance policy may not mean the same as it does in the dictionary.

This is part two of a two-part discussion on different causes of loss. If you haven't yet, please be sure to read part one.

"Click" below for additional information

Vehicles
Smoke
Volcanic Eruption
Vandalism and Malicious Mischief
Damage By Burglars
Falling Objects
Weight of Ice, Snow or Sleet
Accidental Discharge
Sudden and Accidental Tearing Apart
Freezing
Electrical Damage

Vehicles

Damage caused by direct physical damage with "vehicles" is covered by the vehicles peril. Damage caused by objects thrown by vehicles (such as stones, etc.) is covered as well. The vehicles peril does not include loss to a fence, driveway or walk caused by a vehicle owned or operated by the insured or a resident of the described location. Back to Additional Information

Smoke

Smoke damage is usually referred to as "sudden and accidental damage from smoke."

Any sudden and accidental damage from smoke caused from any source except smoke from agricultural smudging or industrial operations would be covered. The terminology used makes clear that the damage must occur over a short period of time. A prime source of claims is furnace malfunction that results in the backup and blowing of smoke and grit into rooms through a central heating system.

Agricultural smudging would include damage from burnoff of growing materials on or near the covered premises and use of smudge pots to protect growing crops and trees from frost. Damage from smoke associated with businesses would include that caused by the "blowing out" of smokestacks in the course of periodic cleaning. Excluded damage would also include damage caused by smoke from malfunctioning industrial heating and processing equipment. Back to Additional Information

Volcanic Eruption

Damage caused to insured property by the eruption of a volcano is covered under the Dwelling Policy Program; however, loss caused by earthquake, land shock waves or tremors is excluded.

This peril is designed to address the damage caused by the eruption of a volcano, including the ensuing lava flow and airborne particles. In most policies, one or more volcanic eruptions that occur within a 72-hour period is considered to be a single covered event. Back to Additional Information

Vandalism and Malicious Mischief

Vandalism and malicious mischief are generally cited as a single peril meaning willful or malicious physical injury to or destruction of property. Historically, malicious mischief has been added to vandalism to identify the covered peril because it has a special meaning by definition, and because it embraces a number of situations that are not technically covered by "vandalism."

"Vandalism" means willful destruction or defacement of things of beauty. It implies general hostility to nice things and satisfaction from their destruction. It is derived from the name of a Germanic people who overran Gaul, Spain and northern Africa in the 4th and 5th centuries and who sacked Rome.

"Malicious mischief" implies damage to property motivated by hatred or spite. It is not associated with beautiful things, but rather with utilitarian things such as machinery and business buildings and their contents. Acts leading to this kind of destruction are premeditated and include those arising from resentment and ill will during labor disputes.

Accidental damage is not covered under the "vandalism" peril. Coverage applies only when the damage is intentional. The vandalism and malicious mischief peril does not include loss to property on the "residence premises" if the dwelling has been vacant for more than 30 consecutive days immediately before the loss. A dwelling being constructed is not considered vacant. Furthermore, the vandalism or malicious mischief peril does not include loss by pilferage, theft, burglary or larceny. Back to Additional Information

Damage By Burglars

Damage caused by burglars refers to the damage caused during a break-in and not to the actual stolen property. For example, if two burly burglars attempted to remove a grand piano from the insured residence, the actual damage to the walls, floors and doorways caused by the piano being moved would be covered. The actual loss of the piano would not. Typically there is no coverage for loss to property in a building that has been vacant for more than 30 days immediately before the loss. Back to Additional Information

Falling Objects

This peril covers damage to the exterior of the insured premises and its contents if the falling object first damages the roof or exterior wall. Damage caused by any falling object is covered, including falling trees; however, damage to the falling object itself is not covered. This peril does not include loss to outdoor radio and television antennas and aerials including their lead-in wiring, masts and towers, outdoor equipment, awnings and fences. Back to Additional Information

Weight of Ice, Snow or Sleet

Damage to the insured building and/or contents due to the weight of ice, snow or sleet is covered. This coverage excludes loss to certain property, such as: awnings; fences; patios; swimming pools; foundations; retaining walls; bulkheads; piers; wharves; or docks. Back to Additional Information

Accidental Discharge

Damage to insured property caused by accidental discharge or overflow of water or steam from within a plumbing, heating, air-conditioning or automatic fire protective sprinkler system or household appliance is covered. Coverage includes the cost of tearing out and replacing any part of the building on the residence premises necessary to repair the system or appliance from which the water or steam escaped.

Damage caused by continuous or repeated seepage or leakage to the insured property is not covered; the cause must be sudden and unforeseen. Damage caused by freezing is not covered under this peril. Further, this type of loss is not covered if the dwelling has been vacant for more than 30 days immediately before the loss. A dwelling being constructed is not considered vacant. Back to Additional Information

Sudden and Accidental Tearing Apart

Sudden and accidental tearing apart, cracking, burning or bulging of steam or hot water heating systems, air conditioning systems or fire protective sprinkler systems or appliances for heating water is covered. The emphasis on this peril is that damage caused by the steam, hot water and related systems must be sudden and accidental as opposed to gradual and foreseen. Back to Additional Information

Freezing

Loss caused by the freezing of a plumbing, heating, air-conditioning or automatic fire protective sprinkler system or of a household appliance is covered. This peril does not include loss on the residence premises while the dwelling is vacant, unoccupied or being constructed unless the insured has taken reasonable care to maintain heat in the building or shut off the water supply and drain the system and appliance of water. Back to Additional Information

Electrical Damage

This peril involves damage to insured property as a result of sudden and accidental artificially generated electrical current. Tubes, transistors and similar electrical components are not covered. Back to Additional Information

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COPYRIGHT: Insurance Publishing Plus, Inc. 2004

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Personal Injury

While you might be familiar with the terms "bodily injury" and "property damage" which refer to accidentally harming others or their property (respectively), there is another source of loss faced by most persons called "personal injury." Unlike events that result in a person suffering a serious injury or property that is damaged or destroyed, personal injury usually involves interference with another person's legal rights or hurting another person's reputation. Typically, personal injury includes the following acts:

  • False arrest, detention or imprisonment - Example: A homeowner locks a teen she suspects of stealing in a bedroom for an hour until the police arrive and it turns out the teen did nothing wrong:
  • Malicious prosecution - Example: A gentleman accuses his neighbor of stealing a laptop from his home and files charges with the police;
  • The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor - Example: A boarder comes home from work and finds his room's door padlocked. The homeowner/landlord did it after the boarder, for the third night in a row, plays his stereo loudly;
  • Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services - Example: A homeowner is the president of her PTA and she also publishes articles for the association on her Website. After an argument with another PTA officer, the president recounts the incident on her site and includes some insults and false items about the person; or,
  • Oral or written publication of material that violates a person's right of privacy - Example: A woman is visiting a friend. During the visit, she overhears her friend's conversation with her doctor. The next day, the person reveals to others that the friend, a young, single female, is having medical problems due to an unexpected pregnancy.

Naturally these are the type of incidents that could result in lawsuits. However, they are also the sort of events that are excluded from coverage by the typical homeowners policy. The major reason for their exclusion is that they are deliberate acts rather than being accidental. One way to get some coverage for such losses is to purchase personal umbrella coverage. It may be worthwhile to discuss your possible need for personal injury coverage with an insurance professional.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2004

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The Businessowners Policy

If you own and/or run a smaller business, your insurance needs may be properly handled by a businessowner policy or BOP. BOPs are similar to a homeowners policy, offering both property and liability protection. Businesses such as retailers, wholesalers, small contractors, artisan contractors, dry cleaners, restaurants, offices and convenience stores (including those with gas pumps) are eligible for BOP coverage. All such operations may be insured by a BOP as long as they are not larger than 25,000 square feet in total floor area or have gross annual sales greater than $3,000,000 (per location). More restrictive guidelines typically apply to businesses that include cooking operations.

BOPs protect buildings as well as other features such as additions (completed or being built); indoor and outdoor fixtures; machinery and equipment; landlord furnishings, and maintenance property (such as mowers, snowblowers, ladders, etc). BOPs also cover outdoor furniture, floor coverings, and appliances used for refrigerating, ventilating, cooking, dishwashing, and laundering. The building coverage also applies to materials, equipment, supplies and temporary structures located near the insured premises.

The policy's protection to business personal property applies whether the property is located inside or immediately outside the covered buildings. Business personal property (such as office equipment, copiers, desks, etc.) includes property you own, lease or control (i.e., borrow or control) as long as the property is used by the business.

Businessowners liability coverage provides comprehensive protection for claims or suits made by other parties. Its liability section covers losses involving injury to other persons or damage to property that belongs to others. It also provides limited protection against personal injury (slander or libel), advertising injury and losses involving an operation's products or services.

Naturally, there are certain situations that are not covered by a BOP. For instance, there is no coverage for losses involving most vehicles, money and securities; illegal property (contraband), land, water, growing crops or lawns; or watercraft.

A BOP may be supplemented to provide additional protection. Property coverage options include adding insurance for accounts receivable, valuable papers and records, earthquake, spoilage, etc. Liability coverage can be expanded to handle additional business interests, limited vehicle liability, losses related to personnel situations, liquor liability and injuries to leased employees.

A BOP may be the answer to your company's coverage needs and it may be worthwhile to get more information on the BOP from the nearest insurance professional.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2004

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Certificates of Insurance

Business transactions frequently require insurance and a Certificate of Insurance as proof of compliance. A certificate is not the same as the policy. It can’t alter an insurance policy, so requests to "endorse the certificate of insurance" are inappropriate. A certificate is a separate document used to comply with a common contract requirement to verify certain types and amounts of insurance.

Certificate holders, the entity requiring the certificate, often demand being named "additional insureds." This requires an endorsement to the policy and it gives them coverage for injury or damage resulting from the contract. A lease of premises is a common example. The tenant is required to add the property owner to their insurance coverage as an additional insured. If a customer is injured on the premises and sues both the property owner and the tenant, the tenant's liability policy would provide coverage for both parties.

Construction contracts require certain forms of insurance, certain limits be maintained, hold harmless agreement and additional insured requirements. A "hold harmless" agreement is a contract provision that states how much responsibility each party accepts for damages arising out of the agreement.

The Certificate of Insurance can confirm that the appropriate policies were issued and that the other requirements were also met. It is important to have a system for monitoring receipt of the Certificates of Insurance BEFORE any sub-contractors are allowed to begin work. If Certificates are not obtained or kept current, when the contractor’s Workers Compensation and General Liability policies are audited, the payroll for the sub-contractors without Certificates will be included with the contractor's resulting in an additional premium charge.

Ask your insurance agent to help determine if you should be obtaining Certificates of Insurance from your business relationships. In addition, when you’re required to provide a Certificate, send your agent a copy of the contract. The contract allows the agent to assist you in determining what liabilities you are accepting and what can be done to modify your insurance program to best protect your financial well-being.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2002

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Joint Ventures

A joint venture is an entity formed by two or more businesses that want to pursue a specific purpose for a specified period of time. While some states require a legal filing of the venture, other states recognize any entity that meets the definition. A partnership differs from a joint venture as the former lasts indefinitely and its purpose may change.

A joint venture can consist of sole proprietors, corporations, partnerships or any combination of these entities. Such ventures often bring together two areas of expertise into a single endeavor in order to capitalize on that combined expertise for a specified time period.

Insurance policies generally do not cover a joint venture unless the venture’s name is shown on the policy. There is no automatic coverage for a business that begins a joint venture during a policy term. For instance, two contractors are interested in bidding on a major project. They decide that it may be beneficial to bid on the project as a single entity. In this case, the joint venture is recognized as a distinct legal entity formed for pursuing the project. Unfortunately, it’s equally common for businesses to fail to recognize their formation of a joint venture. The oversight could result in the joint venture suffering a loss that isn’t covered by insurance.

Consider contacting an insurance agent to discuss your possible coverage needs which may include general liability, automobile liability and, if the joint venture has employees, workers compensation insurance. It is also important to determine if the joint venture will need insurance to continue after it ceases to exist. The issues are unique to each joint venture and should be carefully addressed by legal counsel and the insurance agent in cooperation with the joint venture principals.

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The Commercial Umbrella Policy

The Umbrella Liability policy is still a relatively new type of insurance coverage for the average business. As recently as 25 years ago, it was seen as only needed by the very largest of business entities. Liability claims and court decisions involving millions of dollars are no longer uncommon; any business can be found legally responsible for this type of judgment.

The coverage form is still not standard, varying greatly among companies and some jurisdictions may create unique coverage issues. Punitive damages are an example. Some states only permit responsible parties to pay punitive damages; others allow them to be paid by insurers. Another area of difference is that no policy covers everything; every policy has exclusions.

A business owner may consider an accident that does not involve a fatality a minor item. The reality is that such an accident may result in millions of dollars of medical care, lost income and other expenses. Can your business afford a payment of millions of dollars? Think of accidents involving vehicles which, today, are much safer than 5 or 10 years ago. That means that accidental deaths are less likely while severe head injury is very likely. Severe head trauma can significantly increase a claim’s cost because it may take up to seven years to determine the ultimate extent of injury. Recovery is often slow and sporadic. These elements combine to make regular insurance coverage insufficient.

A business may have auto liability coverage but insurance limits of more than $500,000 is rare. This is because insurers are reluctant to offer higher coverage at an affordable price. When the limit under the business auto policy is not enough to meet the amount of a loss, the business is responsible for the difference.

An Umbrella Liability policy could be the difference between bankruptcy and an on-going business venture. The Umbrella policy would take over where the business auto policy stopped, providing defense coverage and additional limits to pay large judgments.

There are no standard Umbrella Liability policy forms; each company has their own variation. Each form offers different options that can help tailor coverage to specific business needs. One thing to remember is that an Umbrella Liability policy will not cover everything; there are exclusions in this form as in any other contract of insurance.

Contact an insurance agent to discuss securing this valuable form of liability coverage. It could help preserve your business in the event of a liability claim.

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Office Functions and Alcohol

The office picnic, Christmas party, and client party are all examples of company events that may involve alcohol. Can a business be held responsible for injuries that result from serving alcohol? Is the current insurance program sufficient to address this concern or is it necessary to purchase special insurance?

Individual states govern the answer. Typically, state Dram Shop (liquor) Laws set the standard for liability for injury or damage arising from serving alcohol. The laws vary among states, but often indicate liability exists when serving someone that is underage or visibly intoxicated. In states that do not have Dram Shop Laws, the civil court system sets the standards based on each case. Even in these states, courts often follow the same line of reasoning used in Dram Shop Laws.

The Commercial General Liability policy excludes coverage for Liquor Liability but only if the insured is 'in the business of' selling, serving, or manufacturing alcoholic beverages. If the event offers alcohol without a charge, it could be stated that the insured is not 'in the business of' selling or serving. If persons have to pay, even if the charge is only to offset the alcohol’s expense, could create a different legal situation.

When hosting an event that includes liquor, some businesses have decided that hiring a bartender will reduce their risk of being held liable. This step at least offers the benefit of another party being held primarily responsible and reducing the amount the business might be required to pay. The main issue is obtaining a Certificate of Insurance from the bartender to confirm that he or she carries an adequate level of Liquor Liability insurance. The certificate should be obtained PRIOR to the event. Otherwise, it may be too late when you find out that there isn't a policy or that the limits are insufficient.

Society is less tolerant of drinking and driving. An impaired driver who causes an auto accident is much more likely to be sued. Besides the driver, the lawsuit will probably be extended to include a business that provided alcohol. Why, because such a business is considered as contributing to the loss and is called on to share (or fully bear) the cost of injury or damage. The Commercial General Liability policy could provide the necessary defense for the business, if it is not 'in the business of' providing or selling the alcohol.

The solution is to discuss the types of events your business sponsors or hosts with your agent to determine if you need to purchase special coverage. This discussion may also help you take steps to reduce potential lawsuits. Some businesses may find it easiest and safest to ban drinking during business hours, including business lunches, dinners or other events. Your insurance agent and legal counsel can assist you in determining ways to protect your assets.

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Umbrella Liability and Uninsured Motorists

How does your business umbrella policy handle a loss involving an uninsured or an underinsured motorist? Uninsured Motorist (UM) laws intend to put an injured person in the position he would have been in if the party causing the injury had met his or her minimum financial responsibility (varies by state). Underinsured Motorist (UIM) laws are intended to put an injured person in the position he would have been in if the party causing the injury had met his or her actual financial responsibility (varies by accident circumstances). Recently, court decisions have favored allowing "full compensation" for losses, resulting in more judgments paid under a coverage part that was designed to be the "last resort" (collecting coverage under your own policy).

Liability coverage is designed to pay for you injuring others. Let's take a simple example. Phil owns PC Physician, a firm that services personal computers and laptops, including pick up and delivery. While making a house call, a PC Physician service van driver is distracted and fails to see a red light. The van runs into a stopped car. The injury to the car’s driver and the damage to her vehicle are covered by the liability section of PC Physician’s automobile policy. The injury and damage to the PC Physician driver and van are not covered.

An Umbrella Liability policy only provides liability coverage, not coverage to you for any injuries you receive. UM and UIM coverages provide coverage to you for injuries caused by another party, acting as substitute liability coverage. While state laws are fairly clear in their requirement that primary auto policies include UM and UIM protection, it’s not clear if umbrellas (secondary or excess policies) are also subject to the requirement.

In recent years, more attempts have been made to force umbrellas to pay for injuries involving uninsured or underinsured drivers. At each level of the court system, conflicting opinions have been written on this subject. The result is tremendous confusion within the legal system and the insurance industry whether an Umbrella Liability policy provides Uninsured and Underinsured Motorist coverage. The current trend is, where permitted by law, requiring insurance companies to have their policyowners sign that they either accept or reject the coverage in the Umbrella.

The solution is to contact your agent and discuss the issues within your state and the states where you operate automobiles. Determine what options are available from your Umbrella Liability carrier and what best protects your assets.

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Business Insurance Costs

Many business insurance customers may have complaints such as the following:

  • Why have my insurance costs gone up so much in the past couple years when I haven’t had any claims?
  • Doesn’t anyone in this state offer affordable business insurance?
  • Why doesn’t my insurer write this type of insurance in my state?
  • I’ve only had two claims, why won’t anyone insure me?

Businesses price their products to cover the costs of production, plus sales and marketing expenses. Prices also reflect some post-sales costs such as repair or replacement under warranty. At one time many industries began pricing their products below their true costs. The strategy was based on the assumption that increased sales would make up the difference. The strategy wasn’t successful. It hasn’t worked for the auto industry, the computer industry or the insurance industry.

The problems of the insurance industry became apparent about three years ago. Individual companies were just beginning to alter pricing as part of the solution. Then the terrorist attack of September 11, 2001 changed everything. Suddenly, a catastrophe beyond imagination hit this country and the insurance industry in a very significant way. Workers Compensation, a coverage that had never experienced a loss of this magnitude, was struck by a catastrophic loss. Property losses, business income losses, liability losses, life insurance claims, every type of policy was affected by this horrific event. What started to be a gradual correction became a sudden and violent change. Now the industry has to handle many more claims being presented many years after their policies have expired. In the case of pollution, asbestos and employment practices, the industry is being asked to handle losses that policies weren’t designed to even cover.

Well, what can a business owner due to minimize their high insurance cost? Before considering sacrificing the amount of protection you carry to save money, consider alternatives. Some other solutions would be:

1. Review your coverage:

    1. Take a close look at your insurance. Could you increase the deductibles to lower your premium?
    2. Are you carrying physical damage coverage on commercial vehicles that aren’t worth it?
    3. Are you insuring items you could replace out of pocket? Are there pieces of equipment that are insured when they could be replaced from operating funds without submitting a claim?

2. Review your exposures:

a. Could you reduce the premium by installing an alarm system or fire protection system? Would these premium savings offset the cost of the system?

b. Could you implement safety programs that would reduce the cost or make the insurance company more interested in providing coverage? For example: driver safety programs, back to work programs, safety training in proper use of equipment and job functions.

3. Identify your insurance goals:

a. Do you need an insurance company that can provide loss control services?

b. Do you need an insurance company that can provide claim-handling services for your Workers Compensation insurance?

c. Do you need an insurance company that will allow you to make payments by phone or on-line 24/7?

d. Do you need an insurance company that has a local agent/representative that can assist you in your insurance solutions?

Shopping and price are not the only issues in insurance. What you don’t know can cost you more in the long run than you could ever save in premiums. Discuss your situation with an insurance professional and make the choice that works for you.

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Discontinued Operations

Regardless the industry, mergers and acquisitions have become the norm. These are very complex legal transactions that can affect an organization’s insurance needs. Unforeseen liabilities may arise for merged entities that produce tangible products. One area of concern is a discontinued operation.

Once a product enters the marketplace, its associated liabilities do not cease with the sale or merger of the original manufacturer nor when that particular product is no longer produced. Liability claims often occur many years after the product was first produced or sold.

Often businesses are sold on an ‘assets only’ basis. If the original business owners retain the corporate structure, then liabilities connected to their original operations will remain with that corporate entity.

For example: Utility Trailers, Inc. manufactured small trailers. The owners of Utility Trailers received an attractive offer from another company. The board decided that a sale was in everyone’s best interest. The sale was ‘assets only’. Utility Trailers, Inc. was not dissolved as a corporate entity. A year after the sale of the company, some customers filed claims for damages due to product defects on trailers that were made by the original entity. The claims reverted to the original corporation and without ‘Discontinued Operations’ Coverage, it could have become the liability of the original owners of the corporation.

Courts take different positions on these issues according to individual cases. In some instances the courts find the new owner responsible, particularly when they continue the operations of the original entity. Statutes of limitation may provide some y protection. Some jurisdictions have laws that prohibit lawsuits after a certain number of years. However, others allow a time limit for filing a suit which lay dormant, not being triggered until some harm has been discovered. Once that occurs, the clock begins to tick for taking legal action. The latter instance means that years could pass before a substantial claim arises.

‘Discontinued Operations’ coverage would provide coverage for bodily injury or property damage caused by defective products. The same coverage can be designed to provide coverage for contractors that have ceased doing business. It would be a disappointing situation to find that after a product has been discontinued or assets sold, all profit from the sale – and perhaps more – has been taken away due to a defective product that is still the responsibility of that entity. So contact your agent and discuss whether you have continuing liability for a discontinued operation.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2003

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Loss (Reporting) Control

Are you familiar with the adage "honesty is the best policy"? Are you a firm believer in open, complete communication? Both of these positions are important to hold as you operate your business. However, you may want to re-evaluate how handle minor losses. Why? Because what you say may incriminate you...at least to your insurer.

Daily, insurance consumers are asked to reconsider filing a claim, not because of its merits, but because of the possibility that insurance affordability or availability could be harmed. Insurers are focusing more of their attention on loss history and how past losses affect a given business that they insure or are considering insuring. In the current insurance environment, reporting a minor loss could make you a two-time loser. First, depending upon loss circumstances, coverage may be denied. Second, the fact that the loss occurred may cause your insurer to take a closer look at you.

Insurance companies want to have as much information as possible in order to decide whether to offer or continue to offer coverage. Loss history has always been important to insurers. However, an increased emphasis is being placed on using past losses as a way to predict the likelihood of future losses. The difference is that insurers have abandoned asking only about losses that exceed a certain amount. They now look for information on every conceivable loss. This increased sensitivity to losses may cause an insurer to increase premiums or even decide not to renew coverage when, in the past, minor or unpaid claims were not treated as problems.

Look, you have to be honest with your agent and insurer. However, insurers have changed the rules on viewing loss activity. So you owe it to your organization to manage losses in a manner that is in sync with the new reality. Handling more small losses as an operating expense instead of through your insurer may be good business. More organizations are becoming aggressive and creative in managing losses, especially as insurers have changed their attitude toward losses and underwriting.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2003

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A Look At Lloyd’s

Lloyd's of London is an organization that has provided insurance worldwide for more than 300 years. In the United States, the organization has a reputation for handling either very expensive or exotic types of insurance. Lloyd's is neither an insurance company nor, for most of its history, a corporation. It is made up of approximately 17,000 members consisting of the underwriters, the insurance brokers who bring them business, and the investors known as "names." The underwriters accept insurance business on behalf of syndicates (groups of "names"). Prior to the 1980s, many American insurance agents, producers, and risk managers were reluctant to place insurance in the Lloyd's market because of lack of familiarity with the organization. Currently, American insurance professionals and private investors have a much higher level of participation with the historic marketplace. In fact, the U.S. is becoming a dominant source of business handled by Lloyd’s.

The history of Lloyd's begins at Edward Lloyd's coffeehouse in 1688, where he attracted a clientele of merchants, particularly ship owners with vessels and cargoes needing protection. Mr. Lloyd’s establishment quickly evolved into a meeting place where businessmen sought brokers to place insurance with wealthy, reputable men. Character and integrity were important because the persons (called underwriters) who agreed to invest in the ships and cargoes put their personal fortunes at risk in order to pay their share of any claim. If a ship’s voyage was successful, the underwriter would share in the profits.

Note: The term underwriter came from the practice of persons agreeing to insure a ship and/or its cargo by placing his signature under the name of the vessel he was willing to sponsor.

Lloyd's of London has long been identified with British history and the growth of worldwide commerce. It is an international insurance market, located in London, whose members cooperate with each other, compete with each other and, of course, compete against other insurance organizations. There are four major markets at Lloyd's: Marine, Non-Marine, Aviation and Motor. Lloyd’s also has a smaller market that handles short and long term life insurance.

Insurance is not placed with the Corporation of Lloyd's, a society incorporated under Act of Parliament of 1871. The Corporation provides the premises, shipping information services, administrative staff and other facilities that enable the Lloyd's market to transact insurance business. The actual insurance transactions are handled by thousands of Lloyd's members. About one-third of the membership is actively engaged in the market. The remaining members provide capital, but do not actively place business in any of Lloyd’s insurance markets. Only the underwriting members may accept insurance business on behalf of a syndicate.

Historically, a policyholder with a valid claim could be certain that the claim would be paid, whatever the cost to the member who accepted the risk. Formerly, every underwriting member was responsible up to the full extent of his personal assets for his share business. If his personal assets were not enough, Lloyd's would make any deficit out of its reserve funds.

Today, Lloyd's liability is more conventional, limited in the same manner as traditional insurance companies. The change was necessary due to its long-term problem in handling losses associated with asbestos claims. However, the changes made by the organization make it likely that Lloyd's will continue to be an important part of the insurance market.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2004

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Contractual Liability

As far as the insurance industry and the law are concerned, a business entity (sole proprietor, partnership, limited liability company, corporation, etc) is the same as a person. A business is held both civilly and criminally accountable for its actions and for actions that occur on behalf of a business. In other words, a business that harms another party or damages/destroys another's property may be sued or prosecuted.

For larger businesses, the insurance coverage that protects against liability to third parties is a Commercial General Liability policy. This policy is designed to take care of the business that is described within the policy and its ability to do its job is complicated when the insured business voluntarily agrees to take over someone else's responsibility. When this agreement is in writing, it is referred to as contractual liability.

Contractual liability throws the CGL for a loop. The policy's design and cost is based on the assumption that it only has to concern itself with the party that is listed on the policy. Taking on some other business' liability means that the policy is being asked to either defend or pay for the injuries or damages caused by an entity that it doesn't "know" and isn't getting money for that opportunity. A company that decides to step-in for another company has to make sure that it can arrange insurance to handle a loss it has assumed. It may try to take care of the situation by endorsing (changing) its CGL by adding the name of the other party as an additional insured. Or, when the insured company is a property owner and the other party is a contractor, the property owner may buy one special form of coverage called Owners and Contractors Protective Liability.

Of course, regardless the coverage arrangement that is attempted, it doesn't mean that every situation will be covered. You need to read the CGL policy (including any endorsement form) or Owners and Contractors Policy language to determine what situations are insured. Typically, a covered event has to involve a type of loss that the policy protects against and the persons involved must have a certain arrangement with the party that is insured by the policy. For instance, if someone sues you because your temporary business partner's employee hits them with a company truck, the policy won't help. A CGL doesn't cover auto-related losses. Let's say you own a printing company and you, in writing, agree to cover your friend's plumbing business if they are sued by a customer. Neither a CGL nor an OCP would help, because the written agreement has no relationship to your operations.

You should discuss your business relationships with an insurance professional in order to be sure that you, your business and your related liability are handled efficiently and economically. This often means that the best strategy is to have every party take care of their own insurance needs.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2004

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Insurance – A Matter Of Trust

Regardless the subject of an insurance policy, be it trucks, manufacturing plants, printing presses, inventory, professional acts or cargo, it involves trust. Insurance policies are contracts. These are written agreements that involve at least two parties. One is the insurance company that provides the applicable form of protection. The other is the party or insured, who is protected by the policy. These two parties have a direct, contractual relationship with each other. The insurer agrees to protect the insured if the insured agrees to pay for the protection.

The trusting relationship begins before any policy is issued. When an insurance company seeks customers, either directly or through agents, it does so under the assumption that their policies will be issued to persons who meet their qualifications. Qualified persons are discovered by using applications. Besides collecting identifying information, applications also gather details that help a company determine if a person is eligible for a type of coverage. Where does trust come in? The insurer relies on the information that an applicant provides on the application. It acts on that information by reviewing it and deciding whether a policy should be issued. The information also helps the insurer decide how much to charge for the coverage, what level of coverage it should agree to grant and the conditions for providing the protection.

The insured also to be able to trust the insurer. He, she (or a business entity) has to rely on the company actually issuing the type of coverage it promises. The insured also trusts the company to pay for a loss (that is eligible under the coverage) and to handle any loss fairly and efficiently. Both parties must approach the contractual agreement honestly and fairly. The contract is affected if either party fails to act in good faith.

For example, an insurance company breaks a contract when it refuses to cover an eligible loss without a valid reason. On the other hand, an insured breaks a contract when he or she refuses to pay for the policy. An insured may also break the contract if he or she either withheld information or intentionally supplies false information. Of course the information must involve some significant item that would have affected the company's decision to accept the insured. Breaching a contract may allow an insured to sue a company for coverage or allow a company to void the policy it issued.

Whenever policies are not handled in good faith, there are consequences that impact more than just the two parties. Third parties, such as other businesses or persons, may also be harmed by insurance contracts that turn out to be invalid. Modern economies depend upon the role played by insurance contracts. It would be impossible to handle large transactions without a way to protect all parties against possible losses. Further, many parties would not even attempt certain types of transactions without the support of insurance, such as large building projects, major equipment sales, vehicle rentals and numerous other transactions.

Certainly there are many times when one party fails to handle their insurance obligations in good faith. However, such instances are the exception. Our economy and standard of living are made possible because most parties deal with each other honestly and we all benefit when that happens.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2004

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The Silica Problem

A "new" problem has come to the legal forefront, affecting commercial insurers and their clients. Called by various names, the "silica problem," "silicosis," or Crystalline Silica, the situation is serious enough that some in the insurance industry refer to it as the second coming of the asbestos problem. It may have a serious impact on your business if it includes operations that expose your employees (or yourself) to the health hazard.

"Silicosis" refers to a lung disease that is triggered by long-term, inhalation of silica particles. In 2003, the Occupational Safety & Health Administration (OSHA) published an estimate that nearly two million American workers were vulnerable to contracting the disease. Persons in the construction industry are particularly at risk. The risk of silica particle exposure is greatest in jobs involving abrasive blasting, mixing/making concrete (or brick) and drilling masonry material. Other areas of concern (again according to OSHA) include the following:

  • asphalt pavement manufacturing
  • ceramics (& china) manufacturing
  • tool and die industry
  • steel and foundry industries
  • any job using abrasive blasting for cleaning, smoothing or etching

Generally, silicosis develops only after years of exposure to Crystalline Silica. The levels of the disease may either be Chronic, Accelerated or Acute. Symptoms include fatigue, shortness of breath (particularly after a strenuous activity), chest pain and weight loss. A chest X-ray may determine lung damage. In some cases, silicosis may be fatal.

Silicosis claims and lawsuits are becoming more common. There have been reports of very costly damages being awarded, since the more serious claims involve long-term health issues. It is important to look for ways to avoid having anyone contract silicosis. Try to apply precautions such as the following:

  • If possible, substitute other materials for silica when performing abrasive blasting
  • Use proper respirators with correct seals
  • Do not permit eating, drinking or smoking near work areas that generate silica particles
  • Use proper ventilation to clear work areas of particles
  • Make showers available to workers, along with either disposable or washable work clothes. NOTE: Clothing should first be vacuumed before it is removed
  • Provide training to employees in how to monitor work situations and in recognizing (and reporting) silica related problems
  • Wash hands and face before eating/drinking
  • Use "wet" sweeping to clear dust from work areas

There are other methods to help fight this problem. If your operations include exposure to this health hazard, be sure to discuss solutions with insurance professional.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2005

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The Commercial Property Program

Protecting your real and business personal property is a part of any insurance program, as even a small business may have most of its assets and resources tied to tangible property. A national standard for insuring property is the Insurance Services Office (ISO) Commercial Property Program.

The Insurance Services Office is the nation's largest corporation that develops and maintains insurance forms many insurers in the property and casualty insurance industry. Companies may use ISO forms as is, modify ISO forms or create their own forms. Many companies use the ISO Commercial Property Program which may be written either as a single policy that covers only buildings and property or as a package that provides property, liability and, if you choose, crime insurance for your business.

Eligibility

Nearly any business may qualify for protection under the Commercial Property Policy. The exclusions that do exist usually involve the type of businesses that can qualify for lower rates. Otherwise, you could pick up a hundred different CPP policies and see a hundred different types and sizes of businesses covered, from bakery to insurance agency, from auto repair shop to a small, domestic brewery; the program is very flexible.

What Is In A CPP Policy?

A Commercial Property Policy is flexible because it consists of several basic parts or forms:

  • Declarations Forms - these tell you who is covered, the amount of insurance, the type of coverages written and other information about the business and other identifying details.
  • Conditions Forms - these documents contain sets of conditions that control how the policy operates such as the customer's duties when a loss occurs, the method used for settling a loss or what steps to take when the customer and the insurer disagree over the amount of a loss.
  • Coverage Forms - which include descriptions of the type of property that is covered or excluded and it explains items such as coverages, insurance limits, definitions, deductibles and other important provisions.
  • Causes of Loss Forms - as you might expect, these forms describe the causes of loss (perils) that are insured against and any exclusions.
  • Policy Cover or Jacket - which is, literally, a cover designed by the company providing the policy and it usually includes a table of contents or an index.

The above, basic parts can be modified or supplemented to better fit different types of businesses by adding a wide variety of optional coverage forms called endorsements.

Causes Of Loss Forms

The following Causes of Loss Forms are available under the CPP:

  • BASIC - protects against Fire, Lightning, Explosion, Windstorm, Hail, Smoke, Aircraft or Vehicles, Riot or Civil Commotion, Sprinkler Leakage, Vandalism, Sinkhole Collapse, and Volcanic Action
  • BROAD - adds several additional covered causes of loss over the Basic Form, including Breakage of Glass, Falling Objects, Weight of Snow, Ice, or Sleet, and Water Damage.
  • SPECIAL - provides coverage on an "all risk" basis which essentially covers anything not otherwise excluded.
  • EARTHQUAKE - covers earthquake shocks or volcanic eruptions that occur within any 168-hour period.

What is Covered?

A Commercial Package Policy covers building, completed additions, fixtures, permanently installed machinery and equipment, personal property that is used to service or maintain the building or premises, and, under certain circumstances, construction equipment, material and supplies.

Under personal property, the CPP covers furniture and fixtures, machinery, equipment, stock, all other personal property owned by the insured and used for business, labor, materials, or services furnished or arranged by the insured on the personal property of others, any improvements and betterments made by or acquired by the insured (when a tenant), and any leased personal property the insured has a contractual responsibility for. The CPP also covers property that is outside if it is in the open or in a vehicle that is within 100 feet of the premises.

What Isn't Covered?

Like any insurance policy, there are items that are not covered. A CPP does not provide coverage for accounts, bills, currency (and similar property), animals, automobiles held for sale, bridges, roadways, walks, patios, or other paved surfaces, contraband, property being transported by air or over waterways, land, crops, underground property, most vehicles, expenses related to replacing company records and other property.

Again, this is just a very brief discussion of the CPP. If you need more information, help is nearby. Contact an insurance professional to talk about coverages and your coverage needs.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2002

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Vacancy Provision

All commercial property policies significant reduce their coverage for buildings that are vacant beyond a certain period of time. In some cases, certain types of coverage are eliminated altogether. In most cases, coverage may continue, but it requires additional premium and the attachment of a permit in order for insurance to be continuous during a period of vacancy.

Insurance companies are interested in insuring ongoing businesses and the cost of insurance is based upon active occupancy. Therefore, if property is vacant there is a considerable increase in the pricing. Since vacancy is often only discovered after a claim, the typical commercial property policy's Loss Conditions severely limit coverage when a vacant building has suffered damage.

Definitions

Before any restrictions can be imposed, the insurance company must define exactly what they mean by vacancy.

Tenant - When the insured is a tenant and the policy covers that insured's property interest, the definition of building is the unit or suite that has been rented or leased to the tenant. That building is considered vacant when it no longer contains enough business personal property to conduct the customary operations of the insured tenant.

Building Owner Or General Lessee - When the insured is a building owner or general lessee, building is defined as the entire building. The building is considered vacant UNLESS at least 31% of the TOTAL square footage is rented to a lessee or sub-lessee and used by the lessee or sub-lessee to conduct its customary operations OR is used by the building owner to conduct customary operations.

Buildings Under Construction - Buildings that are under construction or renovation are not considered to be vacant.

Vacancy Provisions

Now that vacancy has been defined, the vacancy condition can be stated. If the building where loss or damage occurs has been vacant (see definition above) for more than 60 consecutive days before the loss:

The insurance company will pay NOTHING if the loss was caused by vandalism, sprinkler leakage, glass breakage, water damage, or theft (including damage from attempted theft).

The insurance company will reduce any loss amount by 15% if the claim is due to any Covered Cause of Loss not listed in 1 above.

Vacancy Permit

When vacancy does occur, many companies, for an additional premium, will add a provision (sometimes called a Vacancy Permit). This form changes the policy wording so that it provides coverage for the property during specific time periods, while it is vacant.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2004

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Commercial Output Policy

For certain businesses, it may not make much sense to buy a standard Commercial Property Policy which protects against routine building and business property loss exposures. For companies that deal with heavy retail sales activity, active product transportation, above average processing/manufacturing, or that are involved in equipment installation or repair, there's another coverage alternative. Such businesses may want to consider a Commercial Output Policy or COP.

The COP is the modern version of an older coverage form called a MOP (Manufacturer's Output Policy). The policy is very well suited to handling larger businesses, particularly ones that move property around to different locations. It is also a good coverage choice for businesses with high, fluctuating levels of stock or merchandise.

A COP provides flexible protection by combining broad commercial property and inland marine coverages in a single form. This approach reduces the potential for coverage gaps that could occur when commercial property forms are merely packaged with separate inland marine policies.

The COP can insure damage to stock (output) during the manufacturing process and while it is in transit. Coverage exists for a variety of property such as equipment used by contractors and computers. It can cover operations involving building and installation as well as offer equipment breakdown protection.

A COP typically offers a variety of optional features such as coverage for loss involving:

  • Crime
  • Employee Dishonesty
  • Spoilage (particularly of refrigerated products)

Another feature of a COP is the use of blanket coverage. In other words, a single, substantial limit of insurance may apply to several classes of property (buildings and business personal property, property in transit) and without a coinsurance provision.

The COP is flexible enough to provide coverage to most large commercial operations. It also offers limits that are much higher than what is generally offered by other types of commercial property policies. If you own a large business, it may be worth your while to call a COP.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2004

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Functionally Valuing Older Business Property

Many firms have been in operation for decades and their longevity is usually the result of doing things the right way. Besides serving their clients well and operating profitably, there's another area that veteran firms may have in common. They may be using machinery or equipment which, while still serviceable, may be very old. The aging equipment may have reached the point where it:

  • is functionally obsolete
  • no longer exists or
  • has been replaced with more effective, functional and technologically advanced equivalents.

The issue of functionally operating equipment is not a problem when the equipment continues to operate and can be maintained. However, the situation causes a problem when trying to insure such property. A typical insurance policy would not have the option to respond to the loss properly. However, a commercial property policy can be modified with a form that may make coverage more practical. One form, called "Functional Personal Property Valuation," changes a policy so that the regular policy conditions on valuing a loss and coinsurance don't apply. This is a significant change because those provisions work under an assumption that the insured properly may be routinely replaced.

Coverage that has been changed to deal with older equipment recognizes that the insured firm may have to be more concerned with repairing damaged, older equipment or finding an equivalent substitute. A policy with a functional valuation provision is likely to offer the additional option of paying an amount equal to the damaged or destroyed property's market value that it held just before their loss. Other features are requirements that any repairs be done quickly and that any replacement property be at the same site and for the same use of the property that was lost or destroyed. A coverage modification is also likely to add terms with special definitions, such as "replacement" or "functional equivalent," or "market value."

A policy that has been altered in order to value certain property on a functional settlement basis should result in smoother claims handling and a better loss to post-loss transition. Arranging for such coverage may also spur a buyer to identify possible sources for replacing his vulnerable, older property.

If your concern is one that may be dependent on older equipment, it may be past the time that you need to discuss your particular coverage need with a knowledgeable insurance professional.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2004

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Additional Insured-Lessor of Leased Equipment

Eventually, every contractor or subcontractor faces a job where he needs to rent or lease equipment in order to complete the project. Securing the equipment usually involves a written contract in which the leasing company will ask the contractor to provide proof of insurance. This proof usually takes the form of a "certificate of insurance" and, in almost every case, the rental company wants to be named as an additional insured to protect their legal liability and interest in rented/leased equipment.

The above situation can be addressed by endorsing a version of the Additional Insured-Lessor of Leased Equipment form onto the contractor's liability policy. The basic version specifically names the rental company. It is normally used for contractors who rent equipment only occasionally, or rent it without a written contract. The other form is for the contractor who frequently enters agreements to rent equipment. This form covers the interest of any leasing company from whom equipment is rented by the contractor when a written contract is involved, and it does so without having to endorse the policy each time to name the rental firm.

Because of various court decisions, the Additional Insured Lessor form was recently changed. A number of courts interpreted the form's language quite broadly. Specifically, some courts found endorsed contractor policies obligated to provide defense coverage and indemnification to equipment lessors even when the lessee (contractor) had no responsibility for the loss that triggered the lawsuit. Removing some conflicting language changed the forms. The revised forms are written with a clearer intent. They should apply only in losses where there is, at least, some degree of fault or negligence on the part of the contractor.

A contractor and an insurance professional should approach this subject with a checklist to be sure that all the important items are handled. To start with, be sure that the rental company has its own liability insurance. This is suggested in case the contractor renting the equipment is not negligent or responsible for a particular job site incident involving the equipment and liability reverts back to the equipment's owner. In this case, maybe get a certificate of insurance from them! Next, ask all relevant parties (contractor, rental company insurance agent, insurance company underwriter) to review the rental contract. This step assures that everyone is aware of its terms and conditions and how it matches up to the coverage and limitations of the additional insured form. Next, make sure to use the same language to add the rental company on the certificate of insurance and to attach the corresponding form to the policy. It is also important to understand that additional premium charges may be necessary. In such cases, be certain that all parties accept the reasoning for the charges. Finally, it is critical that al parties be aware that coverage ends when the work is done and the equipment is returned to the rental company.

This additional insured form can help a contractor out in special situations, but it is only useful when all parties take the time to use the form properly.

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Dealing With Indirect Loss

As a business owner who deals with protecting your company's assets, it may seem logical to focus on handling threats to your physical assets, such a building, equipment, office furniture, etc. However, consider the following:

Example: Paula’s Dry Cleaning suffered a minor fire caused by a short-circuit in a dryer. However, a lot of smoke and residue accompanied the small fire. The dryer could be repaired and cleaned in a few days, but the premises would take three weeks to clean and decontaminate.

In this case, the business owner's loss of use of her store was a far greater loss than the actual damage to the physical item (dryer). Depending upon the type of loss and the type of business you operate, intangible or indirect losses (also known as Time Element losses) may threaten your operation's financial health as seriously as any direct loss.

Time Element describes losses to businesses that occur because of the time needed to repair or replace property that has suffered direct damage. The longer repairs take, the greater the amount of the time-related loss.

DIRECT VS. INDIRECT DAMAGE - Direct damage refers to tangible damage to property. A fire occurs to a warehouse. That warehouse has experienced direct damage. Time element damage is not as clear. It refers to property being damaged or destroyed and then the business must stop operations until the property is repaired/replaced and normal operations resume. The amount of the loss is not always dependent on the value of damaged property. Rather, it is related to the impact the loss has on regular operations.

INSURABLE VS. BUSINESS RISK - Tangible losses are not the sole cause of time element losses. Any event that interrupts operations causes a time element loss.

Example: A printing plant’s employees go on strike for two months, closing down operations.

Example: A local restaurant featuring Australian cuisine loses 80% of its business when customers’ tastes change.

However, these are business risks and are not eligible for protection under most insurance contracts.

SECURING COVERAGE - Should you begin your search for coverage against indirect loss, be sure that it addresses any loss of business income as extra expenses that are created by a direct loss. Getting adequate protection means you'll have to determine the level of income coverage you may need, the likely length of business interruption you may suffer and the importance of continuing operations. Once you determine your priorities, you can find matching coverage.

Example: An insurance agent’s regular office is severely damaged by fire. She keeps a full set of backup files at a remote location. The agent will not actually lose any income because of the loss of her office, but she will need to rent temporary replacement space, furniture, equipment, communications services, etc. She will also incur significant costs to notify clients and insurers and other expenses to maintain her operation while she rebuilds or finds a new office.

You have invested a lot in your business. It is important to be sure that you take the steps to deal with both direct and indirect sources of loss. As usual, it is always a good idea to discuss your questions and needs with an insurance professional.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2004

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The Standard Property Policy

What if you own a building that is used for business purposes? What if you weren’t able to buy a Commercial Package Policy (CPP) because of your building’s size, age, construction or because of its contents? Well, if your major concern is getting coverage for your building, a Standard Property Policy is an available coverage alternative.

What Is Your Building Covered For?

Besides the building described in the policy, the Standard Property Policy also covers completed building additions, property that is for maintaining or servicing the building (such as mowing or painting equipment), permanent fixtures (such as permanent shelving), machinery and material meant for construction or repairs to the covered building.

Can I Get Coverage For My Business Personal Property?

Yes, the Standard Property Policy can be used to cover furniture, fixtures (that aren’t permanently attached), machinery, equipment, stock, materials and even property that you lease or which belongs to a building (business) tenant. Further, you also have coverage for personal property of others that is under your care or on or near your insured building

Is any Type of Property Not Covered?

Of course some types of property are excluded. The Standard Property Policy doesn’t cover money, securities, deeds and similar property. Further, there’s no coverage for animals, illegal goods, parts of the building that are below the ground, cost of digging or excavating, property being transported by sea or air, or property that’s insured by another policy. There are other items that aren’t covered, but most of them fall into the categories of outdoor structures that are beyond the scope of the Standard Property Policy or items that should be covered by other types of policies.

What Types of Loss Are Covered?

The coverage provided by the Standard Property Policy takes care of losses from basic sources such as fire, lightning, and certain kinds of explosions. Further, you have the option of adding coverage for damage caused by wind, hail, smoke, aircraft, vehicles, hostile mobs, sinkholes, leaky sprinklers and volcanoes. The policy even offers several additional coverages to take care of your expense to remove debris, protect property, take care of pollutants or handle a fire department charging you to make a fire run.

There are also some handy coverage extensions available under the policy and, of course, the policy includes a group of exclusions that are common to most commercial insurance policies written to cover property. If you have a commercial building, then you have the need for protection. Talk to an insurance professional to see if the Standard Property Policy is a good way to protect your property.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2002

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Inland And Ocean Marine Coverage

If your business operation includes sending and receiving goods, it’s likely that part of your insurance needs may be handled by Marine Insurance. This major and oldest type of coverage consists of Inland and Ocean Marine coverage.

Inland Marine is a varied and flexible line of business. While it shares elements that are found in Property, Automobile, Ocean Marine and Liability coverage, it also has features that are quite distinct from any of its peer lines of business. Inland Marine coverage protects a wide variety of property. It is used to protect portable commercial property such as many types of equipment used in construction as well as some types of property that are, for all intents, immovable, such as tunnels, bridges and other property that facilitates non-marine travel. For help in identifying inland marine exposures, insurance professionals use a standard called the National Association of Insurance Commissioners (NAIC). Nation-Wide Inland Marine Definition was last revised in 1976. It still acts as the major source used by states to guide their approach in recognizing what classes of property are members of the Inland Marine Family.

The oldest line of insurance is Ocean Marine. Merchants who traded goods over waterways developed the earliest concept of minimizing risk. A person sending goods along the Nile usually split-up their goods. His use of several barges meant that the loss of one shipment would not result in a total loss. Much later, coffee-loving businessmen in olde London discussed upcoming sea voyages and decided which they might partially sponsor against risk of loss.

Ocean Marine coverage protects interested parties against the financial consequences of direct damage or loss as well as from their legal liability related to owning or operating a vessel. Ocean Marine policies protect (usually larger) craft of many types such as cruisers, barges, tankers and tugboats that are used on either "blue waters" (oceans) or "brown waters" (lakes, rivers). The policies are also used to insure cargo while shipped between their destination points.

While inland marine policy language is very similar to other types of insurance, ocean marine is not. Maritime law still heavily influences the latter and its policy wording reflects that unique heritage. If you need such protection, talk to your insurance professional who should be able to provide access to a specialty insurance carrier.

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Commercial Auto Symbols

Have you ever, during a particularly wild moment, closely examined the insurance policy that covers your business vehicles? If so, you may have noticed the little numbers that appear next to each coverage. Hopefully you’re familiar with these numbers and their meaning. If the symbols mystify you, then by all means keep reading.

Covered Auto Designation Symbols

Those little numbers on your policy’s cover page are called covered auto designation symbols or, to their friends, just symbols. Each symbol has a special meaning as they represent the type of vehicle that is protected by the applicable liability or physical damage insurance limit. As you read the symbol definitions, it’s important to remember two things. The first is that the symbol may apply to either a particular kind of vehicle OR the vehicle’s ownership status. The second item is that "auto" is a defined term, so you must be familiar with your policy’s definitions. Also notice that the symbols differ depending on whether the coverage is for liability or physical damage.

Liability Coverage Auto Symbols

1 = ANY "AUTO". This is the broadest symbol designation and covers any "auto."

2 = OWNED "AUTOS" ONLY. This symbol covers any "auto" owned by an insured, including any "auto" that is acquired after the policy begins. The symbol also applies to any "trailer" while it is towed by an owned vehicle.

3 = OWNED PRIVATE PASSENGER "AUTOS" ONLY. This symbol covers only private passenger type "autos" owned by the insured, including any private passenger type that may be acquired after the policy begins.

4 = OWNED "AUTOS" OTHER THAN PRIVATE PASSENGER "AUTOS" ONLY. This symbol covers all "autos" other than private passenger type "autos" (vans, trucks, motorized equipment) owned by an insured, including such vehicles that may be acquired after the policy begins. The symbol also applies to any "trailer" while it is towed by an owned vehicle.

5 = OWNED "AUTOS" SUBJECT TO NO-FAULT. Any "auto" owned by an insured that is garaged or licensed in a state where no-fault benefit laws exists. This symbol also applies to any "auto" acquired after the policy begins.

6 = OWNED "AUTOS" SUBJECT TO A COMPULSORY UNINSURED MOTORIST LAW. Any "auto" owned by an insured that is garaged or licensed in a state where drivers are required to carry uninsured motorist coverage. This symbol also applies to any "auto" acquired after the policy begins.

7 = SPECIFICALLY DESCRIBED "AUTOS". Only those "autos" that are specifically listed on the policy are covered. The symbol also applies to any "trailer" while it is towed by a listed vehicle.

8 = HIRED "AUTOS" ONLY. This symbol covers only those "autos" that an insured leases, hires, rents, or borrows. HOWEVER, it does NOT include "autos" leased, hired, rented, or borrowed from an employee, partner, or member of an insured’s household.

9 = NONOWNED "AUTOS" ONLY. This symbol covers only those "autos" an insured does not own, lease, hire, rent, or borrow that are used in the insured’s business, including "autos" owned by employees, partners, or members of an insured’s household, but only while those non-owned "autos" are used either in the insured’s business or personal affairs.

Physical Damage Coverage Auto Symbols

1 = OWNED "AUTOS" ONLY. This symbol covers any "auto" owned by an insured, including any "auto" that is acquired after the policy begins.

2 = OWNED PRIVATE PASSENGER "AUTOS" ONLY. This symbol covers only private passenger type "autos" owned by the insured, including any private passenger type that may be acquired after the policy begins.

3 = OWNED "AUTOS" OTHER THAN PRIVATE PASSENGER "AUTOS" ONLY. This symbol covers all "autos" other than private passenger type "autos" owned by the insured, including any "autos" other than any private passenger type that may be acquired after the policy begins.

4 = SPECIFICALLY DESCRIBED "AUTOS". Only those "autos" that are specifically listed on the policy are covered. The symbol also applies to any "trailer" while it is towed by a listed vehicle.

5 = HIRED "AUTOS" ONLY. This symbol covers only those "autos" that an insured leases, hires, rents, or borrows, unless the "auto" is leased, hired, rented, or borrowed from an employee, partner, or member of the insured’s household.

Manuscript Symbols

In some instances, a particular insurance company may agree to provide coverage for an auto situation that is not described in the above symbols. When this occurs, a special symbol, such as 10 for liability or 7 for physical damage coverage, is used and added to the policy by an endorsement. The endorsement must contain a complete explanation/description of what the symbol means. Then, that number must appear next to the applicable coverage(s).

If you have a question about any of these symbols or how coverage applies under your policy, the answers lie with the nearest insurance professional. Call them; they’re eager to help you understand your protection.

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Non-Owned Auto Coverage

Employees routinely use their own vehicles in their jobs or just to run errands for their employer. Does your company have protection in case of an accident and both your worker and your company are sued?

If your company has a business auto policy, it should include coverage for ‘non-owned’ automobiles. These are vehicles owned by others (such as an employee) that are used in the business of the company. Generally a business auto policy only protects against losses involving company-owned vehicles, so it is important to add "non-owned" coverage.

Basic business auto insurance only covers employees while they operate a company-owned vehicle to perform company business. Usually, the employee’s personal automobile policy will provide insurance to both the employee and the business when operating their personal auto on behalf of the business. However, some personal auto policies now exclude business use. So, a coverage gap may exist if the business coverage is not extended to handle non-owned vehicles.

Another important consideration is, even if coverage exists, is the coverage amount enough? The non-owned auto liability limits have to be high enough to protect both the business and the employee. A company has to take time to study this coverage need to be sure that a proper level of coverage is bought.

Including ‘non-owned’ auto liability coverage on the business policy will provide coverage for the business over any deficiency in limit from the employee’s personal auto policy. This is coverage for the BUSINESS, not the employee.

If the company does not own any automobiles, it is possible to purchase business auto liability coverage for only the danger of loss involving its use of ‘hired and non-owned’ vehicles. The ‘hired’ portion would cover business travel and vehicle rentals; the ‘non-owned’ portion would cover employees using their own auto in the business.

Even if an employee’s use of a personal autos for company business rarely happens, it only takes one serious accident to create a significant loss for the business. You should find an opportunity to discuss this coverage with an insurance professional.

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COPYRIGHT: Insurance Publishing Plus, Inc., 2003

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Coverage For Business Autos

Almost every business may face a loss due to its owning, renting, using, or loading/unloading a vehicle. Most coverage needs can be handled by a business auto policy (BAP) or similar form. BAPs may cover a variety of operations, including trucking, garaging, public and private transport and businesses with auto exposures that fall outside the other classes. Coverage is flexible. It may be purchased as a separate policy or as part of a package of coverage that may also protect buildings and business property (equipment, furniture, etc.). A BAP generally offers:

  • Liability Coverage - protection for physical injury to other persons or their property because of an accident related to your covered vehicle including legal defense cost or expense.
  • Comprehensive Coverage - handles loss from any cause except collision. A limited, less expensive option is available. It only protects against a set of specific causes such as fire, lightning, explosion, vandalism and several others)
  • Collision – takes care of damage from crashes with another object or overturn of the vehicle
  • Towing And Labor Costs for disabled vehicles
  • Loss of Use—Rental Vehicle Coverage – if you damage a rental car, this option helps to reimburse the rental company for income it loses because the vehicle is out of use. Also, there may be limited coverage for injury or damage that you cause to others while using a rented vehicle anywhere in the world.

Business Auto Policy Exclusions

Typically a business auto (or similar form) will not provide coverage for the following:
  • any injury/damage that you expected or intended
  • responsibility for damage you assume under a contract
  • losses that should be handled by a Workers Compensation, Disability Benefits or Unemployment Compensation Law
  • Bodily Injury to an employee caused by a Fellow Employee
  • Damage to property that is in your Care, Custody and Control
  • Any bodily injury or property damage that occurs because of Pollution
  • Any loss that is related to racing, demolition or stunts

Other items that are not covered are the same as those found with most types of policies, such as Nuclear Hazard or any type of War or Military Action. Racing, Wear and Tear, Freezing, Mechanical or Electrical Breakdown, Blowouts, Punctures or Other Road Damage to Tires are also excluded.

Are you protected against business auto losses? Drive over and discuss your situation with an insurance professional. The trip will be worth it.

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Commercial Drivers and Drug Testing – Pt. 1

The Department of Transportation enacted the Controlled Substances and Alcohol Use Testing and Education program to help employers protect the public against drivers who use controlled substances during their work. We will discuss the act in two parts. This part will focus on the actual regulations and who is subject to the act. Part 2 will discuss compliance and consequences of non-compliance.

Nationally, drivers must comply with the following:

  • .04 is the maximum blood alcohol level for persons operating a commercial motor vehicle.
  • The driver cannot possess any non-manifested (listed) drugs or alcohol in his vehicle.
  • No on-duty use of drugs or alcohol permitted, including avoidance of use within four hours before operation or eight hours following an automobile accident.
  • Cannot refuse either a random or post-accident drug or alcohol test.

Commercial Motor Vehicle Definition - Under the rules, a commercial motor vehicle is one that has a gross combined weight (GCW) of more than 26,000 lbs.; that is made to carry 16 or more passengers (including driver); or that is used to transport hazardous material.

Persons Subject to the Act - Any person who operates a commercial motor vehicle must follow regulations. Affected persons include, full-time, regularly employed drivers (included self-employed operators); casual, intermittent or occasional drivers; leased drivers and independent owner operator contractors who are either directly employed by or under lease to an employer who operates a commercial motor vehicle at the direction of or with the consent of an employer. It’s important that businesses be aware that any person who operates a commercial motor vehicle must comply with the act, regardless whether the person has a commercial driver’s license.

The regulations apply during any time that a driver is performing a safety function. Safety functions include a wide variety of tasks such as:
  • While waiting to be dispatched
  • During equipment inspection
  • Anytime at a vehicle’s controls
  • During a vehicle’s loading/unloading
  • During a vehicle’s repair

Compliance with the Act involves testing for alcohol use as well as for use of marijuana, cocaine, amphetamines, PCP and opiates. Drivers are required to tell their employers when they are using any therapeutic or prescription drugs. Testing must be performed prior to offering employment, within a certain time after an accident, and at random times. If justified, testing can be ordered for a driver. However, that can only take placed if a trained person has a reasonable suspicion that the driver is affected by drugs or alcohol.

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Commercial Drivers and Drug Testing – Pt. 2

The Department of Transportation enacted the Controlled Substances and Alcohol Use Testing and Education program to help employers protect the public against drivers who use controlled substances during their work. We will discuss the act in two parts. This part will focus on penalties, training, recordkeeping and consequences of non-compliance. Part 1 discusses the actual regulations and who is subject to the Act.

Penalties For Failing A Drug Test – A driver who fails any alcohol or substance abuse test may face the following:

  • suspension from performing any "safety functions"
  • evaluation by a "substance abuse professional"
  • extensive documentation of test results
  • retesting of the suspended driver, with passing results (alcohol test with no more than .02 blood alcohol and a negative controlled substance test) before reinstatement.
  • Termination (not a regulation, but at the discretion of the employer)

Record Keeping Requirements - Employers must maintain complete records of their drug-testing results for at least five years. Further, an employer must keep a calendar year summary of their testing program that is subject to review by the Federal Highway Administration (FHWA).

Training Required By The Regulations - Drivers must receive training in substance abuse avoidance and be given a manual on the company’s alcohol and substance abuse policy. Manuals must be acknowledged in writing and it must be kept on file. Supervisors – employees who are authorized to order testing based on reasonable suspicion of abuse must have two hours training.

Respecting Employee Rights - Employers should consider:

  • Supervisors who order a test under reasonable suspicion should base his/her judgment upon specifics
  • Before testing, the driver must be verbally notified that it is required by statute
  • Only a properly trained supervisor can order a drug/alcohol test due to reasonable suspicion
  • Random tests must truly be random
  • Any random test must be given either just before, during or after performance of a "safety function"

Required Rehabilitation Services - Any driver who is tested by a supervisor due to suspicious behavior (regardless of test results) must be given the names, addresses and phone numbers of "substance abuse professional" counseling and treatment programs. Before reinstating an employee who has failed a drug or alcohol test, the driver must undergo evaluation, pass drug testing and be given follow-up tests.

Employers Who Use Independent Drivers - These employers have to periodically verify that the drivers participate in an approved alcohol and controlled substance testing program. The business must secure written evidence that the drivers have been tested and have passed these tests.

Consequences Of Noncompliance - A company that fails to comply with the Act may face civil and/or criminal penalties. In addition, a party that decides to sue a company because of an accident might use any evidence of violations against it.

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Employment Practices Liability

There are numerous state and Federal Laws about the workplace, governing anything from payment of overtime to dealing with sexual harassment. Whether Federal Laws apply depends upon the number of employees (typically 15 is the dividing line). Individual states must enact laws that are at least equal to the Federal laws, but they may also be more stringent.

Many states operate under the "employment at will" concept, where either the employer or the employee may, without reason, terminate employment at any time. In its pure form, employment can be terminated for a good reason, a bad reason or no reason. However, this concept is being eroded by laws governing termination reasons as well as employment conditions.

Hiring and firing practices have become legal minefields that have spurred the development of Employment Practices Liability Insurance (EPLI). It is important that a business has clear policies that are applied consistently to each employee and that directly relate to their job. The best defense against employment practice claims is knowing the law in your state and then having policies and procedures that meet the legal standards. For example, is it legal to terminate:

  • a driver with a bad driving record?
  • an employee who is rude to your customers?
  • an employee who swears at customers?

Don’t think that the answer is simply "yes." A business’ action may depend upon circumstances such as whether an employee’s duties involve driving a company vehicle, or directly involves customers and if the company can prove that such behavior fails to meet the applicable job standards.

One key issue is having access to legal counsel that has expertise in this special area of the law. Another key issue is documenting the essential job functions and establishing measurable standards for each position. Use of regular performance reviews and applying the standards equally to each employee is a smart employment practice. The best defense against employment practice claims is to know the law in your state and then having policies and procedures that meet or exceed its legal standards.

The U.S. Department of Labor offers a Small Business Handbook from their Website at http://www.dol.gov/asp/public/programs/handbook/main.htm. The U.S. Equal Employment Opportunity Commission also offers numerous publications addressing different employment laws from their Website at http://www.eeoc.gov. Contacting an insurance agent regarding Employment Practices Liability Insurance is another avenue to explore. Policies and premiums for this type of coverage vary tremendously among insurers. Many companies offering the coverage also offer assistance in writing policy and procedure manuals and other ways to reduce the potential for claims involving sexual harassment, wrongful termination or discrimination. No business is immune from these claims.

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Directors and Officers Coverage

Is your business incorporated? Does it have a board of directors and corporate officers? Do you serve on a Board of Directors? If the answer is yes to any of these questions, you could be exposed to suits from shareholders for acts that ‘de-value’ the corporation. While protection exists under Directors & Officers (D&O) coverage, small and medium-sized corporations often consider it too expensive or unnecessary.

Decisions made by directors and officers impact the viability and value of a corporation. Considering the current issues of accounting practices, reporting and use of corporate assets and the increase in suits being filed against executive boards; this position should be re-evaluated.

D&O coverage should no longer be considered a luxury, but rather a necessity for corporate entities. The coverage supplements the protection provided by General Liability policies since the former responds to legal actions filed by shareholders, customers, scorned merger partners, creditors and regulars.

Board of Directors must take steps to determine that D&O coverage exists. Boards should also identify the level of coverage available for handling defense costs since this expense is handled by the overall policy limits and is not a separate coverage. Criminal acts are not covered by D&O Insurance. However, the cost of providing a legal defense until criminality is determined may be covered.

In the past it was common for a director to handle the risk of a lawsuit by accepting a corporation’s indemnification agreement. In other words, a corporation would agree to handle the cost of litigation (and any settlement) out of its operating funds. Today such agreements have little value when the business is in bankruptcy or ceases operations.

The increase in shareholder lawsuits has created a much tighter market for this coverage. Today, corporations needing the protection must be willing to provide detailed financial and operating information to D&O insurers. This information is mandatory and businesses should not let their concern over protecting such data be a barrier to securing this coverage. The stakes are too high.

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Workers Compensation Coverage

Outside the home, the workplace is the most common place for a person to be injured. Therefore, all states have passed laws requiring employers to handle certain losses that happen at work. In other words, states have created a statutory (written or enacted) obligation to provide coverage.

The Workers Compensation And Employers Liability Insurance Policy is used to provide insurance coverage for a company's statutory liability (coverage responsibility) under a Workers Compensation Act. It usually involves paying for medical treatment and disability. It also handles lawsuits from injured workers that fall outside of the Acts.

Essentially a workers compensation policy responds to mandatory benefits for accidental injury that occurs during work. However, the injury must also be related to the injured person’s duties. Further, the policy also covers costs associated with disease or death that may be a result of the accident. If the employee’s injury does not qualify for compensation under the Workers Compensation Acts (or Occupational Disease Acts, if separate) the policy will respond to the employee's allegation of employer negligence. The insurance coverage provided by the basic policy may be expanded, restricted, clarified or brought into compliance with specific state regulatory requirements through the use of endorsements.

The type of business that can be insured with a workers comp policy may be an individual, partnership, joint venture, corporation, association, fiduciary, or other entity. A typical policy lists the locations of the workplaces that are covered. The policy is designed to handle work-related accidents as well as diseases. The amounts that must be paid are defined by the state or jurisdiction where a covered incident occurs. The policy usually lists the other types of costs and expenses that are eligible for payment under the policy.

In other respects, a workers compensation policy is similar to other kinds of insurance. The policy benefits include being provided a legal defense against certain types of lawsuits. The policy explains that, when other sources of loss payment are available, the policy will begin any payment once the other source has paid its obligation. However, the policy will not pay for any amounts that exceed stated benefit amounts. Generally the insurer that provides coverage acquires the covered company's legal right to pursue payment from a party that may have been responsible for a workplace injury.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2004

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Professional Liability

Professionals, such as doctors, lawyers and accountants, have long been held highly accountable for the consequences of their decisions. While such professions are still the Big Three, there are a growing number of other occupations that represent an exposure to liability loss that needs special protection, including pharmacists, architects, engineers, opticians, beauticians, insurance agents, consultants and many others.

In most instances, a type of coverage called a general or commercial general liability policy will protect a business against the damage or injury their actions may cause to others. However, this type policy is designed to handle routine, fairly generic and low-risk activities. Examples are customers who cut their hands on a sharp edge of an office's reception desk or a customer who is hurt when she collides with a clerk who is stocking a shelf. Much more is at stake with professional activities. Consider several aspects that make professional liability tougher to insure:

Professional Advice - The persons needing insurance are sought out by the general public as experts who can assist with special issues such as personal health, expensive business transactions, or personal crises. Many of these situations also involve a high-level of emotion. When something goes wrong, it is much more likely that a client will pursue "justice" through the courts.

Professional Reputation - Any claim a client makes against a professional involves that individual's reputation. In so many instances, paying such a claim is an admission that a mistake was made. The professional may suffer from a lowered status and could face sanctions from related professional associations or regulatory authorities. Further, many professionals are proud of their standing and their abilities; admitting being wrong is usually fiercely resisted.

Higher Defense Costs - Defending against claims of professional error or incompetence is usually very expensive and time-consuming. Trials will usually involve expert testimony and technical arguments. Since a claim or lawsuit is often viewed by the professional as an attack on his or her abilities, the chances of resolving issues quickly (particularly via a settlement) is extremely low.

Identifying A Loss – The timing between when a loss occurs and when a claim or suit is filed can be a mystery. A professional may find out she's being sued today for something that happened ten years ago. The potential for a huge time gap before a loss arises makes professional liability a very difficult type of business to underwrite and to price.

You have invested a lot in your business and your profession. It is important to be sure that you take the steps to deal with the special as well as the routine sources of loss. As usual, it is always a good idea to discuss your questions and needs with an insurance professional.

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Isn’t Insurance Discriminatory?

Does The Insurance Industry Discriminate?

First, let's admit that this article title and question is tricky; but the answer is yes. Not only is discrimination practiced by every insurance company; discrimination is absolutely critical to the industry. The practice is also quite legal and rightfully so! Before going further, let's remember that discrimination can have more than one meaning. How may discrimination be defined? Let's use a very large dictionary, say Webster's Encyclopedic Unabridged Dictionary Of The English Language (Deluxe Edition):

1. the act or an instance of discriminating.(differentiating or noting differences), 2. Not applicable, 3. treatment or consideration of, or making a distinction in favor of or against, a person or thing based on the group class or category to which that person or thing belongs rather than on individual merit. Unfair Discrimination?

The confusion over the desirability or legality of discrimination arises out of unfair discrimination. Unfair discrimination stems from the latter definition mentioned earlier. A choice that is based on a group, class or category. Choices that revolve around a distinction that is irrelevant to offering insurance coverage is unfair discrimination. The best (or worse) example of this is to deny coverage based upon an arbitrary difference such as race or religion. Fair Discrimination

Insurers are constantly involved in discriminating because they are always studying persons and situations to see if they are in a position to offer insurance coverage. In other words; they note differences and make choices among the requests they constantly receive for coverage. The distinctions made among their insurance applicants are important. Insurers design their insurance programs based on assumptions on the type of persons, property and situations they wish to cover. Market Selection and Pricing

When an insurance company does business, it has to make decisions about the type of market it wants to serve. For example, in the car market, does it wish to insure only regular cars and drivers with pristine records or expensive sports cars and drivers with a few blemishes? In the homeowner's market, does the company wish to target very expensive homes, such as those with a value over $300,000 or might it decide to exclusively write mobile homes?

Once their market niche is selected, a company has to implement matching prices. What components must a company consider? Well, an insurer must charge premiums that reflect the:

  • dollar amount of losses paid to all parties filing valid claims
  • company's costs to investigate and settle claims
  • insurer's operating expenses (including compensation to employees and agents)
  • premiums charged by their competitors

A company's premiums also consider their ability to invest their income and, of course, they must also consider what rates, particularly changes in rates, are approved by state insurance regulators. Underwriting

In the next step after market selection and pricing, a company has to create and follow rules on selecting and keeping the type of business that matches its market and which is supported by their premiums. The rules and practices that a company follows in selecting and rejecting business is called underwriting. In other words, via underwriting, an insurer must discriminate or choose among persons and kinds of property that fit its insurance program. If a company doesn't apply their selection standards consistently; it will eventually lose the ability to do business. What is a quick method to learn what a company considers to be valid factors to do business? The company's application(s). If the information is important for underwriting, it should show up on the application. This is true no matter the type of insurance or market targeted by the insurer. Discriminating Conclusion

Remember, the decisions made by an insurer in writing and renewing coverage must validly affect their market and prices. When the decisions are not based on these factors...unfair discrimination takes place.

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COPYRIGHT: Insurance Publishing Plus, Inc. 1999

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Are You Liable For Summer Fun?

Ready, Set, Summer!

Summer witnesses a huge surge in personal activities. School ends and parents start searching for leisure and recreational activities for themselves and their children. The activities range from elaborate vacations or summer-long camps to simply buying play and sports equipment (or getting it out of storage) and renewing park and pool passes. Summer Fun's Dark Side

At the risk of being a killjoy, it's important to remember that good, clean fun can also have consequences when things go wrong. Using sports equipment such as tennis racquets, baseballs, baseball bats, Frisbees, lawn darts, or horseshoes have the potential to harm others. There is even greater harm posed by operating skateboards, bikes, mopeds, go-karts, and radio-controlled cars, helicopters and planes. An even larger area of concern may involve inviting friends over to use your driveway, play equipment or swimming pool. Basically, the potential liability comes from either you having fun at the expense of other persons or their property, or failing to take precautions that persons you've invited to your residence (or other places) are safe to enjoy themselves. How To Preserve Your Fun

The easiest way to prepare for your summer liability is to ask yourself some questions:

  • What can I do to keep other persons safe from my activities?
  • Am I prepared to be responsible for people I hurt or property I damage?
  • How do I make my home and yard safe for fun-seeking visitors?
  • Am I keeping my guests to various events safe?

While accidents happen, many can be prevented by making sure that you and your children enjoy your activities in a responsible manner. Operating bikes safely and in low traffic areas reduces the chance that others will be hurt. The safe use of games and equipment also make the likelihood of having someone injured more remote. In other words, it's important that your family uses sports and game equipment safely and appropriately. It also means that an adult be around to supervise many activities when necessary, such as when the fun may be more hazardous (street hockey) or when young neighborhood children are around. Supervision is critical for potentially dangerous activities such as the use of motorized recreational equipment, trampolines, and swimming pools, even small wading pools. It's also important to make certain that guests you invite for camping or hiking trips are watched after carefully. In many instances, you are responsible for the safety of your guests when you bring them along to enjoy outdoor activities, particularly boating or other activities involving water-related equipment. Home Inspection

Another way to reduce the chance of others being hurt is to do an inspection of your home and yard. Do you have an adequate fence (with secure or self-locking gate) to protect young children from a pool when you're not around? Is your playground equipment well-maintained and strong enough to support the weight of the children using it? Is your yard and driveway free of tripping hazards? Are dangerous items such as tools, chemicals and lawn equipment kept out of reach of children? If you can answer "no" to any of these questions, you're inviting trouble. Insurance Plays A Role

When accidents happen, they may be followed by medical expenses and, more seriously, lawsuits. You must be protected against such financial consequences. Don't assume you have coverage, especially when an activity involves motorized or powered equipment. You may have to add coverage to your homeowner policy or even buy special coverage for mini-bikes, mopeds, boats, all-terrain vehicles, etc.

So make safety a part of getting ready for summer fun. It's also smart to include a visit or call to your insurance professional to make sure you have the right coverage to support a fun summer.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2000

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Hobby Or Business – Part 1
Part 1 of our discussion on the hobby v. business exposure. Please also see Hobby or Business – Part 2.

Have you thought about how your hobby may affect your insurance needs? Hobbies often require a large investment in tangible property and may even create some legal responsibility to other persons or their property.

Hobbyists: Collectors or Activists

Hobbies typically involve either collectors or activists. A collector acquires property that especially attracts him or her. Examples include people who collect stamps, art, coins, autos, antiques, comic books, baskets, dishes, glassware, sports memorabilia, etc. An "activist" (this writer's term) also collects a certain type of property. However, the activist acquires property in order to pursue an activity. Examples are hunters, musicians, painters, sculptors, cyclists, and enthusiasts of many types, such as fans of model or radio control planes, helicopters, etc.

With collectors, the focus should be placed on the nature of the property being acquired. With activists, besides attention to the property exposure, there should be equal emphasis on the liability exposure that is inherent in their activity.

Coverage Needs Created By Your Hobby

Property Coverage – Your special property should be properly insured. Most homeowner policies provide minimal protection for collectible property. Why? Items such as coins, stamps, antiques, guns, etc., are often fragile. Also, such property is very valuable in relation to its size. The value of collectibles kept in one room may be more valuable than all of the rest of your home's contents. Regular homeowner coverage is not designed to handle high-valued property that is easily destroyed or lost.

Even when collectible property is eligible for a policy's full coverage, this may not be enough. You may want your special property to be covered from more causes of loss than your family room couch. It may be worthwhile to buy an endorsement to add additional coverage for your collectibles to your homeowner policy. Depending upon the type and value of your collectibles, you may even have to consider specialty coverage.

Liability Coverage - if your hobby is more hands-on, then be sure you're protected against any legal liability related to your activity. Ask yourself the following:

  • Are there any dangers associated with the hobby?
  • Does the hobby involve frequent travel to sites or meets?
  • Does the activity attract frequent visitors to your home?
  • Do you publish hobbyist newsletters or give advice to others?
  • Do you actively sell or trade property on or away from your home?
  • Does your activity involve equipment that's inherently dangerous to others?
Get Serious About Your Hobby

Fortunately, many aspects of a hobby, especially legal liability, are covered by a homeowners policy. However, your activity may need special or even business coverage (see part 2 of this series). The way you spend your leisure time should be a happy diversion. Don't let your enjoyment be interrupted by inadequate protection. Discuss your special interest with an insurance professional who has a special interest in meeting your coverage needs.

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Hobby Or Business – Part 2
Part 2 of our discussion on the hobby v. business exposure. Please also see Hobby or Business – Part 1.

For insurance purposes, the elements that determine a business activity are unique. A homeowner (HO) policy may use a definition so broad that nearly any activity qualifies as a business. In such instances, a person should consider business insurance.

Let’s say you love photography and you take pictures at weddings and other events to finance this passion. While you consider this to be a hobby, your insurer may define your activities as a business. If your camera equipment is stolen or damaged, there may be as little as $250 protection under your HO policy. HO coverage for business property differs depending on whether it is located at or away from your residence.

Imagine the photography situation again. This time, you’re at wedding job and have just set-up a perfect shot of the bridal party. As you are snapping a few shots, a large boom stand with hot lighting equipment tips over, injuring the maid of honor and the flower girl. A homeowner policy may exclude coverage if the injured women sue you.

There are numerous types of sales and service jobs. These include cosmetics, clothing, kitchen supplies, home decorator items, computer repair, web site design, photography, music lessons, auto repair and many contractors. Each job involves some type of business property that is excluded or severely limited under the homeowner policy. Therefore, each situation may need to be covered by business insurance.

Although independent consultants are in business, too often they think their HO policy will provide coverage because they don't have special equipment or leave their home office to run their business. Office furnishings such as PCs, desks, chairs and file cabinets are subject to HO policy limitations. Without adjustments to the homeowner policy there may be little or no coverage for property used in a business.

The legal form of the business may create a need for business insurance. If a limited liability company, corporation or partnership is formed, the related activity is a business and needs business coverage. Also, most HO policies will not provide coverage for employees or for any professional liability.

What can you do? First, determine if your activities qualify as a business. Then talk to an insurance professional to determine what coverage is provided by the policies you currently have and what options are available to fill-in any gaps in protection.

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Website Liability, Anyone? Part 1

Please remember to read Part 2:[Return]

A Brave New Web World

Each day, thousands of persons around the world are discovering the Web. While many are content with passively exploring, there are plenty of people who decide to become active participants by creating their own Websites. The reasons for having a Website vary, ranging from frivolity to earnestness, or they may be strictly pleasure or serious business. Personal Websites commonly describe the host, his or her family and interests such as a particular hobby, sports, profession, humor, etc. Whatever the reason for creating your own Website, it can represent an additional source of loss that may require additional insurance. The loss potential is directly related to the purpose and content found on the Website. New Opportunity For Old Types Of Loss

Although the Web is still relatively new, Web-related loss exposure is not. Remember that legal liability to another person or party is the result of your actions that cause injury or damage to property. Your Website liability is an extension of your accountability for what you say or write and it extends to members of your household; so it's important to be aware of your family's little computer wizard. The types of losses that may be created by a Website include:

  • Libel - knowingly publishing false information that harms a person's reputation).
  • Invasion of Privacy - disclosing information that interferes with another party's peace of mind.
  • Infringement - violating or interfering with another's property rights or the right to pursue business
Oops, You May Not Be Covered

This is quite important. Most homeowner policies protect against liability for physical injury to another person or to actual damage to another party's property. Liability created by Website content typically involves personal (or non-physical) injury which is not covered by a typical homeowner policy. While individuals may be able to add protection (such as add-ons to a homeowner policy or umbrella coverage), certain losses may still be uncovered because they involve intended acts or business activity. Can You Protect Yourself?

The good news is you can take steps to eliminate or, at least, minimize the possibility of facing a Website-related loss. The first step is to identify areas of concern. The key to understanding and addressing any possible Website liability is to focus upon:

  • the nature of the Website
  • the Website's contents
  • who may be harmed by the site
  • how a party may be harmed

It's important that you think hard about these issues and approach the job objectively. Your building a site just for "fun" could end with you explaining the punchline in court. Two people can interpret a site in radically different ways. Use a method of examining your Website that helps you view it through "fresh" eyes that won't gloss over important facts. Asking the help of others could be a big plus.

See Part 2 for important considerations about your Website.

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Website Liability, Anyone? Part 2

If you haven't done so already, please read Part 1 :[Return] Considerations For Your Web Site

If you or someone in your household operates or is building a Website, you need to be aware that the site could open you to legal situations. Here are some questions you should consider:

Who created the site?

Key consideration: depending upon the circumstances, a private party that created the site for you may share (or even own) the responsibility for damages caused by the site.

What is the purpose of your site?

Key consideration: Is there ANY business activity or purpose? If so, you may have an immediate need to secure appropriate protection.

What content is found at your site?

Key consideration: Not only do you have to think about YOUR message, but you must think of other parties that appear at your site such as friends, companion businesses or even miscellaneous links.

Who do you intend to attract to the site?

Key consideration: There's a big difference in the type of people you're targeting, such as inviting:

  • relatives to see baby pictures or family newsletters
  • customers to request product/service information or to place orders
  • hobbyists to distribute or solicit stories or advice
  • strangers to a forum for discussing sports, political or other topics

Is there anyone you would not want to see the site? Why?

Key consideration: Answering this question honestly is critical. It can identify prime areas for possible legal action against you. It may also suggest what precautions you may take, including the easiest action such as eliminating the reference to a person, group or organization. Does Your Site Create An Insurance Need?

After examining the key concerns about your Website, you should be prepared to take precautions which may include:

  • adding security features to your Website
  • changing the content
  • adding waivers or disclaimers about links or certain pages that appear on your site
  • adding user agreements to your site
  • creating guidelines on maintaining current and future content at the site
  • Changing your homeowner coverage
  • buying additional or special personal or business liability insurance
  • adding or eliminating a guest book (if you have a guest book, pay close attention to what visitors say)
  • eliminating the Website

Once you've carefully examined your Website situation, a discussion with an insurance professional could be an excellent step to identify coverage needs which may include having to buy commercial coverage. The instant and widespread access represented by the Internet creates new perils for individuals. Don't hesitate to seek the help of an insurance professional or even competent legal advice.

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Contractors or Cons?

Your home may be destroyed by a fire or storm. You’re scrambling around to get your lives and routines back in order and you may think that things couldn’t get worse. Well, they can and often do because of people who can’t spell contractor without c-o-n.

The period after a serious loss is hectic, emotional and disorienting. Your major concern is to get your home repaired or rebuilt. These elements make you very vulnerable to "CONtractors," people who specialize in victimization instead of construction. While you may be in a hurry to restore your loss, it is critically important to avoid persons who appear on your damaged doorstep offering to start construction. While managing a loss, think of taking precautions such as the following in order to avoid compounding your problems:

  • Pay attention to your "gut" being aware of any "feelings" you get about any contractor you speak to
  • Refuse to pay any money "up front"; a reputable contractor always works according to a written agreement, spelling out cost of materials, labor and other important work details
  • Contact more than one contractor to get competitive estimates
  • Make sure that any contractor you talk to provides references and proof that they are insured
  • Check references and ask for evidence of how long the contractor has been in business
  • If a local chapter is available, call the Better Business Bureau and check for complaints
  • Ignore any tactics intended to pressure you into making an immediate financial commitment.

Keep in touch with an insurance professional during such trying times. They’re already committed to providing genuine help.

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Controlling Car In$urance

You may be frustrated with car insurance premiums that creep upward with each renewal. Factors that can affect car insurance premiums include the following:

  • Your insurance company's overall loss experience (due to more claims)
  • The increased value of newer model cars, particularly SUVs
  • Increases in judgment amounts awarded in auto lawsuits
  • Increased business processing and administrative expenses
  • Auto loans lasting longer, meaning increased auto repair costs for older cars

Since these factors are beyond your control, it may be worthwhile to address ways that may lower your car insurance costs.

Begin by gathering your insurance records and any other car-related information. Next, determine if circumstances have changed since you last dealt with your coverage. Once this information is handy, call your agent and discuss relevant items such as:

  • If you have your home and auto insurance with the same company, are you getting a discount?
  • Does my coverage take full advantage of the discounts offered by my company?
  • I have more than one car; am I getting a credit?
  • Does it make sense to change my deductibles?
  • Do my cars really need physical damage coverage insurance? (An important consideration for older vehicles)
  • Do lifestyle choices such as drinking or smoking affect my premium?
  • My son or daughter is on the honor roll, does this affect my premium?
  • Did you know that my car has special security features?
  • Did you know that my son took Driver's Education?
  • Does the company have accurate information on how often and how far I drive?
  • Am I with a standard carrier or do I qualify for any preferred program?
  • Is my vehicle charged an additional premium because of its type or performance?

Do I qualify for a loss-free history or policy longevity discount.

Giving your agent accurate information helps you get the best available premium. Provide your agent with complete details about your driving history. It’s important to clear about who drives your cars and how they’re used. Finally, use your agent as a resource for handling errors about your account or which may be shown in your driver records.

(Revised 01/03)

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Can I Make My New Driver Affordable?

The cost of your car insurance may double by adding a young driver to your policy. This article focuses on ways to control a young driver's impact on your insurance premium.

Reducing your insurance premiums

  • Have your child complete a driver training class, balancing its cost against premium savings and gaining a more competent young driver.
  • Ask your insurer if it gives discounts to students with good grades.
  • Find a company that bases its premium on the car your new driver usually drives instead of assigning him or her to the most expensive vehicle.
  • Does your child have to drive to school? If so, expect your company to charge a higher premium for the increased amount of driving.
  • Build a long-term relationship with your insurer. Some companies reward longevity by forgiving a driver's first accident or minor traffic violation.
  • Make sure your new driver understands that poor driving habits can result in higher premiums or a canceled policy.
  • Increase your physical damage deductibles or, for older vehicles, eliminate this coverage.
  • If your child owns a vehicle, he or she should have a separate policy. However, if you share the cost of the car and its insurance, it may make sense to also own or co-own the vehicle. Your ownership interest lets you take advantage of a multiple-car discount.
  • Think carefully about giving a young driver his or her own car. Coverage for young drivers who have full-time access to a vehicle is very expensive. Make sure you balance convenience against cost.

Important: don’t pursue lower premiums blindly. It's important that your young driver is protected from the financial consequences of causing a serious accident. Further, you may need to protect yourself since you could also be sued for an accident caused by your son or daughter. You might consider getting higher limits of liability by purchasing an umbrella policy. Talk to an insurance professional about more strategies to keep your new driver affordable.

Revised: 08/01

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Can I Make My New Driver Safer?

A new driver can send a parent’s stress-level soaring. So let's focus on ways to control a young driver's impact on your peace of mind.

Keeping your young driver safer

  • Consider preparing your child with a course in defensive driving as a tool for avoiding accidents and increasing confidence.
  • Require your young driver to understand, sign and comply with the Youthful Operator Driver Safety Agreement.
  • Be a proper model by using seat belts and never using alcohol or drugs.
  • Provide your child with a well-maintained vehicle, equipped with safety devices such as air bags and anti-lock brakes. Also, avoid vehicles that are vulnerable to serious damage during collisions or to "rolling over."
  • Control your child's driving privileges...don't hesitate to curtail or revoke them in response to poor behavior.
  • Set high driving standards and test your young driver.
  • Be certain that he or she can properly pass vehicles, maintain a correct distance, park, merge and exit, change lanes make turns, obey speed limits and be aware of pedestrians.
  • Make sure your child understands traffic laws and has a healthy respect for the power of the automobile.
  • Don't let your child become licensed until he or she passes YOUR driving test which must include the ability to drive under adverse conditions (dark, fog, rain, ice, snow, rush-hour traffic, etc.).

Another good idea is to talk to an insurance expert about other strategies to keep your new driver safer.

Revised: 08/01

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Youthful Operator Driver Safety Ageement?

My Driver Safety Agreement

Driving is a privilege that I may lose by violating this agreement or may have suspended for other reasons such as (but not limited to) unsatisfactory school grades and violations of family trust.

  • I will obey any curfews or restrictions imposed by my driver's license.
  • I will obey all traffic laws and speed limits.
  • I will not drink and drive, or use illegal drugs, or drive if I am taking ANY medication that may affect my driving.
  • I will not ride with anyone whom I know or suspect is under the influence of alcohol or drugs (legal, or illegal).
  • I will not permit any open or empty containers of alcohol, or transport anyone who I know or suspect may be carrying illegal drugs in any vehicle I operate.
  • I will not ride in any vehicle where I know that there are empty or open containers of alcohol or where anyone who I know or suspect may be carrying illegal drugs.
  • I agree not to drive with or transport anyone who is in possession of a firearm or other "weapon."
  • I will always wear my seatbelt and shoulder harness. I will not ride in any vehicle in which there are more people than seat belts.
  • I will make certain that I can always hear emergency vehicles and traffic sounds.
  • I will drive defensively, recognizing the driving dangers posed by other drivers.
  • I willI will not transport passengers unless they are properly secured by a seatbelt.
  • I will always wear a helmet if I am driving or riding on a motorcycle. I will not transport a passenger unless he or she also wears a helmet.
  • I will drive in a manner that respects the safety of myself, my passengers, other drivers and pedestrians.
  • I will ignore peer pressure. While driving, I am in control. I can stop and ask others to leave my vehicle and, as a passenger, I can ask a driver to stop and let me out.
  • I will not drive unless I feel safe and certain of my ability.
  • I will be especially alert during dangerous conditions such as rain, snow, sleet, wind, heavy traffic, construction zones, and accident scenes.
  • I will always lock every door and take the keys when I leave the vehicle. I will park in areas where I believe the vehicle will be safe from damage or theft.
  • I will obey the driving instructions of my parent(s) and of law enforcement officers.
  • Additional Conditions Required By My Parent(s)
  • ________________________________________________________________
  • ________________________________________________________________

I have read, understood and I will comply with this agreement.

Signed______________________ Witnessed_________________________

Date:_______________________

Revised: 08/01

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Custom and Electronic Property

You may be frustrated with car insurance premiums that creep upward with each renewal. Factors that can affect car insurance premiums include the following:

A basic auto policy is designed and priced to only cover certain vehicle features. You might need extra coverage to take care of expensive vehicle options such as custom or electronic property.

Factory Options - While traditional, factory-installed features are covered by an auto policy, manufacturers sometimes jump ahead of insurance policy designers. For instance, when first introduced, theft deterrent car radios (which are disabled when removed from the dashboard) were not covered by many auto policies. It is important to read your particular auto policy to make sure that it doesn't contain similar coverage gaps.

Dealer Options - Factory installation does not apply to autos that are modified by a conversion specialist or an auto dealer before being displayed for sale. Car dealers frequently add options to make their inventory more attractive to car buyers (and more profitable). Spoilers, body side moldings, special wheels and hub caps, body paint, car phones, speakers and stereos, pin stripes and conversion packages can be added directly onto the dealer invoice. Insurers cannot adjust their premiums for these additional features unless they're told about them, including how much they cost. If you're not sure what is original and what has been added, ask your local dealer. If the information on options is not shared with the insurer, the unknown options may not be covered after a loss.

Ignoring the issue means you risk the chance that some of your valuable property may be uninsured. The best choice is to share your information with your local insurance professional. Together, you can take the steps to get the coverage you need.

Revised 01/03

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Is Your Car Worth Less Than Your Loan?

Car loans and leases used to last no longer than three years. Today, with vehicles now as expensive as small homes, the length of loans and leases has increased dramatically, stretched out to four or even five years.

Whether your vehicle is a coupe, sedan, van, sports utility vehicle, or truck, one thing is guaranteed. Your vehicle’s value will depreciate very quickly. A rapid loss of actual value accompanied by a longer loan obligation spells trouble.

In short order, the amount of the unpaid loan and lease agreement balance becomes much larger than the vehicle's value and this disparity exists over much of the loan or lease period. Making matters worse is that this gap is usually only discovered after a total loss. After the insurer pays its obligation, you may have to pay the bank or leasing company thousands of dollars out of your own pocket.

Nobody is to blame for this problem-not the bank, leasing company, insurer or the car manufacturer. The situation is an unfortunate side effect of the need to extend financing to accommodate extremely expensive vehicles. However; there are a couple of solutions to the dilemma.

The Auto Loan/Lease Coverage Endorsement

This optional coverage is available in most states, from a variety of insurance companies. The form provides coverage for the following:

  • Leased vehicles - Reimburses you for the difference between the amount due under the terms of the lease and the actual cash value of the auto in the event of the auto's total loss.
  • Owned vehicles - Pays any outstanding indebtedness incurred by you for that financed new vehicle in the event that there is total loss or damage to the vehicle and the amount due under the finance agreement is greater than the actual cash value of the automobile.
  • Partial Losses - On partial losses, the company will normally pay to have the damages repaired or parts replaced, and the lease or loan gap coverage option is not a factor in the loss settlement.

Exclusions

Generally this optional coverage excludes items such as overdue lease payments, penalties (for excessive use, abnormal wear and tear, or high mileage), security deposits, costs of warranties or various types of credit insurance, or carryover balances from a previous lease.

Auto Replacement Cost Coverage

For an additional premium, a new car owner may buy coverage to settle major losses based on the vehicle's replacement cost rather than its depreciated value. There are some limitations such as:

  • the coverage is usually only available for cars up to six months old
  • there may be a maximum dollar amount that applies to a total loss
  • the coverage may only be available for the first few years of the car's useful life

Considering these limitations, the replacement cost option is more suited to narrowing, rather than closing the lease/loan gap.

If you have a newer vehicle and are concerned that you could suffer a large out-of-pocket expense if your car is totaled, you should talk to a qualified insurance professional to answer your questions. You may find that the extra protection is worth the extra cost.

Revised 08/03

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Personal Auto Coverages – Part 1

A driver who's unlucky or careless can maim or kill other persons and severely damage or destroy property. This deadly potential is the biggest reason for auto insurance. Most states have financial responsibility laws. They require you to carry proof that you are able to pay for any damage or injury you may cause while driving. Auto insurance is the way that most people comply with these laws. Typically, drivers are required to carry liability insurance at some minimal limit which varies by state.

Bodily Injury Liability - This covers injury that you may cause to other persons. The key is that it involves you being held financially responsible for injuries to other persons because of your driving. This coverage does not apply to your injuries.

Property-Damage Liability - This handles damage that you may cause to another person’s property. Again, the coverage only responds when you are financially responsible for such damage and it has to be related to your driving.

Uninsured Motorist Coverage – This coverage typically pays for damages you suffer from an accident caused by an uninsured driver. Now, be careful with this coverage. An uninsured driver must be responsible for causing the loss. "Uninsured" usually refers to a person who has no insurance; a person who can't be located ("hit and run drivers"); a person who has insurance but their insurance company is insolvent and other situations (defined by individual state laws).

Important: Payment under this coverage is controlled by the limits mandated by a state's financial responsibility or specific uninsured motorists law that often dictates what limit or limits must be sold. In some states, you may have an option to reject the coverage. Typically, the rejection must be in writing.

Underinsured Motorist Coverage - Similar to uninsured motorist, it pays for injuries caused by a driver who is inadequately insured. Example: You are seriously injured by someone carrying a bodily injury limit of $25,000, but your injuries are nearly $50,000. Your Underinsured Motorist Coverage limit is $100,000. In this instance, your policy would pay the difference between $25,000 and $50,000.

Remember that this is merely an introduction to complex policy coverages. Be sure to contact your agent for detailed insurance information. Please see part 2 of this topic for information on other, typical auto policy coverages.

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Personal Auto Coverages – Part 2
Part 2 of our discussion of typical auto insurance coverages. Please also see Personal Auto Coverages – Part 1.

Cars are expensive to buy and repair, providing great reasons for protecting them. If you borrowed money to buy your car, the lender was likely to make certain that you had coverages to pay for any damage to the vehicle.

Collision coverage - This covers damage to your own vehicle that happens when your vehicle runs into another object, such as other vehicles, trees, light poles, mountains, etc.

Other Than Collision coverage - This also covers damage to your own vehicle that is due to sources such as fire, theft, hitting an animal, vandalism, earthquake, flood or hail.

Unlike liability coverage, both Collision and Other Than Collision coverages are subject to deductibles, the amount of a claim that the policyowner must pay. Deductibles are meant to eliminate an insurer having to pay for very minor losses.

Personal Injury Protection or Medical Expense – This coverage typically handles medical expenses for injuries to you, your passengers or people who are "around" you. It may also cover you and your household if you, as a pedestrian or a bicyclist, are struck by an automobile.

Towing and Labor coverage - This coverage is to help pay for your costs to deal with a disabled car. It could help pay for the car to be towed to a service station or for any repair that occurs at the location of the car's breakdown. Note that this coverage is for labor rather than the costs of car parts. Available coverage is minimal (often between $25-$75).

Rental Reimbursement - This coverage reimburses your expense of renting a car as a temporary replacement. The car being replaced must be an insured car that's unavailable for use because of it being damaged, lost (stolen) or destroyed in a covered loss.

Remember the above information only touches upon some typical auto insurance issues. It's always wise to contact your agent and discuss your coverage questions and needs in detail.

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The Loss Is Only The Beginning

Once a loss takes place, an insurance company has to meet its promise to handle that loss. However, there are some important obligations that a policyholder has to fulfill. These obligations affect whether an insurer pays the claim. The duties help an insurer to determine whether payment is due or how much it has to pay.

Notification – You must contact the insurance company with accident details. Notification may be through an agent and it should include the identity and addresses of any injured persons and any witnesses. Quick notification starts the entire claims process, and it helps the insurer to control claim expenses.

Assisting the insurance company – You must help the insurer with the claim's investigation, settlement or with its defense against any claim. Assistance includes sending the company copies of any accident-related material. It also means participating in physical exams and interviews under oath. You’re also required to give your insurer access to all records (especially medical) related to the accident and a proof of loss statement (a document that has all loss details and information about the lost property).

Repeated requests for help or information may strain relations between you and your company. While companies have the right to thoroughly investigate losses, it has to balance its right against your expectation of fair treatment and privacy.

Preserving the damaged property after a loss – Let’s demonstrate this important condition with an example. Tina returns home early in the morning in her convertible and hits a large landscape rock that's in front of her house. The damage is minor, but the impact causes an alignment problem that makes it impossible to close the convertible top. Instead of moving the car into the garage or covering the car, Tina leaves it in the driveway. It sits there all day, sitting exposed to a downpour that severely damages the interior and the car's electrical systems. The car now has to be towed to have the damage inspected when, originally, it could have been driven. Tina’s inaction complicates a once simple claim. In this case, the insurer may require Tina to handle the towing charge. The insurer may also either dispute and/or deny the exposure-related loss.

Being too quick can also cause problems. A claimant who repairs or disposes of damaged property before an insurer examination has seriously breached the insurance contract. This breach could result in an insurer refusing the claim.

On the other hand, recent court developments have changed the situation. At one time, a policyholder could endanger coverage by any missed obligation, regardless whether the "miss" was significant. In other words, a technicality could void coverage. Today, courts have started to rule that an insurer has to show that a breach of duty has to harm or prejudice its rights. If the insured's action (or inaction) has no effect on an insurer's position, then it can't deny coverage.

If you have any questions, your insurance agent is an excellent choice to help you properly understand your insurance policy obligations.

Revised 10/04

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Auto Policy Exclusions

Having an auto insurance policy shows that you're a responsible driver. It also means that you're complying with your state's requirements for driving on its roadways. However, even if you have auto insurance, there are still instances, called exclusions, when your policy won't provide coverage. Why should exclusions exist in an insurance contract? There are several different reasons for exclusions:

  • help contain the expense of providing insurance;
  • prevent coverage under one type of policy that should be covered elsewhere (such as a homeowners policy); and
  • prohibit coverage for losses that are against public policy.

Let's look at these reasons more closely.

Help contain the expense of providing insurance - If your auto policy had to cover every imaginable loss, it would also have an unimaginable premium. Auto insurance is affordable only if insurance companies can exert some control over the losses their policies can be expected to cover. Therefore, automobile policies generally contain exclusions against accidents which involve:

  • injuries caused directly or indirectly by a nuclear weapon, reaction radiation or contamination; or by war, civil war, insurrection, rebellion or revolution.
  • injuries involving any vehicle inside a facility designed for racing while preparing for, or competing in, a race.

The first instance involves losses that are beyond any insurance company's ability to control and to pay for. The second instance involves losses that are strictly under an individual's control (so it isn't accidental). Insurance companies certainly want to avoid situations where their customers choose to put themselves and their cars in an excessively dangerous position.

Prevent coverage under one policy when it should be covered elsewhere - Most automobile policies won't provide coverage for a loss or injury which:

  • happens while in a vehicle that has fewer than four wheels
  • occurs while the vehicle is transporting persons or property for profit
  • happens while the vehicle is being used as a residence
  • occurs while on the job, and workers compensation coverage is either available or required for the bodily injury
  • takes place while an insured making use of a vehicle he owns or has regular access but the vehicle is not listed on the automobile policy.
  • involves a vehicle that's being used in an insured's "business."

These limitations are fair. Their purpose is to make sure that coverage that you buy for your own car, van or truck listed on your policy does not also handle situations that should be addressed by either another person's auto policy, a worker's compensation, a business policy, by a specialty policy (such as racing events coverage) or other types of policies.

Prohibit coverage for losses that are against public policy - Some examples of this reason are when coverage is denied for losses:

  • occurring when the injured person is occupying a vehicle knowing that she or he does not have the vehicle owner's permission
  • that were fraudulently staged by the vehicle's owner in order to collect insurance for "phantom" injuries.

Insurance would be impossible to afford if it were expected to pay for injuries to car thieves or people who fake accidents and injuries.

So remember, without reasonable exclusions, you or I would not be able to enjoy the protection and security that is offered by automobile insurance. If you have questions about exactly what is excluded by your policy, talk to your insurance agent.

revised 02/04

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Does Car Pooling Affect My Personal Auto Coverage?

Why Do We Still Car Pool?

Environmental concerns, traffic congestion, convenience, desire to relieve driver stress, poor public transportation, lack or expense of parking are factors that contribute to commuters forming driver groups or car pools. Parents use such arrangements to transport children to school, sports events and extracurricular activities. It is also common for a student owning a car to carry classmates back and forth between home and school.

Regardless of the name, driver groups, share-the-ride arrangements or car pools are a permanent part of the American scene. Typically, several drivers take turns assuming the responsibility for driving their companions. It's common for the turns to last a week and may be done on a rotating basis. These people frequently live in the same area and work in the same office or plant, taking turns driving or regularly riding in one car and paying the owner a reasonable fee to help pay for gasoline, maintenance and wear and tear.

The practice of a parent taking a group of children on an outing, to a Little League baseball game, and the like is commonplace. Other examples of group driving exposures are plentiful:

  • church group activities
  • book club members driving to their regular meeting or outing
  • coaches taking players to practices or games
  • employees traveling together to league games or practices, etc.
Liability Insurance Exclusion

Drivers involved in car pools and other group arrangements may wonder if the situation is covered under their auto policy. This concern is valid as many auto policies have restrictions. Typically, liability coverage under personal automobile policies does not apply to ". . . liability arising out of the ownership or operation of a vehicle while it is being used as a public or livery conveyance." (A public conveyance is a vehicle used indiscriminately in transporting the public without being limited to certain persons or occasions. A livery vehicle is one that is offered for rental). There is slight variation in language among policies issued by various insurers, but the intent is the same, to exclude the use of a personal auto for transporting people or property for income. However, this exclusion does not affect coverage for car pool, driver group, and share-the-ride arrangements. Why Isn't Coverage Excluded?

Coverage is unaffected because the driving exposure is essentially the same. The common exclusion concerning "public or livery conveyances" is to prevent coverage for situations that involve a commercial or business exposure. Using an auto that is covered by a personal auto policy to transport people or goods for hire is unfair to insurers because, while the insurance company charged a premium based on personal use, "public or livery conveyances" are typically:

  • driven more miles
  • exposed to worse (i.e. high density) traffic situations
  • driven under more pressure to meet delivery schedules
  • exposed to poorer driving conditions

In other words, such use calls for more careful underwriting, different or special coverages and, more important, a higher commercial premium.

However, group-driving arrangements are not significantly different than the routine personal use of a car since personal auto premiums contemplate using the car for commuting, vacations, personal errands, etc. Most car pool arrangements are a form of personal use, so the "personal" premium compensates an insurer for the exposure. Are There Other Coverage Considerations?

Yes. Car owners may worry if their insurance is affected if another member of a car pool is driving their car. The answer is that any person using the vehicle with the car owner's permission is covered along with the car owner. Obviously, a car pool relief driver has the named insured's permission, so coverage would still apply.

Persons who drive in carpools may want to discuss the details with their insurance agent. It's important to discuss the details to make sure that coverage isn't adversely affected or to be certain that their insurance limits are adequate. An insurance agent may recommend that you carry higher bodily injury liability insurance limits, especially if your policy contains sub-limits that apply separately to injured persons and to the total amount of losses. Higher medical payments coverage limits may also be in order. Providing full details can help an agent make sure that any fees involved in the arrangement represent coverage for the driver's operating expenses and not additional income. Conclusion

In most instances, the use of a covered car in a typical share-the-ride arrangement or car pool will not compromise or void either the liability or medical payments protection under the personal auto policy. The fact that passengers pay a small amount of money to help cover the expense of automobile operation is unlikely to eliminate their driver's insurance coverage since the car is not being used as a "public or livery conveyance."

Insurance consumers should be encouraged by the flexibility of coverage under their personal auto policies. Participation in a car pool does not void automobile liability insurance provided the pool is not operated for a profit. There is no problem when the members of the pool use their respective cars approximately the same amount of time. If one of the members does not share the driving and pays a regular fee, the insurance protection of the owner of a car involved in an accident remains intact. However, any fees received by a driver from car pool passengers should only reflect a reasonable share of the gas and oil expense and depreciation on the car. Do you still have questions about your situation? If so, contact your insurance agent, a professional who's in an excellent position to provide you with answers.

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COPYRIGHT: Insurance Publishing Plus, Inc. 1998

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Avoiding Road Rage

How likely are you to become enraged while on the road? Emotions have a huge impact on driving. Long before starting your car, you've had to wake up, deal with home emergencies, perhaps get your kids moving, and worry about work (including getting there on time).

Now that you're stressed out by the way your day may have started, your emotions may be fueled by having to deal with a variety of drivers who choose to:

  • Cruise through intersections during a red light
  • Make quick left turns in front of oncoming traffic
  • Change lanes six times in the space of two city blocks
  • Tail-gate so closely that they threaten to weld their car onto your rear bumper
  • Ignore the changing light in order to adjust mascara, shave, eat or comb
  • Pay more attention to their cell-phone conversations

Such folks turn every day on the road into a test of patience and may even trigger a dangerous emotional response.

"Road rage" refers to driving incidents involving aggressive or violent behavior. Various sources have blamed increased traffic accidents and fatalities on road rage. Others debunk the term as a "fad." and say that traffic statistics don't reflect increased violence on the part of drivers.

Chances are, most instances of poor driving are isolated incidents. Every driver is guilty of an act that can be blamed on a momentary lapse in judgment. You or I may make a proper lane change or legally proceed through an intersection 99 out of 100 times. However, the drivers who witness our mistakes may assume that we're hopelessly inept or are doing something deliberate. Take a deep breath from behind your wheel and recognize that the driver who has just done something "stupid" is likely someone who is normally a good driver.

It makes sense to give other drivers the benefit of the doubt. One reason is because it's earned. Most drivers do a terrific job on the road. Especially when you consider the dangers inherent in driving, such as traffic congestion, poor weather, time-pressures and routine road hazards (breakdowns, potholes, pedestrians, etc.)

A better reason for staying calm behind the wheel is that cool-headed drivers make better decisions. They have a better chance of avoiding or minimizing accidents. Finally, you may run into serious problems if you cause an accident while acting too aggressive. There's a greater chance of causing serious injury and a higher likelihood of legal consequences. You also increase your chances of being sued. Oh, and let's not forget that insurers aren't seeking to cover drivers who fail to use common sense.

Driving is tough enough without complicating it with rude or aggressive behavior and car insurance isn't free, so start your car, give other drivers a break, and keep a cool head. It's an attitude that creates the best chance for getting where you need to go....safely.

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A Fresh Look At SUVs
Sports Utility Vehicles Still Popular

It’s been roughly a decade since Sports Utility Vehicles (SUVs) have made a serious splash on the traffic scene. Today, more than ever, they are the undisputed kings of the road. Further, their popularity is still climbing for the following reasons:

  • they have a very comfortable ride
  • they're heavy and sturdy, making them safer in collisions
  • they're capable of handling certain types of inclement weather better than smaller vehicles
  • they're more stylish than pickup trucks and large vans, making them more attractive to female drivers.

The combination of power and safety have propelled these vehicles into a position of dominance in sales and, naturally, on the streets and highways. An early reason for the popularity of SUVs was the belief that they were safer. The motorized behemoths’ sales grew at the direct expense of lighter cars which, while efficient on fuel, were vulnerable to heavy damage in higher-speed collisions. On the other hand, SUVs heralded the arrival of personal transportation that, initially, survived collisions better than the lightweights.

Sports Utility or Personal Assault Vehicles?

We have learned that SUVs also have a dark side. Ironically, one of the biggest issues is that they're - well - BIG! Although SUVs make their occupants safer, it comes with a price.

Construction - SUVs are not only heavier than most private passenger vehicles, they're also stiffer. SUVs react more like jeeps on wet roadways and on turns. While smaller vehicles may fish-tail under these conditions, SUVs have a tendency to roll over. Further, with their heavier weight and stiffness, SUVs have bodies that don't have as much "give" during impacts with other vehicles.

Collision - This means that smaller, lighter vehicles that collide with SUVs suffer a higher level of damage upon impact. Naturally, the occupants of smaller vehicles that collide with SUVs face a higher chance of serious injury or death. SUVs have front bumpers that are significantly higher than most vehicles and this can cause big problems. Instead of helping to mitigate the impact by making contact with the other vehicle's bumper, it maximizes damage because the SUV's hardest part makes contact with the more vulnerable body of a smaller vehicle. In fact, depending upon its speed, an SUV may actually run over the top of a smaller car.

Increased Liability - The nature of the construction elements of an SUV during accidents with smaller cars result in these types of vehicles inflicting more serious bodily injuries to other operators. This fact leads to more lawsuits against SUV operators. More claims increase the cost to insurers and results in higher insurance rates. In fact, a number of apply premium surcharges to SUVs in order to make up for their greater risk of causing serious accidents.

While SUVs may fit the needs of persons who put a premium on vehicle strength and safety, such vehicles inflict more serious damage on smaller vehicles and their occupants. Further, as the number of SUVs increases, there will be a diminishing return on their safety since the probability will increase that SUVs will crash into other SUVs. In the end, a person interested in buying and driving an SUV will just have to consider the positives and negatives.

revised 10/02

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What Is Diminished Value?

Has your car ever suffered from diminished value (DV)? DV refers to damage to an auto that reduces its market value. There are several different types of DV:

Inherent DV: Describes a general conviction that a wrecked vehicle, which is then repaired, is less valuable than a vehicle that is accident-free. This belief is unaffected by having information on the scope of the repairs or by whether there are any visible signs of repair

Example: Will Prudunt is ready to get a new car. Although his '98 model has served him well, he's ready for a change. After finding his dream car, Will wants to make a good trade-in deal. Will and the sales rep look over his '98 and agree on a $3,950 trade-in. As they discuss the loan papers, the rep asks if the '98 has ever been in an accident. Will slaps his forehead and says "Oops, I was rear-ended three years ago. My insurer paid about $2,000 in repairs." The sales rep then picks up the finance paperwork and says that he will have to re-figure the agreement. When he comes back, the rep says that they can only offer him $2,400 on the trade-in. Will points out that he's never had any problems with the car and that it ran even better after the repairs...the rep won't budge on the lower trade-in offer.

Claim Related DV: This refers to any instance where an insurer's action or practice results in an inferior vehicle repair. This is subjective because parties can argue over what is meant by inadequate repair. Insurer actions that could trigger claims-related DV include an insurer's:

  • insistence upon the use of selected auto repair shops
  • requirement that a repair facility use after-market, rather than original, equipment and manufacturer parts
  • refusal to pay for additional repairs identified by a repair shop.

Repair Related DV: This refers to any instance where a repair shop's action or practice results in an inferior vehicle repair. What is considered a below-standard result that is created by a repair shop may involve:

  • completed work which includes below standard labor or improper procedures
  • completed repairs where below-standard parts were used when an insurer authorized standard parts
  • incomplete repairs when an insurer authorized that all needed repairs be performed.

Now that you have more information on the basics of DV, please be sure to read our companion article, "Is Diminished Value Covered?"

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Is Diminished Value Covered?

The issue of diminished value (DV) has long been a great debate among insurance companies, lawyers, state courts, consumers (including activist groups), auto parts manufacturers, auto repairs shops and others. The focus on whether such losses are covered concentrates on claims that a policyholder would make to his insurer for damage to his or her own car. Answering this question is only clear from one's viewpoint. Supporters of the DV theory say that these losses are real and should be reimbursed under an insurance policy whenever there is accidental damage to a covered car. Other groups say that such losses are similar to depreciation and were never intended to be covered. Factors affecting this debate include:

  • Can DV be accurately measured?
  • What are the financial stakes of the groups supporting each side of the issue?
  • Should DV be considered only when a vehicle is repaired and then sold?
  • How is an older car's "pre-accident" value measured?
  • Should repair shops or insurers bear the responsibility for DV?
  • The wording of applicable insurance policies.
  • Current and pending state laws involving DV.
  • If DV is paid and a vehicle owner sells the car without a loss of market value, does the DV payment have to be returned to the insurer?

Courts’ Views

Over a dozen, high-profile cases have been decided by courts nationwide over the last 18 months. Most of the cases have resulted in the courts dismissing DV as a legitimate area of coverage, but there has been a notable exception. In November, 2001, Georgia’s Supreme court ruled that DV should be considered whenever a loss occurs to a vehicle, so insurers will have to include DV in any settlements they make.

What To Do About DV

The only thing that is really important to you is your unique coverage situation. Depending upon the age and value of your cars, you may or may not have a concern over this issue. If you do, your best bet is to discuss your concerns with an insurance professional. You can find out what coverage options may be available or, at the very least, gain a better understanding of your existing coverage. Please be sure to read our companion article, "What Is Diminished Value?"

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COPYRIGHT: Insurance Publishing Plus, Inc. 2001

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Driving Through A Winter Wonderland? – part 1

Driving during a snow laden winter can take your breath away. However, the season's beauty comes with equal peril. The elements that create stunning winter landscapes also bring driving nightmares. Driving safely during the months that include snow, blinding storms, ice and slush takes preparation and the proper mind-set. What considerations do drivers need to make during the coldest of seasons? Well, there are several areas that really need your attention. In part one we'll discuss preparing your car and getting equipped for handling emergencies. Preparing Your Car

Cold weather makes it necessary to make sure that your vehicle is ready to stand up to its rigors. A stalled car may be an irritating inconvenience in warm or moderate weather. However, the same circumstance could literally endanger a driver's life when it occurs in a winter storm or during extremely low temperatures. Your goal should be to minimize the chances of a vehicle breakdown by having a qualified mechanic inspect the following:

  • Wipers
  • Tires (tread wear, alignment, and traction by maintaining air pressure)
  • Brakes
  • Radiator and coolant system
  • Transmission
  • All fluid levels
  • Hoses, clamps and belts

It is important that once checked (and any deficiencies corrected), a car owner be sure to periodically certify that these items remain in good order. This is especially crucial prior to long trips. Preparation For Emergencies

Wintertime driving calls for drivers to be ready to deal with the hurdles represented by weather conditions and the likelihood of being stranded. Car owners should consider having the following items available to deal with routine and emergency winter driving situations:

  • ice scraper
  • first aid kit
  • snow brush and small shovel
  • heavy blankets
  • flares
  • flashlight
  • matches
  • metal cup or small container (in order to melt snow for drinking water)
  • small or basic tool kit
  • bag of cat litter or sand
  • candles
  • salt
  • extra clothing (coat, boots, gloves)
  • jumper cables and drive belts
  • extra gallon of antifreeze and windshield wiper fluid
  • extra quart or two of motor oil
  • car phone, cell phone or citizen's band radio
  • non-perishable food
  • a dry support for a car jack such as small, sturdy wooden board

It is also helpful to keep plenty of fuel in your car or truck's gas tank to avoid running out during weather related snags in traffic or if you must pull off the road.

Be sure to read Driving Though A Winter Wonderland? Part 2.

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COPYRIGHT: Insurance Publishing Plus, Inc. 1999

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Driving Through A Winter Wonderland? – part 2

In this part, let's talk about making long trips, skidding, actions to take when you're stranded and driving in the right frame of mind. Preparation For Long Trips

Long distance trips by car or truck can be dangerous during the winter, so here are some suggestions for minimizing the chance of the trip becoming a tragedy:

  • find out about expected weather conditions at locations along your route
  • tune into local stations for information on road conditions
  • give persons on either end of your trip a travel itinerary including planned departure and arrival times and call these persons to let them know of your safe arrival
  • stop frequently for resting and re-fueling
  • travel as much as possible in daylight
  • be familiar with your route, carry recent maps and prepare alternate routes
  • be prepared for travel delays and be willing to pull over on the road or to stop at road shelters to wait out poor driving conditions
What To Do If You're Stranded
  • pull your car over as far off the road as possible to avoid being hit
  • put on any additional clothing to keep warn
  • use phone or radio to call for help
  • it is better to stay with the car and run the engine periodically, not continuously
  • conserve your energy; over-exertion by trying to move your vehicle or shoveling too long endangers your health
  • melt snow for drinking water
  • move your arms and legs to improve your circulation and to keep warmer
  • before leaving your vehicle, consider the outside temperature. A person can freeze very quickly, especially if there is much wind
  • If you are stranded in an area where there is regular traffic, put on your flashers or raise your car's hood to attract help
What to do if you start to skid

Above all, try not to panic. Abrupt or wild steering or braking will make things more dangerous. Skids occur when the car's speed overcomes tire traction. If you do not have anti-lock brakes, gently pump your brakes until the car slows and traction (ability to steer) is regained. If you DO have anti-lock brakes, apply steady pressure until control is regained. If you are able, try to steer your car in the same direction in which you're skidding. In other words, if you're skidding to the right, turn your STEERING WHEEL (not your tires) to the right. This action should counteract the skidding. Drive With A Winter Frame Of Mind

Winter driving often becomes frustrating due to having warm weather driving habits, expectations and behaviors. Cold weather driving becomes easier when you're realistic. Winter travel takes more patience, care and planning. A 30 minute drive during clear, sunny and dry conditions is no longer possible under snowy, slick or icy conditions. Minimize your frustration and increase your chances for safe travel by doing the following:

  • allow more distance between you and the car ahead of you as safe braking distances are MUCH longer on slick roads
  • slow down
  • watch for icy conditions, especially on bridges and overpasses
  • keep your headlights on so that your car is more visible to other drivers
  • don't start driving until your windows are clear of frost, snow, etc.
  • clear snow and ice from your vehicle's lights
  • leave for destinations earlier, expecting that travel will take significantly longer
  • drive with a higher level of awareness of traffic and road conditions
  • clear snow from the top of your car so that it doesn't later obscure the view of other drivers
  • use caution when approaching intersections
  • avoid sudden braking, turning, accelerating and lane changes
  • make it a habit to wash your car, including the underside, regularly to remove harsh chemicals and salts which are corrosive

Winter often does provide a beautiful backdrop in which to drive, but it helps if you're patient, cautious, realistic and prepared.

Be sure to read Driving Though A Winter Wonderland? Part 1.

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COPYRIGHT: Insurance Publishing Plus, Inc. 1999

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What Are Auto Symbols?

This is a brief discussion on a major factor that is used to develop your auto insurance premium: auto symbols. Your Coverage Is Symbolic

Auto insurance collision and comprehensive coverage rates are based on several factors, such as a vehicle's:

  • original cost new
  • horsepower, size, weight, other physical characteristics
  • year of manufacture (model year)
  • vulnerability to damage, and
  • sports features (speed, handling, styling, seat capacity)

The above items are represented in a Vehicle Identification Number (VIN). Besides being used as a sort of automobile fingerprint, each VIN is converted into a number between one and twenty-six. At this point, the number is called a "symbol." The higher symbols are assigned to higher end cars such as Mercedes, Ferrari, and similar vehicles which represent the ultimate in luxury, styling, sportiness, etc. Logically, the lower symbols are assigned to modest cars, but even the little Yugo has a symbol higher than one. Other Characteristics That Affect Symbols

Insurance companies look at vehicle safety features, weight to horsepower ratios, body styling, utility of the vehicle and many other factors beyond the price of the vehicle when assigning a symbol. Generally, vehicles that are known for their safety features (Volvos, Saabs, etc.) receive lower symbols than comparably priced sedans and will cost less to insure. Two door, two-seater, high horsepower vehicles will generally receive a symbol much higher than their actual value because of their sport or high performance nature. Such cars are built to attract drivers who take advantage of the speed and handling ability of their cars.

An insurance company may actually increase or decrease a symbol based upon the claims and damage repair cost history of a vehicle. This can happen a few months or several years after a new model is introduced. Symbol changes may also be made for vehicles that are prone to special dangers such as vehicle rollover or gas tank explosions. Why You Should Consider Symbols?

First, it will affect your cost to insure a new car. Ask your agent about the differences that features make before buying a car. A simple decision such as ordering a 4 door vs. a 2 door could make the difference in hundreds of dollars in additional insurance costs over the years.

Second, insurance companies calculate their premiums based only on factory built cars containing factory installed options. Other dealer-installed options or aftermarket options (installed by custom auto shops) may not be covered unless you tell your agent. Sure you'll have to pay additional premiums, but that's better than the alternative of not having a feature repaired or replaced after a loss. Cars, trucks and vans are big investments that need to be properly insured. Talk your needs over with an insurance professional to make certain that you're protected.

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How Do I Protect My Classic Car?

Standard Is As Standard Does

Depending on the type of car you own and your driving history of tickets and accidents, you are likely insured in the standard or preferred auto market. Standard and Preferred markets are nearly identical. They both cover typical car owners, driving typical cars in typical uses. Typical or average cars and operators allow insurance companies to use a comfortable set of assumptions on what to expect for the number or losses and the expense of repairing the losses so that premiums can be developed and charged. But what if you own a classic or antique auto? Well the above assumptions can be tossed out because you're in a special coverage situation. Coverage Needs

You may have to reach out to the specialty market for protection of your special auto. A classic auto is commonly considered to be an auto around 15 to 25 years old and, naturally, has appreciated in value. Specialty coverage is necessary because standard auto coverage rates are based upon a car losing value each year due to aging and normal vehicle use. The owner of a classic or antique car needs coverage for a vehicle that maintains or increases in value. Further, such owners have to deal with a carrier that has expertise in handling losses to their collectible cars as well as being experienced in making the necessary considerations to charge the right premium. Rating And Eligibility Considerations

Specialty car insurers typically base their rates on elements such as:

  • car's current value (often established by appraisal)
  • any special design or features
  • deductible
  • use (exhibition, touring, parade)
  • availability of storage in a locked garage
  • owner's age (no youthful drivers)
  • whether spare part coverage is included
  • availability of another car for normal vehicle use
  • whether the car's coverage includes automatic increases to account for inflation

If you have a special auto, talk to your insurance professional for advice. He or she shares your concern for having the right type of coverage.

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Why Does My SUV Cost More Or Less To Insure?

What Is an SUV Compared to a Car, Van or Truck?

Private passenger vehicles include coupes, sedans, sports cars, pickups, vans, mini-vans, station wagons, jeeps and sports utility vehicles (SUVs). These vehicle classifications are based primarily upon the physical characteristics, driver use and performance. For example, sports cars are built low to the ground (low profile or clearance) for peak handling ability and speed. Pickup trucks have more powerful engines and open cargo areas for hauling and towing. SUVs have a high clearance or profile and have enclosed cargo areas. They are capable of handling off-road driving, accommodate more passengers (compared to trucks) and have a higher cargo-carrying capacity. SUVs could legitimately be considered as hybrids of other vehicle types. One thing SUVs have in common with other vehicles is that they have to be insured. Insuring SUVs - A Rollercoaster

SUVs have come to dominate vehicle sales as well as the nation's roads. Insurance companies have had to create a pricing and underwriting philosophy toward them. As it turns out, a pricing and underwriting approach is less of a philosophy and more of a rollercoaster ride. Why has it become a ride? Well, at first glance, it seemed to make sense to charge a LOT to insure an SUV! SUVs are big and very expensive, which translates into very expensive to repair or replace. Then it became apparent that passengers were safer in such heavy vehicles, so it would cost less to pay for their injuries in accidents. Then insurers recognized that something was overlooked: those big, safer vehicles inflicted higher damage to smaller cars during accidents, so more money is paid for injuries to other drivers and their demolished vehicles. Insuring SUVs - Two Rollercoasters

Now there is more than one rollercoaster ride as insurers are focusing on different areas of these perplexing vehicles. One insurance powerhouse is focusing on the fact that SUVs are safer for their passengers. Since owners and riders don't suffer as many injuries, it has announced a discount for the rates it charges for Medical Payments coverage (which pays for injuries to the persons named as insureds under an auto policy). Simultaneously, several other well-known insurers have publicized plans to increase SUV rates on liability coverages (which pays for injury or property damage caused by an insured driver). Keeping Insurance A Mystery

An immediate result of these contrary approaches is to continue the industry's strong tradition of being a mystery to consumers. How can the SUV-buying public understand how the same type of vehicle is being priced differently (for different reasons) by different insurers? The only thing that is clear is this: if you have questions about insuring an SUV run, don't walk, to an insurance professional and talk about your needs.

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Are Your Child Passengers Safe?

If you regularly carry young passengers in your auto, have you done everything possible to make sure they’re safe? Are you familiar with what is involved in keeping children safe? If you’re not, read on for some tips on what’s necessary to protect the persons most vulnerable to injuries during car accidents. 

Guidance from Child Restraint Laws?

While you might think it would be safe to comply with your state’s child safety or restraint law, you would be wrong in many states. The National Safe Kids campaign recently reviewed the states’ child restraint laws and found them to be quite inadequate. Based upon the guidelines of its own model child restraint law, nearly every state inadequately protects its children. How? In most instances state laws fall short in the following areas:

  • penalties for restraint law violations are too low to encourage compliance
  • rarely establishes restraint guidelines for children older than eight
  • too many exceptions to the restraint laws exist
  • few states offer child-seat loaner or assistance programs
How Are Child Passengers Best Protected?

While you’re likely familiar with the needs of infants and toddlers, the focus of protection usually is upon a child’s age or whether a safety appliance exists. Here are some considerations for protecting young auto passengers:

Infants - Should be in well-constructed and padded infant carrier that should be located in a rear seat. Infant seats should be of the type that is made to face the rear of the seat and NOT the front of the passenger area. Infants must be protected from the chance of being thrown forward into hard surfaces.

Toddlers - Should be in well-constructed, padded child carriers that, while facing forward, should only be placed in the rear passenger seats. Again, this is to minimize the chance of hitting hard surfaces (such as a dashboard or a windshield) and to avoid air bags which are designed to protect adults.

Pre-schoolers - May move from child carriers to well-constructed and padded booster seats. The purpose of the boosters is to make sure that the seat belts fit properly. As with child carriers, these restraints should be installed in rear passenger seats.

Older children - Around age 12, it should be safe to allow children to ride in a car’s front seat. HOWEVER, the age guideline assumes that a child has become tall and heavy enough to be properly secured by regular restraints. Be careful that shoulder straps either fit these children properly or are properly tied-down so they don’t represent a hazard. Also, be realistic. Age is a secondary consideration to body size. If a child’s small build results in a poor fit for regular seat belts and shoulder straps, continue placing the child the rear with a secure seat belt.

A disconcerting fact from the National Safe Kid campaign survey is the high incidences of children who are allowed to ride in cars without restraints or while improperly secured. This sad fact results in hundreds of thousands of serious injuries and deaths. Every passenger in a vehicle should use restraints that are appropriate for his or her age and size. Don’t depend on a law; depend on what’s needed to keep everyone safe.

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Avoid Flooded Vehicles

If you’re ever in the market for a used vehicle, you probably know that it’s important to find a car that is both affordable and reliable, with affordability often being the higher concern. However, while getting a good price, you need to be sure that your "bargain" isn’t due to it having taking a swimming course.

When serious storms or hurricanes result in flooding, the impact on the car market is felt nationally. Cars that may have been totaled because of serious water damage in one state may end up in another, without a clear indication that it was waterlogged. A person looking at any used car must take steps to avoid buying a car that is nearly guaranteed to needing serious repairs soon.

Flooded cars are often cleaned up by original owners or dishonest dealers and sold to auto auctioneers without information about the water damage. Such vehicles may face a laundry list of problems such as:

  • bacteria infestation (due to damp, hidden areas)
  • more rapid rusting and corrosion
  • engine damage
  • electrical system damage
  • brake, brake pads damage
  • operating parts contamination (with dirt and other particulate matter)

In an ideal world, the fact that a car or truck has been flooded and cleaned or repaired should be told to prospective buyers.

However, since our world falls short of "ideal," you should protect yourself from buying a flood-damaged vehicle. This can be done by asking questions and doing a little detective work. First, ask the seller why the vehicle is available for sale. Sometimes it’s best to be blunt by asking whether the vehicle has ever been in an accident or suffered flood damage. Then take a close look at the car, being careful to spot clues that it’s been water damaged. If you write down the auto’s Vehicle Identification Number (VIN), you can use that information to find out the vehicle’s history. A number of Internet sites offer history reports services including VHR Online and Carfax. Further, either you or a trusted mechanic can inspect the car for the following signs:

  • A damp or musty odor in the car’s interior
  • Existence of brittle wiring casing
  • Debris beneath carpeting floor pads
  • Water line marks or silt
  • Rusting of any metal bolts, door hinges or other pieces in a car’s interior (including the car seat springs)
  • Grass, dirt or debris on a car’s air filter
  • Any pooling of water or signs of rust in the trunk, spare tire and/or car jack
  • Evidence of moisture in gauges

Be certain to check that all electrical items such as lights, horn, radio/CDs, turn signals and headlights operate properly. Also be on the lookout for signs that a seller is hiding something, such as a used car that has had carpeting or upholstery replaced or a car that was recently painted. Other ways to protect yourself are to insist upon a warranty, refuse to buy any vehicle on an "as is" basis and to take the vehicle out for a test drive.

Remember, besides the cost of the used car, SUV, pick-up or van, you also face the costs of registering and insuring the vehicle. Make sure that the transaction isn’t spoiled by a watery surprise.

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Does That Car Have A History?

Let’s consider another type of auto protection that occurs before shopping or buying insurance. What can you do to improve your satisfaction with a new or used car purchase? Of course the simple things are to take time to take a close look at the cars under consideration and ask pointed questions about them including how they handle in turns and emergency braking. Just as important is to be comfortable with the party selling the vehicle, such as a reputable dealer.

Of course, particularly with used cars, vans or trucks, personal inspections and a vehicle Q&A may still be insufficient to get all the details you need. A method that may be more helpful and certainly less expensive than taking a car to a trusted mechanic is to check out the car’s history. But don’t worry, rather than suggesting that you find an automotive private investigator, you only need to start searching with your trusty PC.

A relatively new service available on the ‘Net provides historical information on any vehicle that has a legal identification or a VIN (vehicle identification number). An entity call Carfax is typical of such a service. For a reasonable fee and armed with the VIN, a subscriber may request a search for information and can be alerted to any number of potential headaches such as the vehicle:

  • is stolen
  • was repaired after a serious accident
  • had its odometer reading lowered
  • suffered flood or other weather-related damage
  • is or was part of a manufacturer recall
  • has a history of recurring repairs
  • was previously used by emergency personnel
  • was used commercially (delivering pizzas, newspapers or as a taxi)

All of these are serious problems that, without a car history service, can be easily hidden from an unwary buyer. Why not take advantage of the ‘Net to find a service that can help you be certain that you find a car that is worth insuring?

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Treating Young Drivers Equally

It used to be that, despite all the traditional "woman driver" jokes, young ladies beginning to drive were different from their male counterparts….they were safer. Time passes and things have changed, this time for the worse. Trends, particularly accident statistics, show that girls are gaining equality with boys on the roadways.

The latest information from the National Highway Traffic Safety Administration reveals that the youngest set of female drivers, aged 16, are becoming involved in more accidents. While 16 year old boys are still the scourge of the traffic system, 16 year old girls, licenses still warm from the laminating machine, are closing the gap regarding accidents, increasing their involvement in both non-fatal and fatal categories. Another factor contributing to the equality is that the accident rate for boys in the same age group is improving.

What action should parents of a budding driver take? Begin by recognizing that your new driver, girl or boy, needs your help. Make sure that you provide proper instruction and driving practice. If you’re not already, become a positive driving role model. Once he or she has a license, resist any urge to allow broad driving privileges or to assign responsibility to take over chores such as driving younger siblings. Also, make sure that you exercise control over how and when they can operate a car. Finally, bite the expense bullet and make sure your son or daughter is properly insured. Your insurance professional can give you more assistance in seeing that your new driver turns into a safe one.

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Exchange Students –Automobile Coverage

Check with your exchange student program coordinator to see what kinds of coverage are automatically provided for the child. But don’t take anyone’s word, get copies of documents that prove the coverage situation. This article briefly discusses how a personal auto policy responds to exchange students. Please be sure to read its companion article, "Exchange Students – Homeowners Coverage."

First, make sure that the exchange student is permitted to drive under the rules of the exchange student program. If program rules allow driving, contact your motor vehicle department to make sure that your student has a valid driver’s license.

The typical auto policy, such as the Personal Auto Policy, extends its coverage to any person having your permission to drive a covered vehicle. Your liability coverage will protect the exchange student against damage he or she causes to other property and people. Coverage to damage done to your vehicle is also available when you have the appropriate collision and comprehensive coverages. Of course the coverage is subject to your policy’s insurance limits, deductibles and other provisions.

Medical payments coverage will apply to the exchange student who is injured in an accident while occupying or driving your car with your permission.

If you expressly forbid the exchange student to drive your vehicle and the student does anyway, you may not have insurance coverage, but you may still be found liable under a court of law - perhaps for improper supervision of a minor. Permission to use the vehicle in some policy forms must come from the person named on the auto policy.

Discourage any exchange student who is a minor from purchasing a car, truck, motorcycle, RV, boat, moped, scooter or any other vehicle. An exchange student’s status makes it very difficult to get proper coverage and causing an accident as a vehicle owner could create complex legal problems. If faced with an exchange student who owns a vehicle, it is important to get any available assistance from the exchange student program, including their legal counsel. You should seek your own qualified legal help to make sure that your interests are protected. The safest course would be to avoid an exchange student situation that includes an owned vehicle.

Please check with a qualified automobile insurance agent after reading this and before your exchange student arrives. Virtually every state has its own special state-mandated endorsement that will expand or limit the coverage we describe here. Companies may use different forms that provide coverage that is quite different than the Personal Automobile Policy Form.

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Become A Better Driver

American drivers are pointing fingers again. A recent survey bears some grim news…the other guy and gal behind the wheel is ruder, more aggressive and is causing more accidents. A recent survey sponsored by several motorist and insurance organizations discovered that:

  • Most drivers have recently operated their car, truck or SUV in a risky manner
  • Many drivers think that other classes of drivers should have their driving skills regularly tested
  • The majority of drivers think that their driving habits are fine…everyone else is the problem

It is time to stop pointing fingers. Let’s put our hands back on our steering wheels. Regardless who is at fault, the number and severity of accidents and road tragedies are increasing. The only thing that is under your control is your own driving behavior. While you can’t predict what another driver is going to do, you can make a stronger effort to make the roads and streets safer.

Obey traffic lights, signs and road markings. All of these are important methods to control traffic and minimize accidents. Just try to figure out how much time you "save" by tailgating, lane changing and running traffic lights. If you save anything, it’s seconds, not minutes. Also, if you are involved in an accident, you’ve just lost any time ever gained by risky driving. Insurance paperwork and accident reports can claim hours and days of your life. If time is important to you, then take the time to pay attention to the rules of the road.

You will also find it healthier and safer to avoid paranoia. The other drivers in the other cars and trucks are not out to get you. Don’t take things personally since the silly things that happen in cars are usually mistaken or mindless, not malicious. Just relax and concentrate on your own driving. Yield right of way to others, stop for school buses, and watch for pedestrians and bicyclists. The more patient, respectful, and attentive drivers there are on the road, the better it will be…for all of us (and our insurance rates).

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Senior Drivers

Most of the problems associated with traffic accidents are often related to extremes in ages of drivers. The biggest concern has always been new drivers. Teens will always cause more than their share of accidents because they don’t have the experience or maturity to drive with as much care as they should. But, inevitably, time passes and their driving improves. However, that improvement doesn’t last forever.

All drivers continue to age and, eventually, driving skills will be lost. It is up to us as individual drivers to address how we handle our ability to drive a car, van, truck or SUV. It is important to recognize that older drivers can make adjustments. It probably comes at no surprise that the easiest way to adjust driving habits is to pay greater attention to traffic signs, signals and speed limits. Obeying posted instructions will decrease the chance that an older driver will have to rely on deteriorating eyesight and slower reflexes to avoid an emergency situation.

Some states have laws that increase requirements for older drivers to renew their driving privileges. However, such requirements, such as shorter licensing periods and mandatory driving tests don’t occur until drivers are well past 70 years of age. It makes more sense for drivers to change their habits as well as look for ways to objectively assess their current driving skills. Mature drivers should consider the following:

  • Consider restricting driving to non-peak hours whenever practical
  • Avoid driving in poorer weather
  • Stop driving at night
  • Be aware of how any prescription medicines may affect vehicle operation
  • Voluntarily take driving tests so an objective party can evaluate skills
  • Search Websites, such as those sponsored by state motor vehicle departments, senior associations or driving clubs which offer self-assessment questionnaires
  • Reduce distractions while driving, such as minimal or no use of cell phones, audio devices, etc.
  • Be more sensitive to feelings of fatigue and don’t drive while tired
  • When circumstances call for it, consider giving up your license and depend on other means of transportation

As a group, older drivers will soon grow to unprecedented size. It will be as individuals that this group can make sure that it doesn’t cause unprecedented problems.

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Does Special Property Need Special Coverage? – Part 1

[Return] to Part 2

Limited Coverage For Certain Property

The typical homeowners policy offers plenty of coverage for personal property, usually offering a limit equal to half of the amount reserved for the residence (ex. Your home is covered for $150,000, so your contents and furnishings are covered for $75,000). While this is generous coverage, it doesn't extend to all types of property for all causes of loss. Certain types of property, because of its high value and liquidity, is far more vulnerable to loss...either easily destroyed, easily stolen or both. For instance, an insurer protects your sofa right along with your fur coat for the same basic premium, but the two types of property don't represent the same chance loss. Recognizing this fact, insurers put more restrictions on the coverage provided by a basic policy. Theft Coverage Limitations

When property is lost due to theft, coverage under a standard homeowner policy is severely limited (generally between $1,000 - $2,500) for the following types of property:

  • jewelry, watches, furs, and gemstones
  • dinnerware, serving sets, trophies and similar property made of or plated with silver, gold, platinum or pewter
  • for firearms, accessories and related property
Other Coverage Limitations

Several categories of property are subject to very modest limits (generally between $200 - $2,500) of coverage, regardless of the cause of loss (theft, fire, accidental breakage, etc). Specifically:

  • money, bank notes, coins, medals, gold, silver and platinum (other than jewelry or dinnerware)
  • securities, accounts, deeds, tickets, stamps, manuscripts, passports and similar property
  • watercraft and related property including their trailers
  • trailers not used with watercraft
  • business property located in your residence
  • business property located away from your residence
  • certain types of electronic property (CD players, VCRs, TVs, radios, computers )and related accessories) which is lost or damaged while in a car or is located away from your home and used for business.

Please refer to part 2 on how to get more coverage for these classes of personal property.

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Does Special Property Need Special Coverage? – Part 2

[Return] to Part 1

Remind Me About Homeowners Limitations

In part 1, we told you that the typical homeowners policy contains substantial coverage limitations for certain types of property. The modest insurance protection affects property that is highly vulnerable to loss because it is targeted for theft and/or has a high level of value in relation to its size. Examples are gold, money/securities, precious metal-plated dinnerware, jewelry, furs, stamps, electronic property, business property, watercraft and firearms. How Do You Handle The Limited Coverage Situation?

You have to do something extra to your insurance program. Insurance companies are happy to provide more coverage, if they are paid for their trouble. Specifically, limited coverage can be handled using the following methods:

Increased Coverage C Endorsement - this form is only appropriate for property saddled with limited coverage for theft losses. This form is attached to a basic policy and it increases the theft insurance limit (ie. for jewelry from $1,500 to $5,000).

Scheduled Personal Property Endorsement - this form is used for increasing coverage for property that has protection reduced for all sources of loss. The property is removed from the basic policy's limits and is covered exclusively by the endorsement. This form takes more work since each item of property has to be listed and assigned a particular insurance limit.

Inland Marine Property Floater - this method works like the personal property endorsement, except that it is a separate policy. This alternative is more appropriate for persons owning substantial amounts of high-valued property. The coverage must often be purchased from specialized insurers and comes at a high cost. In order to qualify for such coverage, you may need to meet special circumstances such as having a residential alarm system or make use of vault storage. Another Advantage Of Special Handling

In order to arrange coverage under a schedule or an inland marine policy, the property must be properly valued. This often involves appraising the property. It's very helpful to have an expert source establish the current value of jewelry, furs or other valuable possessions. In fact, such property should be appraised every two or three years since their values often increase over time.

Do you still have questions about property that needs special handling? Talk to an insurance professional about your needs and make sure that you have proper protection.

Please refer to part 1 for more information on restrictions faced by certain types of personal property.

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Covering Coin Collections

The official name for the study and appreciation of coins, currency, medals and similar property is called numismatics or coin collecting. Collecting coins is still quite popular and interesting because it involves geography, culture, history, precious metals, economics, monetary laws, politics and customs. It also touches upon the arts and sciences as it deals with engraving, designing and even metallurgy.

This hobby has a big impact on insurance coverage. Homeowner (including tenant) policies provide extremely limited coverage for property like money, securities and similar items. This is especially true of collectible coins and currency having a special value that, usually, far exceeds their face amounts.

One standard homeowners program contains a severe restriction on the limits available for money. Specifically, it limits coverage to less than $300 for any loss which involves money, including currency and collectible coins. Insurers restrict coverage for coin collections and similar property because it is attractive to thieves, subject to fraud and counterfeiting, small in size but very high in value, and very vulnerable to destruction.

Coin collectors invest a lot into their hobby, so they should be encouraged to seek special protection. A collector has the option of adding additional protection to their basic homeowner protection or buying a separate policy. While arranging for coverage, a coin collector must meet several critical objectives. First, the collector must be able to prove ownership of the property. Second, the collector must use a reliable method that establishes the property's current value. Keeping careful and current records is essential to making sure that a loss is properly covered. A collector should maintain current inventories of their collection. A written inventory is good, but it could be backed up by photos or even video documentation. The collector should also keep independent verification of coin values such as guides and, when warranted, professional appraisals. Finally, the collector must be clear about their coverage:

  • what is the total amount of coverage provided?
  • is the coverage for each individual piece or a single (blanket) limit for the whole collection?
  • what is the basis of loss settlement (actual cash value, guaranteed amount, replacement cost)?
  • are there any special storage or notification requirements?

It is very important to keep your insurer informed about any additions, removals or other changes involving your coin collection. If values have changed, make sure that you tell your insurer to adjust your coverage.

Collecting coins is a great recreation and it's worth a collector's time to make sure that their investment in it is properly protected.

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Have Any Tips On Insuring Jewelry?

Basic homeowner policies provide very limited coverage for property such as jewelry. The reason for this is that jewelry is high-valued (especially in relation to its size), is easily lost or destroyed and is vulnerable to theft and fraud. If your jewelry holdings are modest (say just a few hundred dollars), perhaps the limited coverage provided by a basic policy is adequate. However, when high values are involved, consider buying special insurance coverage. A few options are available such as buying supplemental insurance that is attached to your homeowners or tenant's policy or purchasing a special, separate jewelry policy.

The important step is to discuss the coverage options with an insurance professional. Discussing the coverage will allow you to understand how a loss will be paid. Does the coverage consider values that increase over time? Does it cover mysterious disappearance (when you know the property is gone, but can't pinpoint when and how the property was lost) and other causes of loss, or just fire and theft? Discussing the coverage also helps you understand the steps you must take to make sure that you keep the maximum coverage in force and whether the coverage you receive is worth the additional price.

Documenting The Jewelry's Value

If the jewelry has just been purchased, a store receipt or certificate should establish the insured value. However, as time passes or circumstances change, the insured value should be reevaluated, perhaps by seeking an appraisal. Getting an appraisal that affirms your jewelry's current value is an excellent way to assure that your property is properly protected. Of course, make sure that you work with a competent appraiser (check their credentials and number of years of experience). It is also helpful to talk to a potential appraiser. Does she seem to have expertise? How willing and able is she to explain her work? There are several professional jewelry and appraisal associations that can give you information on appraisers and appraising methods. All of these items are important, especially since you have to pay a fee for an appraiser's services.

Handle With Care

Once you're certain about the value of your jewelry and the adequacy of its insurance coverage, you need to properly handle your jewelry. After all, who wants to actually file a claim? If you own a significant amount of expensive jewelry you may want to look into other precautions such as:

  • Get new appraisals every two or three years, sending a copy to your insurer
  • Take photos of your jewelry from several angles; again, share copies with your agent or insurance company
  • Consider a quality in-home security system, including a hidden vault or storage area
  • Take care on where and when your jewelry is worn to try to avoid becoming a theft target
  • Keep original receipts and all appraisals, especially if they demonstrate that the jewelry's value is appreciating
  • Ask your jeweler whether they have access to "Gemprint," a jewelry identification system that documents a jewel's distinctive markings much in the manner of fingerprinting.

Again, your first step is to talk to an insurance professional since he or she shares your concern that you have the protection you need at a price you can afford.

Revised 05/02

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Antiques

While many of your possessions may be of the routine variety, it’s likely that some pieces may be special, having decorative or other features, particularly age, that may qualify it as art, an antique or both. Examples are expensive china, porcelain statuary, paintings, etc. However, other types of property may be harder to define.

Most policies do not provide a definition of either antique or fine art nor does any industry standard exist. Therefore we have to rely on the commonly understood definition used by a reasonable person, in other words a dictionary definition. Let’s look at two definitions found in the American Heritage Dictionary.

antique – 1. Of or belonging to ancient times, 2. Belonging to, made in, or typical of an earlier period and 3. Old-fashioned—An object having special value because of its age, especially a work of art or handicraft that is more than 100 years old.

fine art - 1. Art produced or intended primarily for beauty rather than utility, including sculpture, painting and music and 2. Something requiring highly developed techniques and skills.

Regardless the definition, basic property insurance policies are designed to handle commonplace property. Special property coverage is either excluded or severely limited. To protect such property, it is important to either modify a policy by adding additional coverage or to purchase a special, separate policy.

Before arranging for coverage, it is important to establish the value of the property. In many instances an inexpensive source such as a price guide or list may be available to determine value. Other methods may be to have the value determined by a professional appraiser or to use current receipts or sales bills. Provenance is also important. Provenance is just a fancy term for documents that prove an item’s history, particularly when there are facts that affect value such as documenting an early year of manufacture, relationship to some historical event or even previous ownership by a famous person. Once a current value is determined, adequate insurance should then be purchased.

Properly describing and setting policy limits to protect uncommon and high-priced items eliminates problems at the time of loss. It reduces the chance of coverage being denied and more clearly defines what is covered and for how much. If you wonder whether you have the right coverage as well as the right amount of coverage, contact an insurance professional to discuss your situation. Perhaps you’ll both develop a greater appreciation for arts and antiques.

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Umbrella Coverages – Part 1

Are You Getting Excessive?

Okay, you have a policy for your home and the cars driven by your family. You have just the right policy for the apartment you rent out to others as well as special coverage for your boating excursions. Your homeowner's policy even has a special, added coverage to handle the business that your spouse runs out of your home. Yes, it looks like you can breathe a sigh of relief and be confident that you have all the coverage you need. Or should you have an umbrella? An umbrella is the term for a liability policy that fits over your primary policies on an excess basis (and sometimes provides protection that is not available under your primary coverage).

Doesn't "Excess" Mean Too Much?

Not in the case of carrying umbrella coverage. Umbrellas are designed to be carried over a person's primary or underlying liability coverage. A person's primary coverage is typically part of his or her personal automobile and homeowner's coverage. Primary refers to the fact that in the event of a loss, the liability portion of your auto or homeowner coverage is the first to respond. Umbrellas or excess liability policies respond to an eligible loss only after the primary insurance has paid its limit.

It's quite possible that your primary insurance limits provide more coverage than you'll ever need. However, circumstances could involve a type of loss that is not completely covered by a primary policy. For instance, your newly licensed child is driving the family car and slides on an icy highway. He ends up causing a chain collision damaging several cars and injuring a dozen drivers and their passengers. Or maybe you often volunteer to help transport members of your son's first grade class on field trips and you have an accident because you tried to beat a yellow light. If you don't have enough primary coverage, any shortage may have to come out of your personal assets.

Umbrellas generally provide additional liability coverage for the following underlying policies:

  • Personal Automobile
  • Homeowners/Farmowners
  • Recreational Vehicles
  • Watercraft
  • Personal Liability

The additional coverage may often extend to providing for related expenses, also on an excess basis, such as the cost of providing a court defense. Please see Umbrella Coverages - Part 2 for more information.

Revised 03/02

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Umbrella Coverages – Part 2

Umbrella or Excess Coverage?

In part 2, we continue our discussion of how umbrella policies work.

A traditional umbrella offers broader protection, covering primary policies as well as a variety of, typically, uncovered exposures. For instance, you may have to go to court after being accused of slandering another person. The liability section of your homeowners policy may not cover this type of loss, called personal injury. An umbrella policy might include coverage for personal injury, so the loss is covered. You may also need a traditional umbrella to handle odd situations such as hobbies or activities that may increase the likelihood of facing liability losses. For example:

  • you have an in-home hobby of training guard dogs and a neighbor's child is attacked
  • you publish a newsletter on the Internet covering local or state politicians and one issue wrongly accuses a state senator of committing crime
  • You collect rare instruments and, as a part of the hobby, you also repair and restores such property for other people. One day you drop an antique mandolin which shatters when it hits your garage's concrete floor
Generally umbrellas provide coverage for any amount of a loss that exceeds the primary policy's deductible. However, when handling a loss that is not covered by primary insurance, special kind of deductible called a self-insured retention (SIR) may apply. An SIR is the dollar amount you have to pay before the umbrella coverage is triggered.

Of course, umbrellas don't always work as named. Your policy may just provide additional amounts of coverage to supplement existing protection. This is how an excess policy performs. Excess policies respond the same way as a primary policy. In such cases, an umbrella may "follow the underlying coverage". This means that the umbrella covers ONLY the situations covered by its underlying coverage. In this case, the umbrella also excludes a loss that's excluded under a primary policy. While in many instances umbrellas provide broader coverage, only a careful evaluation of the actual policy wording will reveal the extent of the additional protection. So, Do You Feel Any Rain Drops?

You may or may not be feeling the need to carry an umbrella. The best way to find out if extra coverage is necessary is to discuss your coverage needs with a professional insurance agent. Especially if you have a larger than average amount of personal assets or are involved with activities that could expose you to larger liability losses. See Part 1 for other basic information about umbrella coverage.

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In-Home Businesses

Homeowner (HO) policies aren’t meant to insure in-home businesses. HO premiums assume that coverage is for a residence and related structures. Therefore no liability coverage is available for business activities such as customers who slip and fall on your premises, damage to business property (owned or in your control), injury caused by things you make (products liability), or damage due to services that you promote or provide. It is also unlikely that an insurer would provide a legal defense against business related claims.

Generally, an HO policy does not provide workers compensation coverage for any employee. Medical expense and liability coverage may be available for workers who are ineligible for workers compensation, such as maids, butlers, or nannies, but such coverage only applies if an injury occurs while performing residential tasks.

Example: You send your nanny to make copies of your business proposal and, on the way to the copy center, she is seriously injured in a fall. Your policy won’t provide any medical expense coverage for your nanny because she was performing a business-related chore.

There is no coverage for detached garages, barns, or similar structures on your residence premises if they are used in whole or part for business.

Example: You store $3,000 worth of equipment and supplies that you use in your job in your garage and the garage burns down. The fire loss to the garage becomes ineligible because of its partial business use.

A basic HO policy may protect certain property. However, the coverage may be limited to as little as a few hundred dollars. Items qualifying for limited coverage include business personal property kept in or around your home, business personal property kept at a location other than in or around your home or landlord's furnishings. One way to improve your coverage is to add policy options that do the following:

  • increase the coverage limits for business personal property
  • cover garages and other buildings that are rented to others
  • protect electronic business equipment which is usually used in a vehicle while such equipment is located outside of a vehicle
  • provide theft coverage for landlord's property
  • acquire limited business personal property and liability coverage for a in-home daycare
  • cover a condo unit owners' liability for damage caused by renters
  • provide premises liability coverage (i.e. a customer slips and falls)

"Click" below for more information

Sales office
Professional office
Landlords
Daycare or in-home school
Retail
Wholesale
Service
Manufacturing
Contracting
Repair
Farms and ranches
Racing

Sales Office

Usually an HO policy does not offer much protection for business property. In fact, available coverage may be up to only $2,500 for personal property used for business and kept on the residence premises. Further, no coverage applies to business property such as inventory, product samples, or items being held for delivery. Finally, even optional coverage excludes property related to a business conducted on the premises. For example, you are a cosmetic sales rep who also holds make-up parties in your home. For customer convenience, you keep an inventory of cosmetics at home. The HO policy will not cover this property.

If you are a sales person operating out of your home and have limited inventory, some companies will cover you with the Businessowners policy. The Businessowners policy provides broad coverages for buildings, personal property, loss of business income and extra expense incurred to remain in business (after a fire or other covered cause of loss), premises liability and medical payments. If you have more than $1,000 of goods off premises in transit, you will need to add additional coverage. Goods stored at other locations must be added to the policy.

If you cannot qualify for a Businessowners policy and a home business endorsement or separate policy fails to meet your need, your agent will probably have to build a special commercial package policy to handle your business. Commercial lines agents have both the expertise to design the appropriate coverage and access to the markets that offer policies for your sales business.

You will need workers compensation coverage for any employee, even part timers, and, if you deliver anything or if your vehicle is larger than a car, van or small pickup, you may need commercial automobile insurance. Another reason for buying a commercial auto policy is if any auto is corporately owned.Back to More Information

Professional Offices

Regarding doctors, attorneys, architects or similar occupations, whether your home office is your only office or simply a satellite office, you will need to work with an insurance agent who is familiar with the coverages that are appropriate for professionals.

Businessowners policies are suitable for most professional offices and can cover buildings, personal property, loss of business income, extra expenses incurred to operate the business (after a fire or other covered cause of loss), premises liability and medical payments.

Consult with your agent or your professional association(s) for professional liability and errors and omissions coverage. Back to More Information

Landlords

The homeowners policy is designed to cover landlord occupied residential buildings, landlord owned personal property, loss of rents (after a fire or other covered cause of loss), premises liability and medical payments. Note that the maximum occupancies that may be covered under an HO policy is a four-family dwelling. A dwelling policy may be used for 1-4 family structures that are not also occupied by the landlord.

For landlords with residential property containing from five to sixty units, the Businessowners policy is usually appropriate. It insures buildings, landlord personal property, loss of rents (after a fire or other covered cause of loss), premises liability and medical payments.

Most Bed and Breakfasts do not qualify for coverage either in the homeowners or dwelling insurance program. Bed and Breakfasts will require a combination of tenants coverage for the resident owner/manager, and a Businessowners policy to cover buildings, landlord owned personal property in boarders' rooms, loss of business income (rents and fees) and the extra expense to operate (after a fire or other covered cause of loss), premises liability and medical payments.

For landlords who have office or retail tenants, the Businessowners policy provides broad coverages for buildings, landlord personal property, loss of rents (after a fire or other covered cause of loss), premises liability and medical payments.

Workers compensation is necessary for any employee. Talk with your agent. Most states require workers compensation for resident managers even if you provide only free lodging as payment. Make sure you have certificates of insurance for any subcontractors (painters, plumbers etc.) you hire to do work for you. If the subcontractor has no insurance, you may be responsible for the subcontractor's work-related injuries.

Most personal automobile insurance will insure cars, vans, and pickups used in business - business use, artisan use. Larger trucks, backhoes and other contractors' equipment will need separate coverage. Some contractor equipment can be covered by the Businessowners policy, some by an auto policy. Ask your agent how best to insure your equipment. Back to More Information

Daycare or In-Home Schools

Coverage for abuse or sexual assault for small schools is often difficult to obtain at a reasonable price. Limited corporal punishment coverage for teachers who are employed by a school system may be available from your homeowners carrier. If you are an independent tutor or run your own school, most homeowners policies cannot be modified to include corporal punishment. Abuse and corporal punishment may be available through the association(s) that specialize in your type of school.

While the company that writes your HO policy may be willing to add an endorsement to cover piano lessons, most will not want to cover a three-to-five child daycare operation. Liability coverage may be purchased separately. Coverage for property and liability can be provided through a Businessowners policy, but none of these forms includes professional liability or abuse or corporal punishment.

Specialty schools, such as ballet, sports, personal training, animal training, or horseback riding will require specialty coverage. Again, your trade organization, or independent agent can often find you coverage at a reasonable price.

Workers compensation is essential for any person you employ.

Driving students in private vehicles or bus-like vehicles poses special problems. You must hold a Commercial Driver's license if you haul more than 16 people including the driver. Your school is probably too small to qualify for standard business auto insurance. If standard coverage is unavailable, many states have assigned risk pools and other mechanisms to provide you coverage-sometimes at reasonable prices. A good independent agent will understand these markets.

Your state will also have laws regulating the transportation of students and these laws may require a special license when transporting fewer than 16 people. Subcontracting the driving does not lessen your responsibility for a whole raft of laws from vehicle accidents, workers compensation, ADA, and whether the driver has met the new substance abuse requirements. Back to More Information

Retail

Persons with in-home retail operations must look beyond an HO policy for coverage.

The Businessowners policy provides broad coverages for buildings, personal property, loss of business income and extra expenses incurred to remain in business (after a fire or other covered cause of loss), premises liability and medical payments. If you have more than $1,000 of goods in transit, you will need to add additional coverage. Goods stored at other locations must be added to the policy, normally as an additional location.

You will need workers compensation coverage for any employee - even part timers.

You may need commercial automobile insurance if you deliver anything or if your vehicle is larger than a car, van or small pickup or if the vehicle is owned by a corporation. Back to More Information

Wholesale

As a wholesaler, here are some coverage options for your consideration:

Businessowners Policy - If you are a manufacturer's representative with limited inventory, some insurance companies will cover your business with the Businessowners policy, commonly called a BOP. The BOP provides broad coverage for the following:

  • buildings
  • personal property
  • loss of business income
  • extra expense incurred to remain in business (after a fire or other covered cause of loss)
  • premises liability
  • medical payments.

If you have more than $1,000 of goods off-premises in transit, you will need to add additional coverage. Coverage for goods stored at other locations must be added to the policy.

Commercial Package Policy - If you cannot qualify for a Businessowners policy, your agent will probably have to build a special commercial package policy to meet your needs. You will need a competent commercial lines agent to help you. Commercial lines agents have both the expertise to design the appropriate coverage and the markets for your wholesale business.

Workers Compensation- You will need workers compensation coverage for any employee - even part timers.

Commercial Auto Policy - You may need commercial automobile insurance if you deliver anything or if your vehicle is larger than a car, van or small pickup, or if the vehicle is owned by a corporation. Back to More Information

Service

The following are the most commonly insured service classes of business by a Businessowners policy. The Businessowners policy provides broad coverages for buildings, personal property, loss of business income and extra expense incurred to remain in business (after a fire or other covered cause of loss), premises liability and medical payments. If you have more than $1,000 of goods off premises in transit, you will need to add additional coverage. Goods stored at other locations must be added to the policy.

The following are the most commonly insured service classes of business by a Businessowners policy. If your service business is not on this list, it probably will need to be insured by the individually designed commercial package policy or similar specialty policy.

  • Appliance and Accessories - installation, servicing or repair - Commercial or Household
  • Bakeries (with baking on premises)
  • Barber Shops and Beauty Parlors and Hair Styling Salons
  • Dental Laboratories
  • Engraving
  • Funeral Homes or Chapels
  • Laundries and Dry Cleaning or Dyeing Receiving Stations
  • Lithographing
  • Mailing or Addressing Companies
  • Photocopy Services
  • Photo-engraving
  • Photographers
  • Printing
  • Shoe Repair Shops
  • Tailoring or Dressmaking Establishments-Custom
  • Taxidermists
  • Television or Radio Receiving Set Installation or Repair
  • Watch, Clock and Jewelry Repair

If you cannot qualify for a Businessowners policy, your agent will probably have to build a special commercial package policy to meet your needs. You will need a competent commercial lines agent to help you. Commercial lines agents have both the expertise to design the appropriate coverage and the markets for your service business.

You will need workers compensation coverage for any employee- even part timers.

You may need commercial automobile insurance if you deliver anything or if your vehicle is larger than a car, van or small pickup or if the vehicle is owned by a corporation. Back to More Information

Manufacturing

Manufacturing businesses cannot normally be insured by a Businessowners policy.

Find an agent and company that specializes in the kind of product you manufacture. Look for a company that will write your size business. Make sure you consider the impact of products liability claims, coverage for your products while they are in transit or at other processors, and products belonging to others that you are working on, whether at your business or at their location.

You will need workers compensation coverage for any employee - even part timers.

You may need commercial automobile insurance if you deliver anything or if your vehicle is larger than a car, van or small pickup or if the vehicle is owned by a corporation. Back to More Information

Contracting

Many companies have excellent "artisan" insurance packages for the small to medium subcontractor. Ask your agent to show you different artisan packages so that you can choose a program that fits your needs. Coverages may be similar among artisan packages, but rating plans vary. Some companies charge rates based upon payroll, sales or number of employees. As your business grows, you will want to ask your agent to shop your coverage to see whether it is to your advantage to change from one rating formula to another.

If you are a general contractor, you will need to work with an agent who specializes in general contractors. Contact your local builders association. Many builders associations will sponsor programs or know of agents who specialize in general contractors.

You will need workers compensation coverage for any employee - even part timers. If you hire any subcontractors, understand that you may be responsible for any injuries to subcontractors or their employees while they work for you. Make sure that you have certificates of insurance from each of your subcontractors for workers compensation, general liability and automobile insurance. It is to your advantage if your subcontractors have liability limits of insurance at least equal to your own.

You may need commercial automobile insurance if you deliver anything or if your vehicle is larger than a car, van or small pickup or if the vehicle is owned by a corporation. Back to More Information

Repair: Auto, Bicycle, Boat, Tractors, Furniture, etc.

Don't expect your homeowners policy to give you coverage. Repair businesses work on personal property belonging to others. Your business probably will need to be insured by the individually designed commercial package policy or similar specialty form. Coverage for inventory, repair machinery, property of others, business income coverage after a fire or other covered cause of loss, and premises and products liability coverage can be built into your policy.

Look for a company that will write your size business. Make sure you consider the impact of products liability claims, coverage for goods that you are working on that belong to others whether at your business, in transit, at another processor or at your customer's location.

You will need workers compensation coverage for any employee - even part timers.

You may need commercial automobile insurance if you deliver anything or if your vehicle is larger than a car, van or small pickup, or if the vehicle is owned by a corporation.

Work on autos will require an Auto Garage liability policy for the on-premises bodily injury, and Garagekeepers liability coverage to protect you against claims for damage to customer vehicles. Back to More Information

Farms and Ranches

The homeowners program can be endorsed to cover some aspects of hobby or "gentlemen" farms, including farm liability and livestock collision.

Farming for profit will require a Farm or Ranchowners policy. Farm and Ranchowners forms can cover your dwelling, barns, sheds, silos, cribs and other buildings, machinery and equipment, supplies, liability coverage, additional living expenses after a fire or other covered cause of loss; some policies can be endorsed for livestock mortality. Crop insurance is a federal program, but local farm insurance specialists can provide crop hail and crop damage coverage. Your agent should help you design an insurance program that meets your specific needs.

You may own property that previously was used as a farm. Farm insurers understand rural homesteads. You may find better protection from an agent and company who specializes in rural and farm property. If you have large barns or other outbuildings, you may need to increase other structures coverage under your homeowners insurance or convert coverage to a Farm or Ranchowners policy. If you lease land to others for grazing or crops or hunting, you will need to add separate liability coverage to your Home or Farmowners policy.

Workers compensation laws for agricultural employees vary in each state. Each state has special rules for hired hands and migrant workers. Even if you are not required to carry workers compensation coverage for a specific employee, you may still be responsible for any-work related injury to that employee.

Farm vehicles normally can be covered through a personal automobile policy. Incorporated farms may require a commercial automobile policy. Back to More Information

Racing: Car, Boat, Motorcycle, RV, Truck, etc.

If you are involved in racing vehicles or craft and, especially if you operate a business in building, servicing or repairing vehicles or craft from your home, you can not rely on your homeowners policy for either liability or property coverage.

Coverage for damage to actual equipment that is raced is seldom covered. You will want to check with your agent or your racing association for coverage for shop equipment, portable tools, travel trailers and other equipment related to your racing hobby or business. You will also need liability coverage or, at a minimum, be sure that the racetrack has spectator liability coverage that applies to your race participation, including practices.

Racing Repair Business

Your business may need to be insured by an custom designed commercial package policy that may need to include coverage for the following:

  • inventory
  • repair machinery
  • property of others
  • business interruption
  • workers compensation (even for part-time employees) and
  • premises and products liability

It's critical to identify if you need coverage against products liability claims that can arise from customer property you have worked on at your business, which may be transit, located at another processor or at your customer's location. An Auto Garage liability policy may be necessary to handle any on-premises bodily injuries and a garagekeepers liability form can protect you against claims for damage to customer vehicles.

You may need commercial automobile insurance if you make deliveries, have a commercial-size vehicle, or if the vehicle is owned by a corporation. Back to More Information

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Is Your Home Winter Ready? – Pt 1

If you live in a climate that includes cold winters, you know the season creates special challenges for homeowners. In this article, we discuss an icy situation.

Ice Dams

An ice dam is a formation of ice along a roof's edge. The dam of ice blocks additional water and the pooling water backs up and finds pathways into a home's interior. This water may cause deterioration and decay to interior wood and plaster. Once an ice dam has forced water to find ways to escape inside a home, the roof becomes more susceptible to future ice dams and water damage.

Too much heat warming the roof most frequently causes ice dams. The process occurs unevenly with the warmer area at the higher part of the roof melting the snow and then the cooler, lower area, particularly the roof edge, permitting the water to refreeze and then accumulate. Poor insulation or improper ventilation usually causes the heated roof. Inadequate insulation lets too much heat escape into the attic and this creates a warmer roof. Improper ventilation creates moisture and heat buildup due to the lack of air movement.

How to detect a problem

Compare the way the snow is melting from the living area of your home with how snow appears on the roof over an unheated area such as a garage or shed. How does your snow covered roof compare with your neighbors' homes? Check for icicles. They can be pretty, but heavy icicle buildup means that interior heat is melting a lot of snow and may contribute to ice dams.

How to prevent ice dams

There are a number of ways to help prevent ice dams:

  • Clear excess snow from the roof. However, in order to minimize damage to the roof and roofing, hire a professional to remove the snow.
  • Add rubberized or special roofing adhesives to help prevent pooled water on the roof from finding entry into the home's interior.
  • Inspect the attic and roof for cracks, holes, or joints that permit warm air to escape to the roof, and seal or repair these areas.
  • Add the recommended amount of insulation to the attic and exterior walls of your home to minimize escaping heat (this also reduces your heating costs).
  • Reduce your home's thermostat and throw on warmer clothing during extended cold spells.
  • Clear your gutters and downspouts so that water is properly shed off your roof.

As always, an insurance professional is a valuable source of safety and insurance information. Don't hesitate to contact an agent to discuss your questions. If you haven't had the chance, please be sure to read parts 2 and 3 of "Is Your Home Winter Ready" which discusses other winter concerns.

Revised 09/03

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Is Your Home Winter Ready? – Pt 2

In this part we discuss an important legal responsibility created by the winter season.

Creating A Clear Liability

Snow doesn't show favoritism. Instead of conveniently falling onto unused areas, it covers homes, sidewalks and driveways. As a responsible homeowner you need to arrange to make the travel ways on your property safe. This calls for clearing your walkways of snow and ice. It is also important to clear your property of items such as rakes, shovels, tools, toys and similar items. Remember that it takes only a small amount of snow to hide items that, during clear conditions, are easily seen and avoided. So take time to move such property and make repairs to uneven or cracked pavement.

Keep in mind that clearing walkways (including stairs) is an invitation for pedestrians to use the path. So, once you clear an area, it has to be kept clear and safe, especially from ice. Also, avoid creating piles of snow that can block either a driver's or a pedestrian's view. Finally, be sure that your property is safe for children who are enjoying winter. Don't allow children to slide around without being aware of pedestrians or motorized traffic and don't let anyone throw snow or iceballs at cars (you could be sued for any accident caused by careless play).

Don't forget the inside of your home. Visitors should be kept safe from harm by making sure you keep inside stairs and floors clear of the watery remains of melted snow. Keep things dry and consider providing mats that provide good traction and an area where folks can clear snow and ice from their shoes or boots.

As always, an insurance professional is a valuable source of safety and insurance information. Don't hesitate to contact an agent to discuss your questions. If you haven't had the chance, please be sure to read parts 1 and 3 of "Is Your Home Winter Ready" which discusses other winter concerns.

Revised 09/03

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Is Your Home Winter Ready? – Pt 3

In this part we discuss a different hazard of the winter season.

Firing Up A Hearty Loss

Do you own a fireplace, wood-burning stove or portable heater? What about a gas or an electric furnace? If so, you need to take steps to make sure that they are safe and used properly.

Have your furnace inspected to make sure that it will operate properly in cold weather. Clean filters and vents will go a long way to keep your furnace a source or warmth rather than a cause of a fire loss. An inspection should also make certain that your furnace is not a source for dangerous carbon monoxide buildup.

Fireplaces and wood-burning stoves should also be inspected and, if necessary, thoroughly cleaned. A byproduct of burning wood, creosote, builds up in chimney and stove flues very quickly. Even a single wood-burning season could produce enough buildup to create a fire or severe smoke hazard. Don't do the inspection yourself. It's worth the cost to have a professional inspect and clean your fireplace or stove. Also, make sure that you don't burn softwood or paper. Using anything other than hard woods exposes your fireplace or stove to quicker creosote buildup (softwood) or more intense heat (paper) which could clog or contribute to cracking a flue or liner.

Be very careful with the use of portable heaters. Depending upon the type, they can be prone to malfunction or could be a hazardous source of burns, especially for children. Further, many types can be easily tipped with the combination of heat source and fuels, creating a serious fire hazard.

Finally, make sure you have fire/smoke and carbon monoxide detectors properly installed and in good working order. Test them and put in new batteries. Small expense, big payoff.

As always, insurance professional is a valuable source of safety and insurance information. Don't hesitate to contact an agent to discuss your questions. If you haven't had the chance, please be sure to read parts 1and 2 of "Is Your Home Winter Ready" which discusses other winter concerns.

Revised 09/03

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Renters Insurance Needs

Most companies protect renters by using a homeowner policy that is designed especially for tenants. Typical policies cover your possessions for common causes of loss, additional living expenses related to making other living arrangements, medical expenses for treating people injured on your premises and, of course, lawsuits.

Property Coverage

Protection under the standard tenants policy is on an actual cash value basis (item’s replacement cost less depreciation). Example: Stewart’s kitchen catches fire and his five year old refrigerator is destroyed. A new model of the refrigerator costs $750. His insurance company pays him $95, the difference being five years of deteriorating value. Most companies offer coverage on a replacement cost basis if you purchase a separate endorsement.

Additional Living Expenses

A typical tenant policy provides a limit equal to 20% of your contents insurance limit. If your contents limit is $15,000, then your additional living expenses limit will be $3,000.

Theft Limitations

Certain types of property are quite vulnerable to being stolen, therefore very limited coverage is available for items such as jewelry, furs, gems, gold, silverware, pewterware, money, securities, guns and accessories. Protection can be increased by adding additional coverage to the tenant policy or by purchasing a personal article floater policy.

Liability Coverages

Liability insurance covers you for damage you cause to others or their property. The policy also provides for the cost of a lawyer (if necessary) and most court costs. Examples of liability claims include: slips and falls; beaning a neighbor’s child with a baseball; hitting a golfer with your errant hook shot; or a friend breaking her hip when she trips on a skateboard your child left on the stairs.

Insuring Apartment Business Activity

See What If I Run An In-Home Business?

Revised 04/01

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Insuring a Condo or Co-op?

Making sure that your condo or co-op is properly covered begins with a thorough reading of your condo or co-op documents (i.e., by-laws, provisions, regulations, etc.) It may help to have your agent review the papers, paying close attention to items such as:

What property is your responsibility to insure - the internal walls, appliances, your detached garage? What is the potential for loss assessments? Does the association or corporation insure common property at its replacement value? What is the association's deductible? Are you obligated to add any extra coverages or limits?

Next, be aware that your coverage typically comes in two forms. "Named causes of loss coverage" only covers the causes of loss specified. You must prove to the company that a covered cause damaged your property. "Risks of physical loss" covers all causes of loss except those that are excluded. The company must prove an ineligible cause of loss damaged your property. Risks of physical loss coverage usually applies to real property and named causes of loss coverage protects personal property. The former type costs more due to such policies typically covering a wider range of losses.

Regardless of the coverage type, condo/co-op policies generally cover the following:

Real property: coverage for the structural part of the condominium or co-op you individually own such as interior walls, appliances, fixtures, plumbing, ductwork, wiring, carpeting, flooring, possibly private garages, and permanent improvements you make to the property.

Personal property: possessions that are portable such as clothing, furniture, toys, books, objects of art, home electronics, computers, etc.

Loss assessment: required contributions that members make for the repair or replacement of property that’s owned in common.

Additional living expense: covers the additional cost of temporary housing, food and other increased costs of living when you are forced from your condominium or co-op by a fire or other covered cause of loss.

Liability coverages: covers you for your negligence in injuring other people or property on your premises (those accidents for which the condo association is not responsible) or through actions related to many of your hobbies. The policy also provides defense coverage, including hiring and paying for a lawyer (if necessary) and paying most court costs.

Medical payments: coverage is for minor injuries to people other than residents of the household and the payment does not require a lawsuit.

Keep in touch with an insurance professional during such trying times. They’re already committed to providing genuine help.

Revised 06/01

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Homeowners Coverage – Part 1

Employees routinely use their own vehicles in their jobs or just to run errands for their employer. Does your company have protection in case of an accident and both your worker and your company are sued?

Generally, a homeowners insurance policy includes at least six different coverage parts. The names of the parts may vary by insurance company, but they typically are referred to as Dwelling, Other Structures, Personal Property, Loss of Use, Personal Liability and Medical Payments coverages. They are usually presented as policy sections and are often labeled Coverages A through F. This article discusses Coverage Parts A, B, and C, which protect property.

Coverage A—Dwelling: The homeowner policy's first coverage section protects your house and any attached structures, such as garages, decks or fences. The typical policy covers your home when it is damaged by many hazards (also known as perils or causes of loss) including fires or storms. However, the following causes of loss are usually excluded from coverage under the homeowners policy:

  • Earthquake
  • Flood
  • Faulty maintenance
  • Damage from insects or vermin
  • Wear and tear, gradual damage or deterioration

Coverage B--Other Structures: This coverage section protects structures that are not attached to the home, such as a detached garage, storage or utility shed, playground equipment and swimming pools.

Coverage C--Personal Property: This covers your possessions, whether they are at your home or away with you on vacation. Personal property is often covered on a named peril basis. This means that only the causes of loss listed in the policy section are covered. The coverage is also subject to limitations and exclusions. Types of property having significant value, such as jewelry, fine arts, collectibles, etc., may require special protection. Talk to your agent about scheduling (adding) coverage on a floater which broadens and extends coverage for high-valued possessions.

Actual Cash Value vs. Replacement Cost: Commonly, protection under sections A and B is provided on either an actual cash value or a replacement cost basis. Actual cash value is defined as replacement cost minus depreciation. Replacement cost is the actual cost to replace the structure, regardless of depreciation. Check your policy to see which type of coverage you have. Coverage under section C is usually provided on an actual cash basis. However, your agent may be able to add replacement cost to your possessions just like that found in Coverage A.

Please be sure to read Part 2, which discusses other coverage.

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Homeowners Coverage – Part 2

Part 1 talked about how a typical homeowner policy covers buildings and structures. Now let’s look at Coverage Parts D, which is also a property coverage; as well as Coverage Parts E and F which involve injuries to people.

Coverage D--Loss of Use: This coverage handles the cost of additional living expenses while your home is being repaired. The coverage also applies if the home is unusable. However, the loss or loss of access has to be the result of an event that is covered by the policy. For instance, if your home were damaged during a war and you had to abandon it, Coverage D would not be available because war is excluded. Additional expenses normally include food, housing, and transportation. However, the expenses must exceed what your family normally incurs.

Coverage E--Personal Liability: This Coverage Part responds if you are legally responsible for causing property damage or physical injury. Protection includes paying for your defense costs and any financial judgment for covered incidents. Naturally the coverage would not apply for excluded situations, such as intentional injuries. Example: Joe is sued by a guy he injured during a brawl at a basketball game.

Coverage F--Medical Payments: This Part provides rapid reimbursement for minor injuries, such as a guest who trips and falls while visiting your home. This coverage does not apply to a family member. For example, if your child and your neighbor's child are both slightly injured while playing and need to go to the emergency room, this coverage will pay for your neighbor's expenses but not for your own child.

This is a brief overview of homeowners insurance. All of the coverage provided by the homeowners policy is subject to limitations such as exclusions, policy limits, and deductibles. It's important that you discuss the details of coverage and any other insurance questions with your insurance agent.

Please be sure to read Part 1, which discusses other coverage.

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Which Homeowners Policy is Right for Me?

Now that you own a home, you should consider the best way to insure it. One strategy you may consider is to match your needs to the right company. Some companies like new, high-valued homes while some companies do well with older or historic preservation homes. Others are comfortable with country homes or old farm homes. It pays to shop around, both for the best coverage and for a company that likes your type of home.

There are two common levels of coverage that you may consider:

Named causes of loss coverage - The policy only covers for certain kinds of causes of loss to your property. You must prove to the company that one of the covered causes damaged your property.

Risks of physical loss – This covers all causes of loss except those that are excluded. The company must prove that one of the excluded causes of loss damaged your building.

Many companies offer risks of physical loss coverage for your buildings and named causes of loss coverage for your personal belongings. Risks of physical loss coverage cost more, but here are some claims that would not be covered under named causes of loss policies:

If, for various reasons, you don't need a lot of bells and whistles on your coverage, ask around for a stripped down policy, sometimes called an HO-8 form. It MAY be appropriate for very low value, older homes. Coverage features include:

  • Protection against a list of specified causes of loss (if the damage isn't created by one of the listed items, such as fire or wind, it isn't covered)
  • Designed for older homes. Older homes generally were built with more expensive and/or exotic materials. You could not build early 20th century homes today for any price.
  • Contains no coinsurance penalty. You and the company agree on a maximum coverage limit that applies if the building is totally destroyed.

You may want to discuss other types of homeowners coverage if you own a different type of residence such as a modular home, mobilehome, apartment, townhome, condominium or you have personal living space in a commercial building.

Basic Homeowners coverages common to all homeowners form that insure both the home and personal property usually takes care of:

  • Coverage for your building (ask about coinsurance and replacement cost issues).
  • Coverage for your outbuildings - garages, sheds, barns, cabanas
  • Coverage for personal property is usually 50-75% of your building limit Limitations - many policies have special limits on certain types of property, such as theft loss to Jewelry and gems ($1,000), Furs ($1,000), Gold, silverware, pewterware ($2,500), Guns ($2,000), Building supplies - no coverage for theft. Further, very little coverage may be available of other types of property, regardless of the cause of loss, such as, money, stamps, fine arts, antiques, electronics, boating equipment, etc.
  • Additional living expense - pays the extra cost of temporary housing, food and other increased costs of living when you are forced from your home by a covered cause of loss.
  • Liability coverages - should you accidentally injure other people or damage their property
  • Defense costs - includes hiring and paying for a lawyer (if necessary) and paying most court costs.
  • Medical payments coverage is for minor injuries to people other than residents of the household. You don't have to be sued or be negligent.

If this short article has raised more questions about your coverage…good. Find an insurance professional to get the answers (and the coverages) you need.

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I Own or Rent a Mobile or Manufactured Home

Your Choices

There are a number of choices available for protecting your type of home. A few years ago, you might have been limited to getting very basic coverage or hunting down a company that specialized in coverage for mobile or manufactured homes. Today, many companies, including specialists, provide these policies. Regardless of the type of home you own or live in, it is important that you learn about the coverage options that are available. You may find that different policies vary considerably in coverage and price.

A fairly recent development in covering mobile/manufactured homes is to insure them by modifying a conventional homeowner policy with mobile home provisions called endorsements. The endorsements change key definitions and provisions of a conventional policy to fit a mobile or manufactured home situation. Such modified homeowner policies are packages that protect the home, outbuildings (unattached garages, sheds, etc.) and personal property. They also provide insurance for personal liability.

Like any homeowner, you probably want a policy offering the broadest protection available. Coverage is generally offered using two approaches. Some policies include a laundry list of items (or perils) that may cause a loss. Other policies state that they will protect your home against everything EXCEPT for a host of specified perils. Either approach includes liability coverage which protects you for injuries or losses to others which you accidentally cause.

If you are a renter, your coverage options are unaffected by the type of home construction. Your primary coverage need is to protect your personal property. A common form called a HO 04 Tenants policy (or similar forms) provides both property and liability coverage. Your Particular Property Insurance Needs

Any coverage option you choose is likely to reflect the fact that mobile homes are,well, mobile. Mobile home coverage is affected by the fact that mobile homes:

  • are able to move under their own power;
  • are more susceptible to wind damage,
  • tend to lose value with age.

The mobility of such homes creates a special need to protect the financial interest of the business which lent the money to purchase the home. For example, a mobile home owner decides to drive his home to Arkansas. The soon-to-be Arkansas resident "forgets" to mention his plan (and his new address) to Ohio Mortgage Company. The Ohio lender would be out of luck if the policy didn't include protection for this whimsical act. Another way in which a mobile or manufactured homeowner policy differs from conventional homeowner coverage involves coverage for unattached buildings. This coverage is usually minimal for, say, $2,000. Such a provision helps keep the premiums for policies lower by avoiding paying claims on very low value structures. The coverage is likely to be offered on an actual cash value basis. Unfortunately, mobile and manufactured homes tend to lose value over time.

The policy is likely to include a provision which requires you to get permission to move your home. Once granted, you're likely to get thirty days of special transportation coverages for collision, sinking, upset or stranding ( a special, higher deductible may apply during the move). Another common coverage feature is coverage for your attempt to move the home in order to prevent damage from an insured cause of loss. For example, you move your mobile home fifty feet to get away from a neighboring trailer that is on fire. IMPORTANT: coverage for moving endangered property usually has a modest limit (several hundred dollars is typical) because of owners who may be too heroic or clumsy for anyone's good. Your Particular Liability Insurance Needs

The liability protection connected with mobile or manufactured homes is, for all practical purposes, identical to the liability provided to conventional home owners. Why? The likelihood of guests to be hurt at your home, or your probability of being sued, tends to be the same. The important thing to remember is that your agent is a tremendous source for getting the information you need to be sure that your home and property are adequately protected at a reasonable price.

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COPYRIGHT: Insurance Publishing Plus, Inc. 1996

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I Own a Timeshare in Addition to Having Another Residence

Face the Coverage Facts

The majority of your coverage concerns are found in our consumer article titled "Which Homeowners Policy is Right for Me?" As a lucky owner of a timeshare arrangement, you may have a special coverage need. The insurance world has a tendency to focus on providing coverage for the most common needs. Naturally, unusual situations result in coverage gaps and owning a timeshare is such a gap. While insurance is readily available to handle individually owned seasonal or secondary residences, buildings, vacant land, or personal property; the common timeshare arrangement may not be handled by basic and/or optional homeowner coverage forms. Why Do Timeshare Arrangements Cause Coverage Problems?

Coverage gaps may exist because typical timeshare arrangements involve:

  • real property with multiple owners
  • living units that are often furnished with personal property that may be jointly or severally owned
  • living units which are occupied by several individuals or families who have control of all of the property during their time of occupancy
  • special agreements or stipulations that govern the property.

All of the above circumstances make it difficult to find coverage since standard policy forms are not constructed or priced to handle unusual or complex situations. All the Right (Coverage) Moves

Taking care of your coverage needs calls upon the quick involvement of an insurance professional. Here are some steps you should consider when you discuss your situation:

1. Bring a copy of all the residence related paperwork. The paperwork should include a valid contract that describes your ownership interest and obligations in the timeshare property.

2. Be open to the possibility that you may need to buy more than one policy to cover the jointly owned property, any personal property that's located at the residence, the joint liability exposure and any special assessments or liability assumptions agreed to under any contract.

3. Discuss the coordination needed to make sure that the coverage needs of all of the owners fit together so that no gaps exist when initially purchasing coverage. Further coordination will be necessary to make sure that, as circumstances change, the coverage is reviewed to make sure that it remains adequate.

4. Be flexible. Proper coverage may have to be provided by a specially modified personal insurance contract or even some form of commercial coverage may be necessary.

5. Take the time to ask that any coverage mentioned during a meeting with a qualified insurance professional be fully explained to you.

It's best not to generalize because coverage needs can vary substantially from one arrangement to the next. Your best bet is to discuss your current coverage and your coverage needs with a qualified agent in order to make sure that you're protected adequately and affordably.

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COPYRIGHT: Insurance Publishing Plus, Inc. 1996

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Any Advice On Domestic And Personal Service Workers?

There's Just No Time

Oh the demands on you…a job, family, your hobbies, volunteer work, your children's school and recreational obligations, the lawn and garden, house cleaning, repairs and on and on. Like many of your peers, you might find that you just don't have the time to get all of it done. Also, like many of your friends and neighbors, you may be "outsourcing" some of your responsibilities. Everything Old Is New Again

In days of old, a mark of the wealthy was to have most of your work done by servants. While this is still true of the very wealthy; a newer development is that this is now becoming a mark of the middle-class. Increasingly, more people are hiring folks to either assist or takeover duties such as:

  • child-rearing
  • gardening
  • decorating
  • housecleaning
  • laundry
  • grocery shopping
  • personal errands
  • child-transport
  • minor home repairs
  • lawn maintenance
  • meal preparation
  • exercise

While such help used to fall under the auspices of butlers, maids and nannies, today, individual specialists are providing similar services on either a part-time or full-time basis. Personal Services and Personal Liability

When personal services are provided by a commercial business, such as a limousine or laundry service or a lawn care company, there's generally no need to worry about being held liable for injury to another person or their property.

Example: The Burlies never had time to take care of their lawn. As their grass grew thinner and the weeds spread, Mr. Burlie decided to sign-up for the "Green Thumb" package from Lucky's Lawn Services. One afternoon, a Lucky Lawn specialist arrived at the Burlie's home, unraveled a hose and began to spray a weedkiller. A few minutes later, Stevie, who lived several homes away from the Burlies, came rushing by on his skates. Stevie didn't see the hose until it tangled his wheels and sent him headlong onto the cement curb. In this instance, Lucky's Lawn Services would be responsible for the injuries.

However, as individuals are hired by Joe and Jane America to perform personal services, the responsibility for injuring other people or damaging the property of others may begin to fall upon Joe and Jane. In these cases, will Joe and Jane have any help in paying for damages or injuries?. Homeowners Insurance To The Rescue

A person who employs the services of another may be held legally liable should the "employee" cause an accident. Can the average person who is guilty of nothing more than trying to make their lives a little less hectic depend upon their homeowners insurance for protection? Well, coverage depends upon the details surrounding an event. Generally a homeowners policy will exclude coverage for losses that are related to the covered person's (insured's) business or when other coverage, such as workers compensation or disability insurance, should apply to the loss.

Example: Molly Kelp really likes her neighbors' son, Peter, who is home from college. Molly knows that Peter is struggling for money to keep attending school, so she occasionally hires him to do jobs around her home. One day, she asks him to trim the branches of a tree that is in the front of her home. The branches are low enough to disturb traffic in the street. Peter jumps down from the ladder he's using for the job at the same time that a car is passing by. The ladder tips over onto the car's hood and the surprised driver swerves off the street and into the front of another neighbor's home. In this case, Molly's homeowner policy may apply to the damages caused by Peter. Why? Because the work was strictly related to Molly's use of her residence. If Peter caused an accident while carrying a ladder to paint Molly's law office which is next door to her home; coverage would be excluded. Do Your "Homework" On Personal Services

If you're not sure about what happens when a person you hire causes a loss, you need to do your homework. Discuss the details with an insurance professional and bring a copy of your insurance policy. Between the two of you, you should be able to make sure that your needs are covered.

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COPYRIGHT: Insurance Publishing Plus, Inc. 1999

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Insuring Roommates and Domestic Parners

Insurance policies continue to be written conservatively. In some instances, they still reflect situations that were prominent decades ago. One example is the way that policies define the persons it insures. Most policies are designed to cover:

  • single individuals
  • traditional married couples
  • traditional family - husband, wife, children
  • relatives sharing the same household

However, when two or more unrelated individuals live in the same residence and/or share the use of the same vehicle(s), the coverage situation becomes confused. It’s still common for either policy wording or company underwriting rules to limit or bar convenient coverage for an unrelated person. Why one or more unrelated persons are together is their business; the relevant consideration is how are their insurance needs met?

Homeowners Insurance

If you share an apartment or rent a home and each of you retains separate ownership of your property, each of you should carry your own tenant's policy. If you own the home jointly, but maintain separate ownership of your personal property, you might consider the following strategy:

1. Name one individual as the "named insured" on the policy. The named insured is covered for his interest in the dwelling and personal property (such as clothes, appliances, furniture, etc.). Further, the named insured is also protected against losses involving his legal liability to others including payments for medical services.

2. Add the other owners as additional insureds - residence premises. The other owners then will have coverage for their interest in the dwelling, premises liability and medical payments to others.

3. Finally, each additional insured should buy their own tenant's policy to cover their personal property.

Auto Insurance

If each person has his or her own vehicle, the insurance question couldn't be simpler. Each vehicle should be insured by the individual owner. However, if two unrelated people share ownership of a vehicle, the policy covering the car should have a joint coverage endorsement added to it. A joint coverage endorsement (which may have various names) should result in giving the co-owners the same coverage as if they were related. (This endorsement is not available in all states.) The same strategy may be used when only one person owns the household's vehicle. The other person (who does not have his/her own car) may be added via a joint coverage endorsement. However, other options may exist such as (depending upon the insurer): the non-owner resident may be added to the owner's policy as a part-time driver or the other person might purchase a "non-owned" auto policy to get automobile coverage.

The insurance industry is making halting steps to acknowledge a broader range of ownership arrangements, including policy forms that allow policies to reflect domestic partnerships. How can you be sure about whether your interests are properly covered? Easy…speak to an insurance professional; discuss your situation in detail and then determine the best way to structure your policies.

Revised (06/02)

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COPYRIGHT: Insurance Publishing Plus, Inc. 1996, 1999, 2002

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Exchange Students – Homeowners Coverage

Check with your exchange student program coordinator to see what kinds of coverage are automatically provided for the child. But don’t take anyone’s word, get copies of documents that prove the coverage situation. This article briefly discusses how a personal auto policy responds to exchange students. Please be sure to read the companion article, "Exchange Students – Automobile Coverage."

An exchange student in your care who is younger than 21 years is automatically insured under a homeowners policy, treated as if the child were a relative. An exchange student's property is covered while located at or away from your home. Off-premises coverage is normally limited to 10% of your policy’s Personal Property limit, subject to a minimum of $1,000. On-premises, the policy’s full content limit is available. If your homeowners policy had a $70,000 limit for Personal Property, up to $7,000 would be available to handle damage or loss to an exchange student’s property while it’s away from your home, say while at a summer camp. Liability coverage that applies to your family also applies for damage and bodily injury caused by an exchange student who is younger than 21 years of age.

If the exchange student is older than age 21, then the policy treats he or she as a guest. A policyowner can volunteer to extend his insurance coverage to include a guest's property while at your residence premises or even while you and the guest are at some other location. However, it is sometimes difficult to determine whether an older exchange student is a guest or a tenant - someone who is paying you a reasonable rent for staying in your home.

Hosting an exchange student creates questions you should discuss with an insurance professional who can help make sure your coverage needs are met.

Revised 06/02

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COPYRIGHT: Insurance Publishing Plus, Inc. 1996, 2002

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How Much Are Your Possessions Worth?

Properly valuing your personal possessions is very important but can often be both tedious and difficult. However, the task is nearly impossible if you don't have good documentation of what you own.

The following list could be very helpful in identifying what you own and, more importantly, used as proof of loss in case disaster strikes such as a serious storm, theft, or fire. If you print and complete this list, make a couple of copies, keeping one or two at a location away from your home. If you also want to keep a copy at your home, use an insulated safe (small ones are sold for in-home storage of important papers). Another good location is to put a copy in a plastic bag and keep it in your freezer (which can offer extra protection for non-food items).

Besides listing what you own, it's also good to do the following:

  • take pictures of and/or videotape your possessions
  • keep your sales receipts
  • keep your warranty information
  • get appraisals and keep them current (appropriate for expensive property)

For items which you don't have receipts or product information, include information on when and where you bought the property.

It may seem like a lot of work, but you'll be happy to have this gold mine of information to assist your insurer in giving you protection against loss of your possessions. General Personal Property Inventory completed by______________________ Date completed____________________________

$__________Sofa, couches, etc.

$__________Chairs

$__________Tables, end tables, etc.

$__________Desks, secretaries

$__________Chests, cabinets

$__________Cupboards, buffet, etc.

$__________Lamps

$__________Pictures, wall hangings

$__________Clocks

$__________Decorations

$__________Books

$__________Draperies, curtains, blinds

$__________Rugs

$__________CD players, DVD players and accessories

$__________Radios

$__________Televisions

$__________VCRs, Camcorders

$__________Home entertainment accessories (speakers, digital equipment)

$__________Computers, scanners, copiers, monitors, printers, speakers

$__________Other computer accessories

$__________Table linens

$__________China, chinaware

$__________Crystal, glassware

$__________Kitchen appliances

$__________Small appliances

$__________Cookware

$__________Cutlery, utensils, etc.

$__________Beds, mattresses

$__________Dressers, vanities

$__________Bedding, blankets, linens

$__________Bath towels, linens

$__________Suits (men's, women's)

$__________Coats (men's, women's)

$__________Dresses

$__________Jackets, sweaters

$__________Skirts, slacks

$__________Shirts, blouses

$__________Hats, gloves

$__________Purses, billfolds

$__________Costume jewelry

$__________Robes, lounging wear

$__________Shoes, boots, slippers

$__________Luggage

$__________Sports equipment

$__________Miscellaneous effects

$__________TOTAL Valuables and Treasures

$__________Fine jewelry (list items separately at the bottom of the page)

$__________Valuable furs (list items separately at the bottom of the page)

$__________Art treasures

$__________Silver, silverware

$__________Camera equipment

$__________Guns and accessories

$__________Musical instruments

$__________Stamp collection

$__________Coin collection

$__________TOTAL

$__________GRAND TOTAL OF ALL ABOVE

List specific items and value below:

$__________ item__________

$__________ item__________

$__________ item__________

$__________ item__________

$__________ item__________

$__________ item__________

$__________ item__________

$__________ item__________

$__________ item__________

$__________ item__________

$__________ item__________

$__________ item__________

$__________ item__________

$__________ item__________

$__________ item__________

$__________ item__________

$__________ item__________

Revised 10/00

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COPYRIGHT: Insurance Publishing Plus, Inc. 1996, 2000

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Special Form vs. Named Peril

You should check your homeowners policy to make sure that your building and personal property is covered on a special form rather than a named peril basis. Named peril means that the policy insures against the sources of loss (perils) that are listed in the policy such as fire, earthquake or hail. Special form coverage protects property against any source of loss that is not specifically excluded. Under named peril coverage, the policyholder may have to prove to the insurer that a loss was caused by a listed peril. With special form coverage, the insurer can only deny a claim if it can prove that the source of loss is excluded.

Generally, a special form policy is preferable since it offers more coverage than a named peril policy. Here are a few examples of losses where special form coverage made the difference and a claim was paid:

  • A battery was left on a hardwood floor. When the battery acid leaked out, it spread to the point that it was necessary to replace a large section of the floor.
  • An insured tipped over a bucket containing ammonia for soaking diapers. The solution ruined a room’s wall-to-wall carpet.
  • A deer jumped through a picture window. It went wild in the house, denting walls and furnishings and bleeding as it ran. It eventually jumped through another window.
  • A washing machine was running when its load of clothes became unbalanced. As the washer’s spin’s cycle began, it shook and "walked" from its position into a brand new water heater, poking a hole in the heater’s casing and breaking its glass liner.
  • An insured was walking on the floor joists of his unfinished attic. The insured slipped off of the joists and fell through the living room ceiling, causing extensive damage.
  • A two-year-old boy found a hammer and went on a spree through his parent's house, seriously damaging several plaster walls, a toilet bowl, wash basin, dressing table and other items.
  • A bucket of paint was spilled on an insured's hardwood floors, getting into floor cracks and pores. It was necessary to replace much of the wood.
  • Finally, an insured converted his oil furnace to gas without removing the home’s oil-input pipe. On its regularly scheduled day, an oil company tanker arrived and pumped 500 gallons of oil into the insured's basement.

Revised 02/02

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COPYRIGHT: Insurance Publishing Plus, Inc. 2001, 2002

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How Much Is That Doggie In The Lawsuit?


America loves its pets, especially dogs, whose population in U.S. households is estimated at 60 million. While dogs make great companions, playmates, and protectors, they also continue to be a problem for insurers. Nearly two million people are bitten by dogs each year with around 800,000 persons getting professional medical treatment for their wounds. Each of these incidents is a potential lawsuit.

Have Teeth, Will Bite

Our country's level of dog ownership continues to grow. Therefore, biting incidents have also climbed. Another factor that contributes to these incidents is that owners often fail to supervise and train their pets. A third big contributor to the problem is that many persons, especially children, do not know how to behave around dogs. Bites may occur when:

  • a person stares at a dog, which the animal perceives as a threat or challenge
  • people attempt to handle dogs during sensitive moments (while a dog is trying to eat or while nursing puppies)
  • trespassers or house guests invade a dog's territory
  • "rough-housing" with a dog escalates beyond playing.

An Issue Of Control

Insurance is still designed to handle accidents, and companies are at a severe disadvantage when policies are asked to respond to losses that are easily avoided. Dog bite claims involve the insured having control over areas such as:

  • choosing to own a dog
  • choosing the particular breed of dog
  • raising the dog in a certain manner
  • housing the dog in a certain manner
  • exposing the animal to various social situations
  • being knowledgeable about a dog's temperament and inclination to bite or attack.

All of the above elements can contribute to lawsuits and to action from an insurer.

The "Policy" On Dogs

If you have homeowners insurance and you own a pet, the liability portion of your policy provides protection for losses arising from pet ownership. Not only are you and your household protected, but coverage even extends to persons who have custody of your pet. However, your policy won't cover businesses that may have custody of your pet, such as kennels, obedience schools, groomers and professional sitters or walking services (they should carry their own coverage).

Minimizing The Problem

Owners have a responsibility to raise and handle their dogs in a manner that reduces the chance for a loss. Steps to take include becoming knowledgeable about their breed of dog and about general principles of ownership and care. They should make certain that family members, social visitors, neighbors and strangers are protected from the owner's pets. Owners should also take advantage of resources to help them, such as tips from animal shelters, dog ownership clubs, the AKC and a plethora of Internet sources.

It may not be the fairest set of circumstances, but more insurers are choosing not to give dogs the benefit of the doubt. It is becoming more common for companies to refuse to write coverage for persons who own certain breeds of dogs. Therefore, owners must fight this trend by not taking their pet ownership lightly....because insurers aren't.

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Claims By Candlelight?

There's something happening with candles?

If things haven't got complicated enough for persons concerned with protecting their homestead, it appears that the soft, soothing glow of a candle's flame may disguise some problems. Specifically, the use of candles may result in:

  • reducing the internal air quality of your home
  • increasing the chance of fire losses
  • damages by particulate deposits on interior and exterior walls, carpets, furniture, appliances, window treatments, floors and other surfaces.

Further, their use may also contribute to health problems from inhaling particulate matter or ingesting harmful chemicals. What's the problem?

Actually, there are a number of problems and they have been accentuated by a change in the market for candles. The last few years have seen an explosive growth in the popularity of candles. They are increasingly used for their traditional, decorative purpose and they are now marketed as scented candles for deodorizing and for a health-related purpose called aromatherapy.

Of course, to boost sales, candle-makers find that they have to offer products with an intense scent. This is accomplished by adding scented oils into their wax mixture. This often causes the candle to burn improperly and increase the production of soot. A Sooty Situation

It looks like soot, which is a carbon residue produced by burning, can create a large, expensive problem. Since soot is particulate matter that can be carried through the air, it can seriously stain walls, carpets, and personal property. Studies show that electronic and plastic components are also vulnerable to soot damage. Unfortunately, soot produced by improperly burning candles bonds very strongly, making it difficult to impossible to clean. Further, soot may contaminate a home's heating system, including ductwork. The soot can then be spread throughout a home, creating widespread damage that is difficult to repair. Property stained by soot may have to be cleaned by professionals and, often, the property has to be replaced. What's in those things anyway?

You may have assumed that the only materials found in candles were the wick and some type of wax. Surprise! Here's a list of ingredients which may either be found in a candle or may be created during combustion:

Acetone Benzene Trichlorofluoromethane

Carbon disulfide 2 Butanone 1 1- Trichloroethane

Trichloroethene Carbon tetrachloride Tetrachloroethene

Toluene Chlorobenzene Ethylbenzene

Styrene Xylene Phenol

Cresol Cyclopentene Lead

Another surprise is that the candle-making industry is not required to tell consumers about the ingredients used in their products, including when a wick is used which contains a lead core. Poor candle design or practices

Besides the use of oils and chemicals, candle-makers sometimes create problems because they make other mistakes. Candles may also burn improperly (causing soot) because a candle's wick may be off-center or there may not be a proper amount of air in the candle mixture. A candle may have a higher likelihood of causing a fire loss due to:

  • an improper candle mixture which results in intense heat or high flames
  • improper holders (glass that shatters or spills flammable liquid)
  • wood holders that catch fire
  • flammable items imbedded in the candle mixture such as potpourri
Coverage under a Homeowner policy?

Damage to a home or personal property due to soot can create serious problems for both an insurer and a homeowner. Losses involving soot can create thousands of dollars in damages. Depending upon the details surrounding a loss and the wording of the particular homeowner policy, coverage for the damage may not be available. Why? Because the source of loss might be considered the result of pollution, which may be excluded. Another reason for rejecting a claim may be an assumption that the damage was gradual instead of sudden, so it wouldn't be considered accidental and sudden damage. A claim could even be affected by the knowledge of the insured. For instance, even if the policy covers soot-related losses, a claim could be denied if a homeowner knew that the type of candle they used could cause damages.

Since the damage is caused by matter that is invisible to the naked eye, it could be difficult to prove that the loss was sudden. Tests can be used to determine the cause of stained or discolored property, but the testing can be expensive and the cost may have to handled by the homeowner. What To Do?

It's all up to you. You might wish to ask more questions about the type of candles you use or curtail your use. You can also discuss whether coverage is available under your homeowner policy with an insurance professional. If you do use candles frequently, you may also want to check your home thoroughly for any stains or discoloration, including any contamination of your heating system. Candle, candle, burning bright? Not if you cause a claim tonight.

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COPYRIGHT: Insurance Publishing Plus, Inc. 1999

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Are These Tragedies Insurable?

Headlines Hit Home

Many Americans have been horrified and confused over the shootings which have occurred in schools nationwide the past several years, and the Columbine High School tragedy has been of particular concern. After having these events splashed over the airwaves and newspapers; the consequences of these actions have to be dealt with by the survivors. While citizens, authorities, social and psychological experts, gun opponents/proponents are all wondering why such things happen, the focus is beginning to shift to pointing fingers. Who's Responsible?

The shootings have created both human and financial consequences and armies of lawyers are being formed to hold someone financially accountable. Let's not oversimplify these events; there are elements that make them different from each other. The individuals involved and the particular circumstances that triggered each event are not similar enough to treat them in the same manner. However, the acts do have an important element in common. Since all of these acts have been performed by children, it may appear understandable that their parents are the first to be held responsible.

The first source that other parties look to for financial relief are insurance policies. In such instances, would the parents' homeowner policies respond to lawsuits over the actions of minors who injure or kill their schoolmates? The answer is…..it depends. What Do Homeowner Policies Intend To Cover?

Homeowner polices are called package polices because they offer coverage in two major sections. Section I protects the property that belongs to the policyholder such as his home, garage, storage sheds, household furnishings and even the increased living expenses created by the loss of use of such property. Section II provides coverage against the policyholder's legal responsibility for injuring other persons or damaging their property. While the shootings certainly involve substantial injuries and property damage, homeowner policies may not provide coverage.

Homeowner insurance policies intend to respond to events that are accidents. While the language differs among policies, generally, the premiums you are charged for this liability protection is based upon having to defend and make payments to injured parties because of losses that are neither intended nor foreseen by the policyholder. Of course, the particular loss details have a great deal to say about whether the event can be considered an accident or not. How the loss was caused, the age of the person causing it and other circumstances affect coverage. Are Shootings Covered?

The question of the hour is: will a homeowner policy pay for the financial consequences of a person shooting someone else? Surprisingly, nothing is clear cut. For instance, it could pay if the shooting involved a person who was defending himself or protecting another person. It may pay if a person was practicing on a gun range and a shot ricochets and injures another. It may even provide coverage if one person aims directly at another and fires a weapon, but the person holding the weapon is, say, a toddler.

Many homeowner policies define whom are considered to be mature individuals and, generally speaking, the age is 13 years or older. Acts involving both guns and persons who are this age or older are excluded from coverage under a homeowner policy. Why? Because such persons should be old enough to understand the extreme danger represented by guns. The choice in deploying a gun or similar weapons against other persons can rarely be considered accidental and, in most instances, are the full responsibility of the weapon-wielder.

But again, there can still be instances where a homeowner policy may be required to defend or pay for such losses, including instances:

  • where a parent may be held to be indirectly responsible for the actions of a child
  • where the shooter is found to be mentally impaired or is otherwise considered unable to have understood the nature of his or her actions
  • where a court may interpret a policy as being applicable to a shooting.

The fact is, the question of insurance coverage for such horrible events is as confusing and complicated as why such events ever occur. Only the passage of time and legal findings have the chance to make this subject any clearer.

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COPYRIGHT: Insurance Publishing Plus, Inc. 1999

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc

What If My Home Is Vacant Or Unoccupied?

Vacant Or Unoccupied?

First, there IS a difference. Webster's Encyclopedic Unabridged Dictionary of the English Language has the following to say:

Unoccupied: without occupants, but not devoid of furniture or other furnishings.

Vacant: having no tenant or contents; empty, void.

The difference between the two is a matter of time and intent. While not being occupied is a temporary condition and an exception to a residence normally having occupants, vacancy generally represents abandonment of property. So what's the point? Well, either condition may affect your coverage under a typical homeowner policy. It is quite important to understand the consequences of either condition in order to keep your coverage intact. Peeking At A Homeowner Policy

Generally, a homeowner policy has a couple of areas that may be affected by a home's occupancy status: damage caused by freezing, or certain property and loss due to vandalism. Let's talk about them in detail.

A homeowner policy usually protects a home from any loss that is caused by a frozen:

  • plumbing system
  • heating system
  • air conditioning system or
  • appliance

Example 1: Fern Guddyson and her family leave their home in Minnesota in January. They'll spend the next 10 weeks in Miami because Fern is teaching a graduate course in Zen awareness at Palm Leaf University. During a bitter cold spell at their home at the end of March, the water line to their refrigerator (for its ice-maker) freezes and breaks. Later, when the line thaws, it overflows and, eventually, soaks all of the home's oak flooring and carpets. Fern makes a claim to her insurer when the family returns home from Miami. The insurance company's claims department rejects the claim when they find out the home was unoccupied for more than 30 days before the loss.

Unfortunately for the Guddysons, most homeowner policies will not cover freeze-related losses that occur during an extended period in which the home is either vacant OR unoccupied. But this loss of coverage can be avoided if the homeowner takes precautions to help avoid such losses. Precautions usually involve either draining any systems or appliances of water and shutting off the home's water supply, or by keeping the home heated during the absence. Freezing

A homeowner policy typically offers protection to a home that is damaged by acts of vandals. with an important exception. Let's visit the Guddysons again.

Example 2: Fern Guddyson and her family leave their home in Minnesota in January. Again, they'll be in Miami for the next 10 weeks while Fern gets her doctorate in surfing from Palm Leaf University. A week before the Guddysons return (in late March), a group of kids break out most of the windows in the home. They then take a variety of tools found in Mr. Guddyson's toolbox and smash doors, floors and walls. Fern makes a claim to her insurer when the family returns home from Miami. The insurance company's claims department estimates the damage and gives Fern a check to cover her loss.

Typically, vandalism losses are covered even during periods of extended unoccupancy. However, if the Guddysons had emptied their home of all furnishings and turned off the power for the time they were gone, the vandalism loss would not have been covered. Why Are Such Exclusions Necessary?

Homeowner policies contain such exclusions in order to avoid special loss situations. A vacated home becomes an attractive nuisance, often attracting acts of vandalism. If a home is to be vacated, it may be necessary to purchase dwelling fire coverage to protect the home. In regards to loss caused by freezing, insurers want to encourage homeowners to do a little planning in order to reduce or eliminate the chance that a system or appliance causes a loss. If an insured refuses to act responsibly toward their property, they risk the chance of an uninsured loss.

If you're facing a situation in which your home will be unoccupied or vacant for an extended period, talk to your agent and make sure you do whatever is necessary to preserve your full insurance protection.

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COPYRIGHT: Insurance Publishing Plus, Inc. 1996, 2000

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Who Cares About Attractive Nuisances?

What Is An Attractive Nuisance?

This is a term originated by a judge to describe property that attracts youngsters and, because of their dangerous nature, creates a special obligation to property owners. Examples are:

  • swimming pools
  • trampolines
  • empty buildings
  • appliances kept outside
  • excavations
  • construction materials

All of these can lure children onto property and they all have the potential to cause serious injury. Why Do Attractive Nuisances Create A Special Obligation?

A special obligation exists because of such property's child endangering nature. Children do not have the reasoning ability of adults. When an opportunity to have fun pops up, it's a rare child who thinks about the chance of being injured. A property owner with an attractive nuisance on his property cannot escape liability because of a trespassing child. When an attractive nuisance is involved, adults have to make a special effort to protect children from their blind sense of adventure or face the consequences. How Do You Handle Attractive Nuisances?

The answer is…do whatever it takes to prevent a child's access to the nuisance. Therefore, in order of their effectiveness:

1. Eliminate the nuisance:

Examples:

  • have old appliances hauled to a junk yard
  • tow old, non-running vehicles away
  • get rid of construction materials immediately after a building project is complete

2. Secure the nuisance

Examples:

  • take off doors or covers from large appliances awaiting garbage pickup
  • keep sharp tools, especially power tools and equipment, locked away
  • store construction materials in a garage or shed

3. Reduce the chance for injury from a nuisance

Examples:

  • install a pool cover and have a locked fence to prevent access to pool
  • do not allow younger children to use equipment such as trampolines
  • make sure there's adult supervision of children using play equipment

If you're not certain about whether you have an attractive nuisance situation, discuss the situation with an insurance professional.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2000

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Do Renters Need Insurance?

Why Renters Don't Buy Insurance

People are renters for different reasons. Regardless whether renting is because of financial necessity or a lifestyle preference, renters often decide that insurance isn't necessary. Renters frequently choose not to insure for reasons such as:

  • Insurance isn't necessary because there's no home, garage or similar property to worry about
  • There's coverage automatically provided by my landlord, host or relative with whom I'm living
  • I can't afford it
  • I don't have enough possessions to insure
  • There's little chance that anything will happen to my possessions
Busting Renters Insurance Myths

The only thing true about the above reasons for not getting renters insurance is that they can cause real misery from an uninsured loss. Renters need to consider the following:

  • possessions are purchased over time. This fact makes it less obvious that a renter may own tens of thousands of dollars worth of property that needs to be insured
  • Many belongings are very high-value. Renters should consider what jewelry they own and pay particular attention to their electronics situation (stereos, CDs, CD players, game systems, speakers, computers, etc.) Even modest living areas can hold lots of expensive property.
  • Renters insurance is affordable, often well under $200 per year.
  • Insurance policies carried by landlords typically offer little or no coverage for property that is owned by tenants and guests.
  • The same things that can damage a building can damage the property in the building, particularly natural disasters and fires; so a building's contents are very vulnerable to loss
What about being sued?

Renters who don't carry insurance should remember that they also need protection for their legal obligations to others. What if you're on a softball team with your friends and you smash a line drive into the face of another player? Emergency treatment and cosmetic surgery is expensive.

If you rent and you don't have insurance…then you have a very good reason for contacting an insurance professional to get you covered….now!

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COPYRIGHT: Insurance Publishing Plus, Inc., 2001

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Toxic Mold

Most homeowners recognize the importance having snug, dry home. Now there’s a reason to put more emphasis on keeping it dry….toxic mold. A certain form of mold, called Stachybotrys (pronounced stakki-botris), is appearing in more headlines. Unfortunately, the mold, which is capable of causing illness in humans, is also becoming a familiar topic in courtrooms.

Toxic mold, like other more common molds (such as penicillin), is found indoors and can grow on nearly any type of damp or wet surface including wood floors, carpeting, tiles, drywall, paneling, insulation, etc. The only conditions necessary for its formation is moisture, food (organic material) and time. Besides mold’s ability to physically damage a home (staining, warping, deterioration), the spores from this type of mold can become airborne, making people susceptible to developing allergic or respiratory symptoms. Research is ongoing to determine whether mold exposure may also cause more serious health problems.

Damage to a home or its occupants that is caused by toxic mold is typically excluded. Insurance policies are designed to handle accidental causes of loss and items such as mold infestation, rusting and rotting are seen as home maintenance issues. However, in one notorious court case, a family in Texas was awarded several million dollars because its insurer allegedly mishandled a loss, creating a condition that allowed the growth and spread of toxic mold.

Rather than be concerned over the possibility of insurance coverage, prevention is the best course of action. Inspect in and around your home, looking for indications of moisture. Correct any conditions that could cause moisture build-up such as leaky roofs or plumbing, condensation, leaking appliances, etc. Keep your home snug and dry and avoid a moldy problem.

Revised 02/02

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COPYRIGHT: Insurance Publishing Plus, Inc. 2001, 2002

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc

Be A Common Sense Host

Season’s Meetings

Holidays often include celebrations that bring together families and friends in private homes across the country. Food, fun, talk and spirits flow generously and, to add a sobering thought, so do injuries and accidents. It’s not news to hear that increased drinking leads to increases in personal tragedies, but it’s important to get reminders that individuals must be responsible for their actions. One major area of responsibility is as a party host. Hosts are given the credit for the enjoyment that their guests experience at a party. On the dark side, party-givers are also asked to bear partial or full responsibility for guests who cause damage or injury on the way home from a gathering. In other words, they may be sued for contributing to losses caused by alcohol-impaired guests.

Applying Risk Management (Common Sense) to Hosting

The good news is that the brunt of responsibility, even via lawsuits, has to be faced by the individuals who directly caused the loss. There would have to be strong evidence to support a host being held financially responsible, since any involvement is indirect. For example, Jane provides drinks to Barrie, who then plows into the side of Chris’ car and garage.

While a homeowners policy may offer coverage if a host has substantially contributed to a loss, an insurer may be able to deny a claim for a number of reasons, including:

  • A gathering involves the host making an income
  • The involvement of paid bartenders
  • The party is thrown as a fundraising event
  • A host’s knowledge that the guest was impaired and continued to serve liquor
  • The host failed to make arrangements for impaired guests (designated drivers, taxis, lodging, etc.)
  • Local or state law(s) related to providing alcohol

Of course, the best course of action is to make sure that parties are thrown responsibly, are done as a social (rather than business or commercial) event, and that the chances of sending drunk guests on the road are minimized. A good host will make sure that food is available, that a liquor supply under his or her control is cut-off and that impaired friends or relatives are prevented from endangering themselves or others. No holiday celebration should end up with a lawsuit.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2001

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Insuring A Trust

Homeowner and other policies that protect private residences have, for most of their history, been written assuming that the property owner is an individual or married couple. Such policies define an "insured" or covered person as an individual, married couple or spouse of the individual listed on the policy. Recently, this assumption regarding "insured" is changing as it has become common for homes to be owned by trusts.

The change is prompted by another reality concerning homes. Besides use as a residence, a home is also often a primary financial asset. As property owners become more sensitive and savvy in handling their finances, the use of trusts to pass on property has expanded. A trust refers to any asset that is controlled or owned by an artificial entity, the trust agreement. Typically, the property owner becomes the trustee, having rights to use the home as a residence, but the legal ownership resides in the trust. The trust allows for tangible property to be passed along to heirs with much more for favorable tax treatment. However, there are consequences that affect insurance coverage and which should not be ignored.

If your home or personal property (furniture, furnishings, etc.) have been transferred into a trust, it is important to share this information with your insurance agent. Then you both may take steps to make sure that the insurance needs of both the trust and the property-users are covered. It is particularly important that liability protection remains intact.

Depending upon the insurer, your homeowner, auto and umbrella policies may have to be modified so that the trust arrangement is recognized and is protected by the policies. It may be that the policy wording already handles things by including trusts or trustees within the meaning of "insured." In other instances, endorsements may have to be added to include the proper additional insurable interest so that property and liability coverage expands to protect the property held in trust and the trustees.

The existence of a trust means you need to get an insurance professional involved to make sure you can still trust the protection of your various insurance policies.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2002

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Are Fireworks Covered?

One rite of summer is to enjoy fireworks. However, it’s important to think before setting off your first firecracker, sparkler, smoke-bomb or bottle rocket.

For all their fun, fireworks are capable of seriously injuring persons and property. If you do cause damage, are you insured? In most instances, if you carry a homeowners policy, you are protected. For instance, imagine you are setting off some fireworks in your driveway for your children and their friends. Suddenly, a sparkler you gave to a neighbor’s child violently flares up, burning her hand and face. Your policy could cover her injuries a couple of ways. If the injuries are minor, her medical treatment could be handled under the Medical Payments portion. However, if the child’s injuries are more serious and her parents sue, your policy’s liability portion should handle your legal defense as well as a legal judgment.

Here’s another example of a loss that could be covered. While setting off some bottle rockets, one takes off and smashes through a window of a house across the street. The rocket sets the home’s living room curtains on fire. The neighbor is able to put out the fire with a garden hose, but the result is thousands of dollars in damage caused by fire and water. Your policy should handle this damage.

Coverage Shortfalls

There are instances where your homeowner policy does not offer coverage. If it’s illegal for you to set off fireworks, this legal hurdle could result in any loss being excluded by the policy. Since a homeowner is meant to handle losses related to owning and living in a home, there’s no coverage for a person who uses their home for making, selling, storing or distributing fireworks. Any business activity involving fireworks is going to cause a big problem if a loss occurs.

Injuries to yourself or others in your household are not covered because Medical Payments and Liability coverage is designed to handle loss suffered by persons outside of your household. Also, if the injury was not an accident, there’s no coverage. Playfully tossing a firecracker or aiming a bottle rocket at another person could be considered intentional, even when no injury was intended.

So when dealing with fireworks, make sure they’re legal, that they’re used carefully and only for entertainment. Then your chances are good that any loss may also be covered.

Revised 05/02

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COPYRIGHT: Insurance Publishing Plus, Inc. 1999, 2002

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Homes And Underground Storage Tanks

Insurance policies continue to be written conservatively. In some instances, they still reflect situations that were prominent

While most homes, especially those built in the ‘80s or later, depend upon heating energy from utility companies, that is not the case for many homeowners. There are plenty of residential properties that include underground storage tanks. Most are for storing oil used for heating. Other residences may, for various reasons, have tanks for storing gas. In other instances, properties have tanks that were left buried after a home was converted to utility service.

Regardless how or why an underground tank may be present, homeowners must recognize that they have a L.U.S.T. (Leaky Underground Storage Tank) exposure. Though a tank’s existence as a leak-proof structure varies, oil tanks are typically viable for a mere 10-15 years while petroleum tanks may last 30 or more years. Unfortunately, the following circumstances can lead to a significant leakage problem more quickly:

  • A tank that was not properly lowered into its hole upon installation
  • Unsuitable materials were used to surround the tank, such as ashes or cinders, which break down with moisture and cause exterior tank corrosion
  • Water builds up inside the tank (leaking in from poor tank pipe seals or due to condensation). The water can combine with other chemicals that rust tanks from the inside
  • The tank and delivery pipes don’t have guards for preventing overspills.

It’s important to be aware of the danger presented by underground tanks. Only a small volume of escaping oil or gas can endanger large amounts of drinking water. Aggravating this danger is the fact that such damage is considered to be pollution which isn’t likely to be covered by a homeowners policy. This is true particularly if the homeowner knew of the tank’s problem. Besides the danger of being sued by persons who have been harmed by any leakage, government authorities may also require that the property be restored to a non-toxic state (referred to as remediation) and then be subject to future testing and monitoring.

If you have an underground tank, contact your insurance professional. While there may be some insurance options, an agent is a good starting point for finding help for inspecting, maintaining and managing this tricky risk of loss.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2002

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc

Fortified Home

Whether terrorizing coastal areas as a hurricane, devastating inland areas as tornadoes or pummeling a local area as a hailstorm, the wind creates many problems. Homeowners aren’t fans of heavy wind activity since it is capable of inflicting major damage. Most homeowners believe that when it comes to facing windy onslaughts, they’re helpless. The truth is that something substantial can be done to make a home less vulnerable to wind damage.

A fortified home refers to a residence with several special construction features that make them much more likely to survive violent storms and winds. There is nothing exotic or complicated about the features that include the following:

  • Installing window shutters that are impact-resistant
  • Avoid using smooth nails. Nails with rough or ringed shafts have much more holding power
  • Use roofing materials that are fire and wind-resistive
  • Before installing roof shingles, seal the seams of the plywood roof deck with asphalt tape
  • Attach the home’s frame directly to its foundation with metal strapping
  • Use a risk management, anti-fire tactic of keeping a home a minimum of 30 feet away from underbrush
  • Be more generous with nails. The more nails used to secure joints, the sturdier the home. Using more nails to secure a roof’s decking is particularly helpful.

A private institute devoted to the construction of safer homes performed a survey and found that building a home that uses all of the construction modifications adds a 5% (maximum) increase in total costs. While it is easiest and more cost-efficient to use the building tips during new construction, some elements can be added to existing homes (called retro-fitting).

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COPYRIGHT: Insurance Publishing Plus, Inc. 2003

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc

A Construction Coverage Gap

2003 was a particularly bad year for massive fires in California. One conflagration resulted in a number of deaths and the destruction of hundreds of homes. One aftermath of the tragedy was the discovery that even those homes that were insured were not properly covered. The source of the inadequate coverage was man-made. In fact, it was legislated.

The world of contractors and construction is filled with rules meant to establish standards for building materials, site preparation, construction methods, etc. Most such rules are created on the level of local government and are typically called ordinances. Each area’s ordinances reflect specific concerns, particularly natural hazards that regularly endanger property such as windstorms, earthquakes, floods and.....fire.

Many of the homes damaged or destroyed in California were built near forested areas in the midst of droughts. Naturally, the likelihood of fires is much higher and, being in remote areas, fire protection is non-existent. In order to compensate for this extreme exposure to loss, local laws often require special construction features such as on-site water supply, pumping equipment, fire-retardant roofing, and fire-resistive construction materials.

Many homeowners enjoy the benefit of "grandfathering." That refers to any exemption given to a person from having to comply with a new law. However, such exemptions disappear under certain circumstances such as significant remodeling or when a certain percentage of a building is damaged. Therefore, property owners who face the prospect of re-building their homes also face full compliance with current building laws. Without special endorsements, it’s unlikely that their insurance policies will provide significant Ordinance or Law Coverage. These property owners could be responsible for thousands, perhaps even tens of thousands in uncovered costs.

If you have an older home or live in an area that has special laws for rebuilding, it would be worth your time to consider adding protection against any extra costs caused by local ordinances. Your insurance professional is the person to know.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2003

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Homeowners – Hurricane Tips

It is an unfortunate fact that many homeowners have to deal with the horrendous loss created by hurricanes. Hopefully, any affected person will own a homeowner insurance policy to help deal with the crisis. Persons who have suffered hurricane damage need to be aware of their responsibilities under the insurance policy in order to take full advantage of any available coverage.

A homeowner should discuss their coverage needs with an insurance expert. One priority should be to make sure that the amount of coverage is adequate in the event that the home has to be totally replaced. Also, the homeowner should keep their deductible in mind, seeking options to make sure that it is affordable. Insurers who operate in areas that experience hurricanes typically require deductibles at a high, flat amount (such as $2,000) or at a percentage of the policy's insurance limit (anywhere from 2 to 5%).

Naturally, a homeowner should consider ways to minimize their possible loss and maximize their personal safety by:

  • Making advance evacuation plans (including determining evacuation route, fueling car, preparing supplies, etc.)
  • Being aware of the nearest, safe shelter
  • Bring outdoor property inside the home (lawn equipment, toys, tools, etc.)
  • Installing or building a proper "safe room"
  • Cover/Secure all windows and doors
  • Have a portable radio and stay turned to accurate source of weather broadcasts.
  • Turn off (unplug) small appliances and turn refrigerators/freezers to their highest settings.
  • If applicable, turn off fuel/oil tanks.
  • Fill sinks and bathtubs with water.

Returning to a damaged/destroyed site is not when a hurricane victim will be at his or her best, but that is the time that certain obligations have to be met in order to make the most out of any insurance recovery. It is important to do the following:

  • At the earliest possible chance, contact your insurer with details about your loss
  • If possible, be sure you have a way to visually record the loss details (camera, digital camera, video recorder, etc.)
  • Take reasonable action to keep intact property protected from additional damage or loss
  • Keep an accurate record of all expenses that are related to protecting your property as well as items related to temporary housing and meals

Though post-catastrophe times are chaotic and spirit-sapping, it is important to keep in contact with your agent and/or insurer. Take the time to be meticulous about filling out reports, documenting the value of your loss and cooperating with claims personnel.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2004

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc

Weather Insurance

In general, weather insurance protects the sponsor of an event or a manufacturer of a product that is dependent on or subject to weather activity. It covers financial loss such as reduced revenue, increased expenses or inventory loss, as well as increased product promotion expense. The policy is most useful for protection against the cancellation of, or diminished revenue from, events such as outdoor concerts, fairs, carnivals, weddings and sporting events. It can also be used as a marketing device. Consider a snow blower company that boost sales by promising refunds if snow accumulation is substantially less than a seasonal average. Weather insurance can also help to stabilize cash flow. For example, it could help a small town when an extreme amount of snowfall substantially increases its snow removal expenses.

There are four basic types of coverage against excessive rainfall for any covered event:

Cumulative Rainfall - Example: A policy provides that, between the hours of 7:00 p.m. and 2:00 a.m. on August 15 and 16, 20XX, no more than 1/10 inch of rainfall will accumulate at the National Weather Service station based at the Indianapolis International Airport.

Consecutive Dry Hours - A specific amount of rainfall that is not to occur each hour for a portion or for all hours of an event is insured. The rainfall amount is generally smaller than the cumulative rainfall coverage (1/100 or 2/100 inch of rain).

Non Consecutive Dry Hours - A specific amount of rainfall that is not to occur each hour for a portion or all of the hours of the event is insured. The insured dry hours may occur at any time during the covered event.

Extended Period - This term is used when the coverage period is for more than one day. Extended period coverage is a combination of Cumulative Rainfall, Consecutive Dry Hours and Non Consecutive Dry Hours coverage.

Other types of weather-related insurance are available to cover sponsored events, including:

Snow Insurance - Provides coverage against any measurable amount of snow during a specified time period.

Wind Coverage - It either covers against loss from higher or lower wind velocities compared to the average velocity over a three-hour period or against the fastest mile per hour wind speed.

Temperature Coverage - Insures against loss caused by maximum, minimum or average temperatures during specific hours, days or weeks.

Sky cover/sunshine - Provides coverage if designated percentages of cloudiness or sunshine during specific times on a specific day or dates is not reached.

Severe weather causing cancellation - Provides coverage if some described weather condition occurs within a specific time and/or date.

A Weather policy only covers loss of income or revenue from the specific event. It is intended to restore a party to the financial condition that would exist had no loss covered by the Weather insurance policy occurred. Is your event or business "under the weather?" It may be worthwhile to contact an insurance professional and discuss whether Weather insurance could make things better.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2004

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Hey, Who Needs Flood Insurance?

Do I Need Flood Insurance?

The simplest way to answer this question may be to walk to the nearest mirror. If the person you see in the mirror owns any significant amount of property that can be damaged or destroyed by water, then you should seriously consider buying flood insurance. Most persons may buy coverage offered by the National Flood Insurance Program. If your community doesn't participate in the program, you'll have to look into coverage from private insurance companies. What's The Likelihood Of Suffering A Flood Loss?

The chances of your business, home or personal property being damaged by a flood depends primarily upon where you live. A flood loss also depends on other factors such as: how much of a flood warning you receive, the level of flood precautions that are taken by yourself (such as moving personal property from lower levels to higher levels), and the precautions taken by your community (such as the use of flood controls in construction standards or sandbagging threatened areas).

Since floods are related to weather conditions and tend to have widespread effects, your chances of a flood loss are significantly higher than experiencing many of the types of losses that are covered under your homeowner policy, such as fire or windstorms. Many people have the obsolete belief that flood insurance is only needed if you live in a flood prone area. I Live In A Flood Zone?!

If you have ever heard the term "flood zone," you may think that it refers to locations that are particularly vulnerable to flooding. The truth is that, wherever you live in the USA, you live in a flood zone. While your area may have a lower chance of flooding than a coastal area or a location situated near a body of water, your area could still experience flooding. A very dry part of the country can be susceptible to flash floods; hilly locations may be harmed by drainage; snowy locations may suffer from heavy snow thaw; other areas may suffer deluges or flooding due to a heavy rain season which has soaked the surrounding soil. So, if you've insured yourself against fire, wind and other causes of loss, it certainly makes sense to also protect yourself from the potential of a flood loss. Why Worry When Disaster Coverage Is Available?

You may believe that, even if you suffer from a flood, your loss may be taken care of when the government declares your location to be a disaster area. However, you're still taking a couple of large risks. First, your flooded locale may not be deemed a disaster area. Second, being designated as a disaster area is not a bargain. Disaster area status only gives citizens access to government disaster loans. IF you qualify for assistance, you have replaced insurance protection with an obligation to pay off a large, long-term loan. Is it worthwhile to gamble on an opportunity to pick up more debt? You'll find flood insurance to be a cheaper and much more valuable alternative. Don't Be "All Wet"

You don't have to leave yourself unprotected. Your agent, an insurance professional, can help you with detailed information on the National Flood Insurance Program. You can also ask for help in getting the coverage you need to "keep dry" and secure in the face of a flood.

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COPYRIGHT: Insurance Publishing Plus, Inc. 1999

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How Do I Save Water-Damaged Property?

Be Safe, Then Act Quickly

Different sources such as salvage experts, property specialists and government agencies advise that quick action is critical. Many types of personal property can be saved if rescue attempts occur within 48 hours of the property suffering damage.

Before trying to save property, make sure that YOU are safe. Flooded buildings may have dangers that must be addressed. Make sure that there is no danger of electrocution by turning off power and avoiding fallen utility lines. Do not come in contact with water containing sewage and make sure the floor, ceiling and wall supports pose no danger. Tips On Handling Personal Property

Photographs - Remove from plastic/paper enclosures or frames, carefully rinse with cool, clean water, DO NOT touch or blot surfaces. Air dry: hang with clips on non-image areas, or lay flat on absorbent paper. Keep photographs from contact with adjacent surfaces or each other.

Paintings - Remove from frames in a safe, dry place. Do NOT separate paintings from their stretchers. Keep paintings horizontal and paint-side up with nothing touching the surface. Avoid direct sunlight.

Books - If rinsing is necessary, hold book closed. Partially wet or damp: stand on top or bottom edge with covers opened to 90° angle; air dry. Very wet: lay flat on clean surface; interleave less than 20% of book with absorbent material; replace interleaving when damp.

Paper - Air dry flat as individual sheets or in ¼" or smaller piles, with absorbent paper placed between each wet sheet (interleaving). Do not unfold or separate individual, wet sheets. Keep coated papers wet by packing in boxes lined with plastic garbage bags; freeze (maps or manuscripts), sponge water out, pack loose flat sheets in flat boxes or plywood covered with plastic sheets. If too many items for air drying: interleave (by groups or individually) with freezer or waxed paper; pack papers or files, standing up in sturdy containers; pack containers only 90% full and freeze.

Tapes - Disassemble case and remove tape; rinse dirty tapes, still wound on reel, in clean, lukewarm water; support vertically on blotting material to air dry; reassemble and copy.

Diskettes -Remove diskette from casing and bathe in clean distilled water, dry with lint-free towels and insert diskette into new casing and copy.

Clothing/Fabrics - Brush off all loose, dried dirt. Rinse thoroughly in cold water as soon as possible until as much mud as possible is removed. Repeat if necessary. Do not use hot water as it sets stains from red or yellow clay. Machine wash when no more dirt can be rinsed out.

Wood Furniture - Rinse/sponge surfaces gently to clean, blot, and air dry slowly. If any painted surfaces are blistered or flaking, air dry slowly without removing dirt or moisture. Weigh down or clamp veneers in place while drying; separate weight from veneer with protective layer. (Finishes may develop white haze; treat later with wood cleaning product.)

Upholstered Furniture - If antique or VERY valuable, get professional estimate on cleaning/restoring.

Metal - Use gloves to handle, rinse/sponge and blot metal object, air dry. If object has applied finish, do not clean. Air dry; keep flaking surfaces horizontal.

Leather (including shoes) and Rawhide - Rinse/sponge with clear water to remove mud, drain and blot to remove excess water, pad with toweling or unlinked paper to maintain shape, air dry. Manipulate tanned fur skins during drying to keep skins flexible.

Baskets - Rinse, drain and blot to remove excess water, stuff with clean paper towels or cotton sheets to retain shape and absorb stains, cover with clean towels and air dry slowly, regularly changing blotting material. Be Practical And Prioritize

Often it is impractical or impossible to try to save everything, so prioritize. Get to the property that is MOST important to you and start with the type of property that's most vulnerable to permanent damage. One practical consideration is to forget about fully upholstered furniture and mattresses. Such property is usually impossible to properly dry and is often contaminated.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2000

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Term Life Insurance...The Basics

Term life insurance provides a death benefit only. It does not build cash value. Three Types of Term Insurance Annual Renewable Term

Death benefit remains level. Premium increases annually since there is an increased likelihood of death. Level Term

Both the death benefit and the premiums remain level for a predefined period of time; usually, five, ten fifteen, or twenty years. Decreasing Term

The death benefit decreases each year even though the premiums remain level. This type of term is often used to cover a mortgage or other loan with a decreasing balance. Characteristics of term insurance

  • Low cost in the beginning
  • Premiums increase over time
  • Can help to meet specific short-term needs.
  • Has no cash value
  • Lasts a specific period of time…no more; no less.

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COPYRIGHT: Insurance Publishing Plus, Inc. 1996

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Cash Value Life Insurance – The Basics

There are several different types of cash value life insurance policies from which to choose. They are all designed to provide living benefits as well as the death benefit.

The principal objective of cash value life insurance is the same as with term insurance: to create an immediate estate should the insured die. The cash value in the policy can also be accessed through loans or withdrawals for emergencies or other needs. It is important to remember that loans or withdrawals of a policy's cash value will reduce the policy's death benefit.

  • Whole Life Insurance
  • Universal Life Insurance
  • Variable Life Insurance

Whole Life Insurance

Whole life insurance offers a number of guarantees made by the issuing insurance company. The following are typically guaranteed with whole life insurance:

  • death benefits
  • cash values
  • level premiums

Sometimes dividends are also guaranteed.

Whole life insurance can be a good tool for long term life insurance needs.

Characteristics of Whole Life Insurance

  • Tax-deferred growth of cash value
  • Cash values are guaranteed
  • Premiums are guaranteed
  • Can withdraw or borrow cash value
  • Dividends are tax free

Universal Life Insurance

With a Universal Life policy, both premium payments and death benefits can be flexible, within limits.

When premiums are paid, part of the premium goes to pay for the term insurance and part of the premium is put into a side fund upon which interest is paid.

If the premium paid is not enough to cover the cost of the insurance, the additional amount needed is taken from the side fund.

The policyowner has a number of options with regard to premium payments. Within limits, premiums can be adjusted up or down. Premium payments can also be skipped entirely if there is enough cash value in the policy to make the payments. Also, the death benefit of the policy may be adjusted up or down. However, a request to increase the death benefit may require proof of insurability (such as updating some health questions or even submitting to a physical examination)

Characteristics of Universal Life

  • Tax-deferred growth of cash value
  • Interest rates are competitive
  • Access to cash value through loan or withdrawal
  • Premiums are flexible
  • The policy's death benefit may be adjusted (higher or lower)


Variable Life Insurance

Variable life insurance is a flexible life insurance product that is offered by a prospectus.

Variable life insurance has a term insurance foundation and an investment fund. The policyowner gets to choose which type of investment vehicle in which the cash value will be placed. The following are types of investment vehicles from which the policyowner can choose:

  • Money Market Account
  • Corporate Bond Portfolio
  • Common Stock Portfolio
  • Government Securities
  • Fixed Account

Insurance agents must be properly licensed to sell securities in order to sell variable products which are sold by prospectus. Be certain that you CAREFULLY read the prospectus before purchasing any variable product.

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COPYRIGHT: Insurance Publishing Plus, Inc. 1996

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

How Can I Preserve My Smaller Business?

Where Small Businesses Are Vulnerable

In a small to medium-sized business, the death of a partner or key officer/shareholder reduces the value of its business assets (as well as legally terminates a partnership). In order to preserve the partnership assets, the survivors must liquidate the partnership with care. The partnership's reformation must deal with different needs. Typically, the surviving partners wish to continue the business without the deceased partner's heirs. The deceased partner's family is most concerned with income replacement.

The death of a stockholder in a small, closely held corporation also creates a substantial risk of business failure. At best, the corporation may face a serious loss of business, reduction in asset values and the loss of jobs.

All of the above consequences may be avoided with a carefully planned buy-sell agreement. Buy-Sell Agreement

A popular method of keeping a business in operation after the death of a partner or a major officer/shareholder is the use of the Buy-Sell Agreement (also known as a Business Continuation Agreement).

A typical buy-sell agreement between the partners allows the surviving partner to purchase the interest of the deceased in order to keep the business operating and keep it out of the deceased's estate and probate. A buy-sell agreement stipulates that if one partner dies, the other partner will have the right to purchase the deceased partner's share of the business at a predetermined price or according to a specified formula.

In a small business where money is often tight, finance is the critical piece of the buy-sell scenario. The purchase of a life insurance policy is an ideal way to fund the agreement.

For purposes of illustration, let's assume that we have two partners who formulate a buy-sell agreement. In the formulation of the policy, they agree that each will take out a $100,000 policy on the other. Their small corporation purchases the life insurance. Upon the death of one, the other will have the money to pay to buy out half of the business. Cross-Purchase Plans

If the two partners were to personally purchase the life insurance on the other, the arrangement would be referred to as a Cross-Purchase Plan. Let's assume for a minute that we have multiple partners. If we have six partners and try to do a cross-purchase plan, then each partner would own 5 policies on the other partners for 30 total policies. While this may be a life insurance salesperson's dream, it certainly isn't a practical arrangement. In this situation, we would be more likely to use the entity agreement. In an entity agreement, the partnership owns life insurance on each partner, and the partnership agrees to purchase the share of the business that belonged to the now deceased partner. This requires 6 policies rather than 30. The Advantages

While the life insurance premiums are not tax deductible, the proceeds are not subject to federal income tax. Further, a funded buy-sell agreement offers other advantages, including:

  • A fair market value for the business is established
  • Funding ensures that the surviving family is financially compensated
  • The agreement legally binds the partners
  • Each partner's interest in the business is determined
  • The partnership gains greater security
  • The employees' jobs at the business become more secure
  • The money is available to implement the agreement

It's extremely important to involve both an attorney and an accountant when arranging a buy-sell agreement since the written terms vary with the structure of the business.

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COPYRIGHT: Insurance Publishing Plus, Inc. 1998

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Are All Beneficiaries Alike?

What Is A Beneficiary?

In the world of life insurance, beneficiary is an important, common term. It refers to a person or entity who is named by the life insurance policy to receive the policy's benefits. The benefits (or proceeds) received after a policyholder dies are generally cash, but sometimes benefits are in the form of services or other types of awards. Entities are included because, besides people, business partnerships, corporations, trusts, churches, schools/colleges/universities, or charities may all be selected as beneficiaries. Beneficiary Types

Beneficiaries are not all alike. Life insurance policies are designed to protect persons/entities that are important to the life insurance policyholder. These policies may use different types of beneficiaries to fit a policyholder's preferences and/or to comply with legal or tax issues. The types of beneficiaries also have a LOT to do with the control of the proceeds and the beneficiary's rights. Here are the most common types of beneficiaries:

  • Absolute Beneficiary - please refer to Irrevocable Beneficiary.
  • Contingent Beneficiary - the party named to receive policy benefits, but only in the case of death of the primary beneficiary. Contingent Beneficiaries are often called secondary beneficiaries.
  • Irrevocable Beneficiary - a beneficiary whose right to receive the insurance proceeds may not be changed UNLESS that beneficiary gives the policyholder his written consent to do so. Also known as an absolute beneficiary.
  • Primary Beneficiary - typically, the party named to be first to receive the policy benefits and proceeds. If any others should be listed, they are considered contingent or secondary beneficiaries.
  • Revocable Beneficiary - any beneficiary for which the policyholder retains the right to change. These beneficiaries exist at the whim of the policyholder.
  • Secondary Beneficiary - please refer to Contingent Beneficiary.

Note that several of these beneficiaries can be combined, i.e. Revocable, Primary Beneficiary or Absolute, Secondary Beneficiary. Other Methods For Designating Beneficiaries

Class Designation - refers to when a group is chosen to share equally in a policy's proceeds. The class designation has an advantage of providing equal benefits to a group that may change between the time the designation is made and when the proceeds are paid. Commonly a policyholder's children, grandchildren, or siblings are selected as a class.

Specific Designation - typically means that a beneficiary selected by his or her name and relationship to the policyholder, such as Gwenna Mygirl, daughter of the insured.

Per Capita Designation - this method of designation permits greater flexibility than a straight class designation. For instance, a policyowner can name his children to share the proceeds equally and, in the case of a child's death; the deceased beneficiary's children may receive in EQUAL (per capita) shares with the surviving policyowner's children. Example: Joe designates his children, Bill, Trudy and Stan, to equally share $3 million in policy proceeds on a per capita basis with any children who survive them. Joe dies in a car accident and Bill dies in the same tragedy. Therefore, Bill's children, Gary, Paulie and Pam become equal participants in the proceeds ($600,000 apiece). If only Joe had died in the accident, Joe's children would have received $1 million apiece.

Per Stirpes Designation - this method is the ultimate contingency plan. It allows the policyowner to pass the proceeds equally to his direct heirs and, in the event of any person's death, that particular share is passed on to any descendants. Example: Joe designates his children, Bill, Trudy and Stan, to equally share $3 million in policy proceeds ($1 million a piece). Joe dies in a car accident and Bill dies in the same tragedy. Therefore, Bill's children, Gary, Paulie and Pam become equal participants in Bill's share of the proceeds. In this instance, Joe's surviving children each get $1 million while Bill's children share the amount that Bill would have received (roughly $333,000 apiece).

If you need to discuss your plans on providing for your loved ones, an insurance professional is a great place to start.

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COPYRIGHT: Insurance Publishing Plus, Inc. 2000

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Disability Income – The Basics

A disability policy is designed to replace lost income when a policyholder is unable to work due to a covered accident or illness. Disability policies generally have:

  • A waiting period-A waiting period in disability insurance is like a deductible on your car insurance. The difference is that while a deductible for auto insurance is expressed in dollars ($250, $500, etc.), a waiting period for disability insurance is expressed in time, such as 60 days, 90 days, or longer. It is the amount of time that you must wait before benefits will be paid. The longer the time period, the lower the premium.
  • A benefit period-A benefit period can be two years, five years, etc. The most comprehensive policy is one that pays benefits to Age 65.
  • An occupational classification-Depending on the occupational classification, the premium and the benefit period will be determined.
  • A monthly benefit amount-A monthly benefit amount can be up to 60% of the present income. Benefits are tax free on an individual policy. The older you are, the more disability insurance will cost, but once a premium has been established, it is likely to stay the same throughout the life of the policy.
How Do I Determine How Much Disability Insurance I Should Buy?

For a guide to determining how much you might need if you were disabled, [click here]

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COPYRIGHT: Insurance Publishing Plus, Inc. 1996

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Disability Insurance: How Much Do You Need?
[Return to "Disability Income…The Basics"]

How much would you need if you found yourself unable to work due to a disability? To meet monthly expenses:

_________Mortgage or rent

_________Food

_________Utilities

_________Transportation

_________Other Living Expenses
To plan for the future:

_________Cash Reserve

_________College Funds

_________Retirement Planning
$_____TOTAL

[Return to "Disability Income…The Basics"]

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COPYRIGHT: Insurance Publishing Plus, Inc. 1996

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

What Does Medicare Cover?

(Note: All Dollar Amounts Are Based On 2003 Figures.)

Medicare is packaged in two parts: Part A and Part B. Qualified individuals automatically receive "Part A" which is hospitalization insurance. When all coverage requirements are met, Part A of Medicare will help pay for limited hospitalization coverage, limited post-hospital skilled nursing home care, home health care, limited hospice care and blood, after the first three pints.

How Much Does Part A Pay For Skilled Nursing Care?

It will pay for the first 20 days if you go directly from the hospital to the skilled nursing care facility. It will pay $105.00 per day for the 21st through the 100th day per benefit period.

How Much Does Part A Pay For Inpatient Hospital Care?

During a benefit period, Medicare Part A will help pay for the first 90 days of medically necessary care in a Medicare-certified hospital. During the first 60 days, Medicare will pay all covered costs except the deductible. During a benefit period, you pay the deductible only once, regardless of the number of times you go to the hospital. However, during the 61st through the 90th day, Medicare pays all covered costs except for coinsurance of $210 per day. You are responsible for paying the coinsurance.

What Is A Reserve Day?

If you are in the hospital for more than 90 days in a benefit period, you can use your reserve days to help pay the bill. If a reserve day is used, Medicare will pay all covered costs except $420 per day. You are responsible for the coinsurance.

Under Part A, Which Hospital Services Are Covered?

  • semiprivate room and meals
  • regular nursing costs and rehabilitation services
  • drugs, lab tests and x-rays
  • operating and recovery room expense
  • intensive care, coronary care and medically necessary services and supplies

However, Part A will not pay for expenses which are care-related such as telephone, television, private duty nurses or the amount between a semiprivate and private room rate unless it is medically necessary

What About Filing A Claim and Handling Deductibles?

The best news yet is that you do not have to file a claim for payment. The facility from which you received care will file the claim for you. However there is a deductible which is an amount that you pay before Medicare pays anything. As of January 1, 2003, the deductible per benefit period is $840.

What Does Medicare Part B Cover?

Medicare Part B is medical insurance rather than hospital insurance. It helps to pay for:

  • physician services and outpatient hospital services
  • emergency room visits
  • outpatient surgery, physical therapy and speech therapy
  • diagnostic tests and clinical lab services
  • medical equipment and other health services and supplies
  • rural health clinic services
  • renal dialysis

Article Revised 06/03

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COPYRIGHT: Insurance Publishing Plus, Inc. 2001, 2002, 2003

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

What Does Medicare Part B Cover?

(Note: All Dollar Amounts Are Based On 2003 Figures.)

Medicare Part B is Medical Insurance Rather Than Hospital Insurance. It Helps To Pay For:

  • physician services
  • outpatient hospital services
  • emergency room visits when you are treated and released
  • outpatient surgery
  • diagnostic tests
  • clinical lab services
  • outpatient physical therapy
  • speech therapy
  • medical equipment and supplies
  • rural health clinic services
  • renal dialysis
  • other health services and supplies

Part B Deductible

$100.00 per year for the year 2003.

Part B Monthly Premium

The Part B premium is $58.70 per month for the year 2003.

Revised 06/03

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COPYRIGHT: Insurance Publishing Plus, Inc. 2001, 2002, 2003

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Long Term Care Policies – The Basics

Long-term health care includes much more than just nursing home care for the elderly. Today's long-term care may also refer to a variety of protection, such as:

  • health care
  • rehabilitative services
  • personal care
  • social services

However, there is a common theme among the different types of coverage: they all feature care for people who, due to illness or disability, need special assistance with daily activities. A common reason for use of a convalescent nursing facility is when a patient has been discharged from a hospital but still needs continued medical care and rehabilitation therapy while recuperating from an illness or injury. However, it important to know that LTC can be provided in either a special care facility or in the home. What's The Cost And Type of Long Term Care?

The cost for a convalescent center stay can rise as high as $40,000 annually. Some experts predict that the cost may exceed $80,000 by the year 2010. Of course the cost is greatly affected by the level of care involved, such as:

  • Custodial care - where the (licensed or non-licensed) caregiver assists a person in performing routine activities typical of daily life such cleaning, bathing, eating, dressing, etc. These services are often referred to as Activities of Daily Living (ADLs).
  • Intermediate care - generally involves care provided several times weekly by nurses or aides to help restore a person's health or physical capabilities. The care is typically supervised by a physician.
  • Skilled care - involving care that is 24 hours a day and 7 days a week. The treatment is always supervised by a physician and is administered by licensed health care professionals.
What About Medicare and Medicaid?

Medicare policies contain only a limited amount of coverage for skilled nursing care and nothing for care that is considered intermediate or custodial.

Medicaid is a federal and state program that covers medical bills for the needy. If you qualify, it will pay for your long-term care expenses. In order to qualify for Medicaid, you will have to have essentially no assets. Benefits Of LTC Insurance

Because of the length and cost of long term care, LTC insurance policies may provide you with a number of critically important benefits, such as:

  • enabling you to keep your assets
  • protecting your spouse's quality of life and independence
  • protecting your family home and estate
  • protecting your business and other personal property
  • allowing you to maintain your independence
  • providing cash so that you may choose the long-term care options that you feel are most suitable for you
Are There Different LTC Policies?

Technically, no. It would be more accurate to say that all LTC policies have the intent of providing coverage for extended care, with each policy providing some level of reimbursement for the following:

  • nursing home stays
  • home health care
  • nursing home stays and home health care

Coverage may be provided by an individual policy or a group policy. Further, the policy may qualify for tax benefits. It is important to work with an experienced insurance professional when purchasing this type of insurance.

(Revised 8/00)

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COPYRIGHT: Insurance Publishing Plus, Inc. 1996, 2000

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Should I Contribute to my 401(k) Plan at Work?

A 401(k) plan is a qualified employer-sponsored retirement savings plan. Employee participation is up to each individual employee. There are definite benefits to both the employer and the employee.

For an employer, a 401(k) helps retain good employees at a relatively low cost. The plan is simple to set up and maintain and has modest administration costs. The plan is flexible both in the design and in the choice of investment choices. Employees discuss their plans and it can boost employee morale and loyalty.

If your employer has a plan available and you are not participating, you might want to reconsider. The contribution that you make reduces your taxable income so that so pay no federal tax, social security tax, Medicare tax, etc. (The government sets a maximum contribution amount each year...check with your plan administrator at work.) Your contributions are 100% vested immediately. If you leave the company, you are entitled to all of your own deposits plus interest, if applicable. When you leave a company, you can roll your 401(k) money into another qualified retirement account and incur no penalties. Your money is invested how you choose (within the parameters of the plan) by professional investors.

Many employers will match the contributions that you make with additional money. This makes the plan even more attractive! Check with your human resource representative to see what choices are available. If you are an employer, check with your insurance agent to see if your agent can set up a 401(k) plan.

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COPYRIGHT: Insurance Publishing Plus, Inc. 1996

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Charitable Giving Through Life Insurance

If there is a charity in which you would like to really make a difference, you might want to consider the option of leaving life insurance proceeds to a favorite charity.

What are some of the advantages?

  • With a life insurance policy, the proceeds are guaranteed. Of course, it is very important to remember that any guarantee is based solely on the assets and financial ability of the company that issues the insurance policy.
  • You pay the premium in monthly installments which can may be tax deductible as a charitable contribution.
  • A small outlay creates a meaningful amount.
  • Your other assets are not affected.
  • Life insurance proceeds are not subject to federal taxes or included in probate.

If this sounds like an interesting idea for you to pursue; discuss it with your professional insurance agent or financial planner. You may also need to seek the advice of an attorney.

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COPYRIGHT: Insurance Publishing Plus, Inc. 1996

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

How To Insure A Valuable Employee

What could happen to my business if I lost a key employee?

A key employee may be a specialist who has knowledge that is critical to your organization (such as a programmer) or he or she may be a generalist who has key contacts, is highly efficient and/or drives production or sales. Regardless, losing such a person could result in:

  • lost sales,
  • unexpected termination or delay of important projects,
  • a loss of lines of credit,
  • a slowdown in productivity, or
  • increased business expenses.
Can I protect my business against the loss of a key employee?

One popular method for protecting your business is life insurance. Your organization can buy coverage, often called key employee or key man insurance. Such a policy can minimize the potential for disaster since the following are among its benefits:

  • provides funds for recruiting and hiring a replacement employee;
  • creates a tax-free source of cash to help offset lost profits; and,
  • assures customers and creditors that business will continue with as little disruption as possible.
What if my insured key employee lives until retirement?

While the key person works for you, the life insurance can still be valuable. The cash value life insurance can:

  • provide a reserve fund;
  • reinforce your business' credit worthiness;
  • strengthen your key employee's loyalty; and
  • (at retirement) be used to create or supplement retirement income.
How does Key Employee Insurance work?

Remembering that you will definitely need the help of your insurance agent and your attorney, it goes like this:

  • a corporation purchases an insurance policy on the key employee's life,
  • the amount of coverage is typically based on an estimate of the employee's value to the company,
  • the business pays the premium and is the owner of the policy,
  • the company appears as the beneficiary, collecting the benefit in a lump sum in the event that the key employee dies.

Making arrangements with an insurance or benefits professional and a lawyer is critical, since key employee insurance has legal and tax implications.

Revised 12/00

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COPYRIGHT: Insurance Publishing Plus, Inc. 1996, 2000

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.