General Insurance FAQ
Q: When applying for an insurance policy, what kinds of questions should I expect to answer? Why do insurers need so much information?
A: An insurer will ask you a number of questions to determine how likely you are to make a claim.
For instance, if you are applying for an auto insurance policy, the insurer will ask for basic biographical information like your name, age, gender, etc. In addition, you’ll be asked about driving experience and for information about the vehicle you drive to determine a fair quote.
The insurer may also use this information to determine if you are eligible for any special insurance discount programs. Adults with good driving records will generally pay less for auto insurance than young drivers with poor records.
Q: Why should I use an independent broker to purchase insurance?
A: A local, independent insurance agent can deliver quality insurance policies with competitive pricing and personalized service. Brokers represent several insurance companies, allowing them to shop the market for the best coverage.
Direct contact with an agent is extremely helpful when purchasing an insurance product and absolutely necessary when filing a claim.
Auto Insurance FAQs
Q: I have an older car with a low market value—do I really need auto insurance?
A: Yes, you’ll need to carry some form of auto insurance if you own a car. Most state laws require that you possess some automobile liability insurance. These laws were enacted to ensure that victims of auto accidents receive compensation.
Most people with older cars decide not to purchase any physical damage coverage because the cost of repairing damages after an automobile accident is more than the car is worth.
Q: What is the difference between collision physical damage coverage and comprehensive physical damage coverage?
A: Collision covers the losses you incur when your vehicle collides with another vehicle or object. For example, if you hit another car in a parking lot, collision will pay for damages to your vehicle.
Comprehensive provides coverage for most other direct physical damage losses to your vehicle, including theft, vandalism, and Acts of God. For example, damage to your car from a hailstorm will be covered under your comprehensive coverage.
Q: What factors affect the cost of my automobile insurance policy?
A: A number of factors can affect the cost of your automobile insurance. 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.
Homeowners Insurance FAQs
Q: How can I lower the cost of my homeowners insurance?
A: Get a comprehensive review of your policy from your local insurance agent. It is not surprising to find quotes that vary by hundreds of dollars for the same coverage on the same home. When you shop, be careful; 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 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 $500 to $1,000 will lower your premium, sometimes by as much as five or ten percent.
Q: What does homeowners insurance cover?
A: A typical homeowner insurance policy has two primary sections of coverage. The first section covers your property. The second section covers personal liability.
Almost anyone who owns or leases property has a need for this type of insurance, and it is usually required by a lender to obtain a mortgage.
Q: What is the difference between “actual cash value” and “replacement cost”?
A: Covered losses under a homeowners policy can be paid on either an actual cash value basis or on a replacement cost basis.
When “actual cash value” is used, the policy owner is entitled to the depreciated value of the damaged property.
Under the “replacement cost” coverage, the policy owner is reimbursed an amount necessary to replace the article with one of similar type and quality at current prices.
Q: What factors should I consider when purchasing a homeowners insurance policy?
A: There are several factors you should consider when purchasing a homeowners insurance policy.
Determine the amount and type of insurance 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.
Q: What are the policy limits (i.e., coverage limits) in the standard homeowners policy?
A: 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 policy owner 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 policy owner 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 policy owner at the time the policy is issued. The coverage limit on medical payments to others is usually set at $1,000 per injured person.
Q: Where and when is my personal property covered?
A: Personal property (except property that is specifically excluded) is covered anywhere in the world.
For example, suppose that while traveling in Europe you purchase an antique mirror and want to ship it home. Your homeowners policy would provide coverage for the named perils while the mirror is in transit even though the mirror has never been inside your home.
Q: Do I need earthquake coverage? How do I get it?
A: Standard homeowners insurance policies do not pay for damages caused by “earth movement.” The term “earth movement” includes earthquakes, volcanic activity, and other earth movements.
Earthquake coverage may be available by endorsement for an additional charge. If you live in an area that is likely to have an earthquake, you’ll pay more for this type of endorsement than someone that lives in an area that is unlikely to have an earthquake.
We can help you weight the costs and benefits of this coverage before you decide to purchase.
Life Insurance FAQs
Q: How much life insurance should I purchase?
A: Common practice suggests an amount of life insurance policy equal to 6-8 times your annual earnings.
However, you should consider a number of factors when determining the right amount of life insurance for you and your family, including:
- Income sources other than salary/earnings
- Your spouses earning capacity
- Number of financially dependents individuals
- Amount of death benefits payable from Social Security and from an employer-sponsored life insurance plan
- Whether any special life insurance needs exists (i.e. mortgage repayment, education fund, estate planning needs, etc.)
Calculating the correct amount of life insurance to buy is not as simple as it appears. We recommend contacting us for help. As independent agents, we will help you avoid buying too much, show you appropriate optional coverages for your needs, and recommend a company that will best serve your interests.
Q: What about purchasing life insurance on a spouse and on children?
A: In certain circumstances, it may be advisable to purchase life insurance on children; generally, however, such purchases should not be made in lieu of purchasing appropriate amounts of life insurance on the family breadwinner(s).
It is of utmost importance that the income-earning capacity of the primary breadwinner be fully protected, if possible, through the purchase of the required amount of life insurance. 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.
Q: Should I purchase term insurance or cash value life insurance?
A: The answer to this question depends on your personal circumstances.
First, recognize that in any life insurance purchasing decision, two questions must be answered:
“How much life insurance should I buy?”
“What type of life insurance policy should I buy?”
The first question should always be resolved first. For example, the amount of life insurance that you need may be so large that the only way you can be afford is through the purchase of term insurance, since term insurance has a lower premium.
If your ability to pay life insurance premiums is such that you can afford the desired amount of life insurance under either type of policy, it is then appropriate to consider the second question — what type of policy to buy. Important factors affecting this decision include your income tax bracket, whether the need for life insurance is short-term or long-term (e.g., 20 years or longer), and the rate of return on alternative investments possessing similar risk.
Q: How does mortgage protection term insurance differ from other types of term life insurance?
A: The face amount under mortgage protection term insurance decreases over time, consistent with the projected annual decreases in the outstanding balance of a mortgage loan.
Mortgage protection policies are generally available to cover a range of mortgage repayment periods, e.g., 15, 20, 25 or 30 years. Although the face amount decreases over time, the premium 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.
Q: Can an existing life insurance policy be used to provide for the repayment of an outstanding mortgage loan?
A: 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 your 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.
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.
Renters Insurance FAQs
Q: Why would I want to buy renters insurance?
A: If you live in an apartment or 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.
Q: How does a renters insurance policy protect my personal belongings?
A: A renters insurance policy provides coverage for named perils. 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 lightening
- Windstorm or hail
- Explosions
- Riots
- Aircrafts
- Vehicles
- Smoke
- Vandalism or malicious activity
- 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
Renters insurance applies to your personal property no matter where you are in the world. This means you’re covered when you’re at home or on vacation.
Q: Why do some apartment complexes require tenants to purchase renters insurance?
A: 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.
Q: What if I share my apartment with a roommate? Do we both need to have renters insurance?
A: 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.
Umbrella Insurance FAQs
Q: What is a personal umbrella liability policy?
A: A personal umbrella liability policy is designed to increase your liability protection. This single policy acts as an “umbrella” over all of your other personal liability policies — home, auto, boat, RV, etc. — so you have a higher personal liability limit than what would otherwise be available.
In certain circumstances, an umbrella policy may provide personal liability coverage that is otherwise excluded from your other policies. For example, an umbrella policy provides coverage anywhere in the world, whereas your auto policy usually provides coverage in the US and Canada only.
Q: How do I know if I need a personal umbrella liability policy?
A: It used to be that the only people who needed personal umbrella liability policies were wealthy individuals who had sizable amounts of personal assets that would be at risk in a lawsuit.
However, in our very litigious society, even individuals with modest incomes and assets are often subjects of large lawsuits. Since they are even less able than a wealthy individual to pay large damage awards, they recognize the need to have coverage limits greater than what can be obtained from their homeowner or auto policies.
