Frequently Asked Questions
Automobile Policy Questions
- How Much Auto Insurance is Enough?
Auto insurance is several types of coverage into one policy.
Typically, your policy will include some combination of comprehensive,
collision, medical, liability and uninsured motorist coverage.
So what do you need? It depends on your specific situation. Liability pays for the damage you cause to others if your car is involved
in an accident. It also protects you from being wiped out financially
if you are sued following an accident. The greater your assets,
the more you stand to lose. If you have substantial financial resources,
you may need liability coverage that exceeds the coverage that
you'll get from an auto insurance policy. In that case, a Personal
Umbrella can provide the extra liability protection you need. Collision covers damage to your car from an accident. We can help you decide
whether or not to carry collision coverage by balancing the cost
of collision insurance with the value of your car. It might not
be worth paying $200 a year for collision insurance on a car that's
worth only $1,000. But if the car is worth $10,000, you probably
want this coverage. Comprehensive coverage pays for your car if
it is stolen, vandalized or damaged in some way other than in a
collision. Medical coverage provides for medical expenses to you
and your passengers that are the result of an accident. The way
you use your car may make a difference in the amount of medical
coverage you need. For example, we might suggest more coverage
for a parent who regularly takes a carload of kids to soccer practice
than for a driver who expects to drive mostly alone. Keep in mind
that many states require certain minimum levels of coverage. We'd
be happy to talk with you about these and other factors.
< Back to Questions
- I have an older car whose
current market value is very low. Do I really need to purchase
automobile insurance?
Most states have insurance laws that require drivers to have at
least some automobile liability insurance. These laws were enacted
to ensure that victims of automobile accidents receive compensation
when their losses are caused by the actions of another individual
who was negligent. It is often the case that the cost of repairing
the damages to an older car is greater than its value. In these
cases, your insurer will usually just "total" the car
and give you a check for the car's market value less the deductible.
Many people with older cars decide not to purchase any physical
damage coverage.
< Back to Questions
- What is the difference between collision
physical damage coverage and comprehensive physical damage coverage?
Collision is defined as losses you incur when your automobile collides
with another car or object. For example, if you hit a car in a parking
lot, the damages to your car will be paid under your collision coverage.
Comprehensive provides coverage for most other direct physical damage
losses you could incur, including theft. For example, damage to your
car from a hailstorm will be covered under your comprehensive coverage.
< Back to Questions
- What factors can affect the cost of my automobile insurance?
A number of factors can affect the cost of your automobile insurance
-- some of which you can control and some that are beyond your
control. The type of car you drive, the purpose the car serves,
your driving record, and where the car is garaged can all affect
how much your automobile insurance will cost you. Even your marital
status can affect your cost of insurance. Statistics show that
married people tend to have fewer and less costly accidents than
do single people.
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Homeowners Policy Questions
- What does homeowners insurance cover?
The typical homeowners policy
covers the property of the insured and provides personal
liability coverage for the insured. Almost anyone who owns or
leases property has a need for this type of insurance. Usually,
homeowners insurance is required by the lender to obtain a mortgage.
< Back to Questions
- How Much Home Insurance is Enough?
The cost to rebuild your home is its replacement
value. This can
be very different from the estimated market
value or actual purchase
price. In most cases, it costs more to rebuild the home you
own than to buy a new one. This is an important insight into
why your Dwelling (Coverage A) limit is so important. We'll work
with you to estimate the replacement cost for your home and to
adjust your policy limits from time to time as needed. It is
critical that you provide us with accurate, updated information
about your home and contents. If your dwelling limit accurately
reflects your home's true replacement cost, some companies will
pay more than the limit if a covered loss is greater than the
limit on your policy. Ask us if Home Replacement Guarantee or
Extended Dwelling Coverage, is available in your state. Once
a review of your home and possessions indicates you are properly
insured, it's a good idea to reexamine your coverages and limits
from time to time, especially whenever you make additions or
improvements.
< Back to Questions
- How Can I Be Sure I Have Enough Insurance?
If you have questions or concerns about the limits in your policy,
ask us to show you how those amounts were calculated. This will
also give you an opportunity to make us aware of any overlooked
information. Be sure to read your policy carefully. Certain property,
such as jewelry, and certain perils, such as earthquake or flood,
is better insured separately. Knowing what is covered and for
how much will help you insure properly. If there is anything
in your policy you don't understand, contact your agent and ask
for an explanation. At each annual renewal of your policy, you
receive a new Policy Declarations page showing limits of coverage
and optional coverages. Review this information. If you do any
significant remodeling or add a family room, extra bedroom or
bathroom, etc., tell us about these changes so your coverage
limits can be adjusted to cover the improvement. Consider carefully
whether your policy provides all the protection you need. Does
it provide coverage for extra costs resulting from building code
changes? Does it automatically increase coverage limits annually
to keep pace with inflation? Does it provide additional funds
if the cost of rebuilding your home exceeds the policy limits?
Find out whether your insurance company will stand behind agreed
upon repairs after a claim. Some companies are willing to put
this guarantee in writing. Does your policy include replacement
cost coverage for contents (clothing, furniture, appliances,
and other personal property inside your home)? If not, you can
add it by endorsement. The cost is small, the protection valuable.
Replacement Cost Coverage pays for losses to your possessions
at the cost of brand new items. Without this option, a covered
loss to your personal possessions would be depreciated by their
age and condition, reducing the size of your claim settlement.
If you have an art collection, antique furniture, jewelry, or
other valuable possessions, talk to your agent about supplemental
coverages, such as fine arts or scheduled property endorsements,
to adequately protect your investment in these items. The cost
is modest for the extra protection, and often the deductible
is waived. Consider whether you should have more coverage for
personal property (contents) than your policy provides. Personal
property coverage is usually 70% of the coverage limit for the
structure. Your limit may be lower than 70%. Supplemental protection
is available for a small additional premium. Prepare an inventory
of personal property items, update it periodically, and keep
it in a safe place outside your home, such as a safe deposit
box at your bank. It will save you hours of time trying to list
everything damaged or destroyed if you need to make a claim.
It will also help ensure you don't forget some items. We can
advise you on ways to simplify the job of preparing a personal
property inventory such as videotaping each room with descriptive
information on the sound track. Besides making sure you have
enough protection to cover possible damage to your own home and
contents, you should also evaluate your exposure to liability
risks. These result from damage to the property of another, or
injury to a person, not a member of your household, for which
you can be responsible. In recent years it's become common for
homeowners to be sued for injuries or damages to others, even
when there is no evidence of negligence by the homeowner. The
reality today is if you have any appreciable assets, you are
exposed to the risk of being sued. Even if you ultimately prevail
in court, your legal fees and the months or years of worry and
uncertainty can be a terrible burden on you and your family.
The Personal Liability coverage provided by your Homeowners Policy
usually provides a limit of $100,000 or $300,000. We recommend
increasing this protection with a personal umbrella policy. Not
only will it increase your personal liability, but also your
auto liability. Limits are available from $1 million to $10 million
and beyond. The cost of this coverage is usually very reasonable.
< Back to Questions
- What is the difference
between "actual cash value" and "replacement
cost"?
Covered losses under a homeowners policy can be paid on either
an actual cash value basis or on a replacement cost basis. When "actual
cash value" is used, the policy owner is entitled to the depreciated
value of the damaged property. Under the "replacement cost" coverage,
the policy owner is reimbursed an amount necessary to replace the
article with one of similar type and quality at current prices.
< Back to Questions
- What factors should I consider when purchasing homeowners insurance?
There are a number of factors you should consider when purchasing
any product or service, and insurance is no different. Here is
a checklist of things you should consider when you purchase homeowners
insurance. Determine the amount and type of insurance that you
need. The coverage limit of your house should equal 100% of its
replacement cost. If your policy limit is less than 80% of the
replacement cost of your home, any payment from your insurance
company will be less than the full cost to replace your home
-- you'll have to pay the rest out of your own pocket. Also,
decide if the personal property and personal liability limits
are adequate for your needs. Determine which, if any, additional
endorsements you want to add to your policy. For example, do
you want the personal property replacement cost endorsement,
an earthquake endorsement or a jewelry endorsement? Once you
have decided on the coverage you want in your homeowners insurance
policy, consult us. We will be able to help you determine if
there are any gaps in coverage you might not have been aware
of, explain the details of the policy's exclusions and limitations
as well as recommend an insurance company that will live up to
your expectations.
< Back to Questions
- What are some practical things I can do to lower the cost of
my homeowners insurance?
There are a number of things you can do to lower the cost of your
homeowners insurance. The easiest thing to do is get a comprehensive
review of your policy and needs from your local agent. It is not
surprising to find quotes on homeowners insurance that vary by
hundreds of dollars for the same coverage on the same home. When
you shop, be careful to make sure each insurer is offering the
same coverage. Another way to lower the cost of your homeowners
insurance is to look for any discounts that you may qualify for.
For example, many insurers will offer a discount when you place
both your automobile and homeowners insurance with them. Other
times, insurers offer discounts if there are deadbolt exterior
locks on all your doors, or if your home has a security system.
Be sure to ask us about any discounts for which you may qualify
Another easy way to lower the cost of your homeowners insurance
is to raise your deductible. Increasing your deductible from $250
to $500 will lower your premium, sometimes by as much as five or
ten percent.
< Back to Questions
- What are the policy limits (i.e., coverage limits) in the standard
homeowners policy?
[Note: this answer is based on the Insurance Services Office's
HO-3 policy.] The dwelling and other structures on the premises
are protected on an "all risks" basis up to the policy limits. "All
risks" means that unless the policy specifically excludes the manner
in which your home is damaged or destroyed, there is coverage.
The policy limit for the dwelling is set by the policyowner at
the time the insurance is purchased. The policy limit for the other
structure is usually equal to 10% of the policy limit for the dwelling.
Losses to your personal property are covered on a "named perils" basis. "Named
perils" means that you have coverage only when your property is
damaged or destroyed in the manner specifically described in the
policy. The policy limit on the coverage is equal to 50% of the
policy limit on the dwelling. Limits for the coverage for the additional
expenses that the policyowner may incur when the residence cannot
be used because of an insured loss is equal to 20% of the policy
limit on the dwelling. The coverage limit on personal liability
is determined by the policyowner at the time the policy is issued.
The coverage limit on medical payments to others is usually set
at $1000 per injured person.
< Back to Questions
- Where and when is my personal property covered?
Personal property (except property that is specifically excluded)
is covered anywhere in the world. For example, suppose that while
traveling, you purchased a dresser and you want to ship it home.
Your homeowners policy would provide coverage for the named perils
while the dresser is in transit -- even though the dresser has
never been in your home before.
< Back to Questions
Renters Insurance Questions
- Why would I want to buy renters insurance?
If you live in an apartment or a rented house, renters insurance
provides important coverage for both you and your possessions.
A standard renters policy protects your personal property in
many cases of theft or damage and may pay for temporary living
expenses if your rental is damaged. It can also shield you from
personal liability. Anyone who leases a house or apartment should
consider this type of coverage.
< Back to Questions
- How does a renters policy protect my personal property?
A renters policy provides named perils coverage. This means that
the policy only pays when your property is damaged or destroyed
by any of the ways specifically described in the policy. These
usually include: * Fire or lightning * Windstorm or hail * Explosions
* Riots * Aircraft * Vehicles * Smoke * Vandalism or malicious
mischief * Theft * Falling objects * Weight of ice, snow, or
sleet * Accidental discharge or overflow of water or steam *
Freezing * Sudden and accidental damage from artificially generated
electrical current * Volcanic eruptions (but this doesn't include
earthquake or tremors) Renters coverage applies to your personal
property no matter where you are in the world. This means you're
covered when you are on vacation as well as at home.
< Back to Questions
- Why do some apartment complexes require tenants to have renters
insurance?
Owners of apartment complexes buy insurance policies for their
liability and to cover their buildings and personal property. However,
these policies do not cover any of the tenant's property or liability.
By requiring their tenants to have renters insurance, the apartment
owner is assured that the tenants will not mistakenly believe the
apartment complex owner's policy will provide coverage for a tenant's
property or personal liability. Although this type of requirement
benefits that apartment complex owner, there are benefits to the
renter as well. We recommend that you purchase renters insurance
regardless of what your landlord requires.
- What if I share my apartment with a roommate? Do we both need
to have renters insurance?
Standard renter's policies cover only you and relatives that live
with you. If your roommate is not a relative, each of you will need
your own renter's policy to cover your own property and to provide
you liability coverage for your own actions.
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Life Insurance Questions
- What Types of Life Insurance Are Available?
There are several different types of life insurance. The most common
include: Term Life Insurance: Provides life insurance protection
for a specified period of time. If you do not currently have life
insurance, term can be a good place to start. It's generally less
expensive than permanent life insurance, and is available in varying
term periods with fixed premiums from a one-year (annual renewable
term) to 20-year period (level term). Furthermore, term insurance
is sometimes convertible to permanent coverage, providing you with
flexibility as your needs change. Whole Life Insurance: A form
of permanent life insurance that remains in force during the insured
person's lifetime, provided premiums are paid as specified in the
policy. Whole life insurance can build cash value. Universal Life
Insurance: A form of permanent life insurance characterized by
its flexible premiums, flexible face amounts and unbundled pricing
structure. Universal life can build cash value, which earns an
interest rate that may adjust periodically, but is usually guaranteed
not to fall below a certain percentage.
< Back to Questions
- How Much Life Insurance Do I Need?
Life insurance is a crucial step in planning for your future. Not
only can life insurance fulfill promises made to your family
if you are no longer around, there are several life insurance
policies that provide benefits while you are living. The need
for life insurance is dependent on your own personal and financial
needs. We can assist you in determining what type and amount
of life insurance is appropriate for you. Generally, you should
consider life insurance if: * You have a spouse * You have dependent
children * You have an aging parent or a physically challenged
relative who depends on you for support * Your retirement savings
are not enough to insure your spouse's future against a rising
cost of living * You have a sizable estate * You own a business
There are benefits of life insurance other than providing for
your loved ones in case something happens to you: * The cash
value earned and borrowed from a permanent life insurance policy
can be used to help with large expenses, such as a college education
or down payment on a home. * The growth of a cash-value policy
is tax-deferred -- you do not pay taxes on the cash value accumulation
until you withdraw funds from the policy. * Life insurance can
be used to cover funeral expenses and pay estate taxes -- consult
your tax advisor agent for more information. As your life changes,
your life insurance coverage may need to change as well to adapt
to your current needs. Some life changes that may require a policy "tune-up" include:
* You recently married or divorced * You have a new child or
grandchild * Your health or your spouse's health has deteriorated
* You are providing care or financial assistance to a parent
* Your child or grandchild requires assistance or long-term care
* You recently purchased a new home * You are planning for a
child or grandchild's education You are concerned about retirement
income * You have refinanced your home mortgage in the past six
months * You or your spouse recently received an inheritance
While a "Rule of Thumb" suggests that an adequate amount of life
insurance is equal to 6 to 8 times annual earnings, there are
many factors should be taken into account when determining the
right amount of life insurance for you and your family: * Income
sources (and amounts) other than salary/earnings * Whether or
not you are married and, if so, what is your spouse's earning
capacity * The number of individuals who are financially dependent
upon you * The amount of death benefits payable from Social Security
and from an employer-sponsored life insurance plan * Whether
any special life insurance needs exist (e.g., mortgage repayment,
education fund, estate planning need, etc.) Calculating the correct
amount of life insurance to buy is not as simple as it appears.
We recommend contacting us for help determining the right amount
of coverage. As independent agents, we are unbiased advisors
that will help you avoid buying too much, show you appropriate
optional coverages for your need and recommend a company that
will best serve your interests.
< Back to Questions
- What about purchasing life insurance on a spouse and on children?
In certain circumstances, it may be advisable to purchase life
insurance on children; generally, however, such purchases should
not be made in lieu of purchasing appropriate amounts of life
insurance on the family breadwinner(s). It is of utmost importance
that the income-earning capacity of the primary breadwinner be
fully protected, if possible, through the purchase of the required
amount of life insurance. This should be done before contemplating
the purchase of life insurance on children or on a non-wage-earning
spouse. Life insurance on a non-wage-earning spouse is often
recommended for the purpose of paying for household services
lost due to this individual's death. In a dual-earning household,
it is important to protect the income earning capacity of both
spouses.
< Back to Questions
- How does mortgage protection term insurance differ from other
types of term life insurance?
The face amount under mortgage protection term insurance decreases
over time, consistent with the projected annual decreases in the
outstanding balance of a mortgage loan. Mortgage protection policies
are generally available to cover a range of mortgage repayment
periods, e.g., 15, 20, 25 or 30 years. Although the face amount
decreases over time, the premium usually remains the same. Further,
the premium payment period often is shorter than the maximum period
of insurance coverage -- for example, a 20-year mortgage protection
policy might require that level premiums be paid over the first
17 years.
< Back to Questions
- Can an existing life insurance policy be used to provide for
the repayment of an outstanding mortgage loan?
Yes. An existing policy, either term or cash-value life insurance,
can be used for many purposes, including paying off an outstanding
mortgage loan balance in the event of the insured's death. Although
a lender may offer a mortgage protection term policy to you, the
lender rarely requires it. Credit life insurance is frequently recommended
in conjunction with the taking out of an installment loan when purchasing
expensive appliances or a new car, or for debt consolidation. Is
credit life insurance a good buy? Credit life insurance is frequently
more expensive than traditional term life insurance. Further, if
you already own a sufficient amount of life insurance to cover your
financial needs, including debt repayment, the purchase of credit
life insurance is normally not advisable due to its relatively high
cost.
< Back to Questions
General Insurance Questions
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