General FAQ's
Q: What kinds of questions should
I be expected to answer when I am applying for an insurance policy?
Why do insurers need so much information?
A: When you apply for an insurance policy, you will be asked a
number of questions. For example, the agent might ask you your
name, age, gender, address, etc. In addition, you will be asked a
number of other questions which will be used to determine how
likely you are to make a claim. When an insurance company is
deciding whether or not to offer automobile insurance to a
potential customer, it will want to know about the person's
previous driving record, whether they have any recent accidents or
tickets, and what type of car is to be insured.
Insurance companies have different programs for different
customers. Adults with good driving records will generally pay less
for auto insurance than will a young driver with traffic tickets.
In order to determine which program you qualify for, an insurance
company needs basic information about you.
In addition to your age, gender and driving experience,
information about the vehicle you drive, and how you drive it, is
also needed to determine a fair price. For example, a large luxury
car costs more to repair or replace than a sub-compact; and,
someone who commutes 30 miles each way is more likely to be in an
accident than someone who rides the bus to work and drives only on
weekends.
Q: What are the advantages to
using an agent to purchase insurance?
A: By using an agent to purchase insurance, the policyholder
receives more personal service. An agent with whom there is direct
contact can be vital when purchasing a product and absolutely
necessary when filing a claim. A local, independent agent is able
to deliver quality insurance with competitive pricing and local
personalized service.
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Auto FAQ's
Q: What should I consider when
purchasing automobile insurance?
A: There are a number of factors you should consider when
purchasing any product or service, and insurance is no different.
Here is a checklist of things you should consider when purchasing
automobile insurance. Don't base your decision on price alone. Base
your decision on value - what you get for what you pay. Consider
the quality of the company's claims service and consumer
education.
Purchase the amount of liability coverage which makes sense for
you.
You should decide which optional coverages you want. For
example, do you want optional physical damage coverages or is the
market value of your car too low to warrant purchasing them.
Once you have decided what you want in your automobile insurance
policy, you can now decide from whom you would like to purchase the
insurance. For example, you may decide you like the idea of
purchasing insurance from a mutual company rather than a stock
company.
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Q: What are some practical things
I can do to lower my automobile insurance rates?
A: There are a number of things you can do to lower the cost of
your automobile insurance. The easiest thing to do is to shop
around. It is not surprising to find quotes on automobile insurance
that can vary by hundreds of dollars for the same coverage on the
same car. When you shop, be careful to make sure each insurer is
offering the same coverage. Many insurers use the ISO policy forms,
but this is not always the case.
Another way to lower the cost of your automobile insurance is to
look for any discounts that you may qualify for. For example, many
insurers will offer you a discount if you insure multiple cars
under the same policy, or if you have had a driver education class
in the last five years. Be sure to ask your agent or your company
about their discount plans.
Another easy way to lower the cost of your automobile insurance
is to increase the deductible. Simply raising your deductible from
0 to 0 can lower your premium sometimes by as much as five or ten
percent. However, you should be careful to make sure that you have
the financial resources necessary to handle the larger
deductible.
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Q: I have an older car whose
current market value is very low - do I really need to purchase
automobile insurance?
A: Most states have enacted compulsory insurance laws that
require drivers to have at least some automobile liability
insurance. These laws were enacted to ensure that victims of
automobile accidents receive compensation when their losses are
caused by the actions of another individual who was negligent.
Except for the minimum liability coverages that you may be required
to purchase, many people with older cars decide not to purchase any
of the physical damage coverages. It is often the case that the
cost of repairing the damages to an older car is greater than its
value. In these cases, your insurer will usually just "total" the
car and give you a check for the car's market value less the
deductible.
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Q: Suppose I lend my car to a
friend, is he/she covered under my automobile insurance
policy?
A: Whenever you knowingly loan your car to a friend or an
associate, he or she will be covered under your automobile
insurance policy. In fact, even if you do not give explicit
permission each time a person borrows your car, they are still
covered under your automobile insurance policy as long they had a
reasonable belief that you would have given them permission to
drive the car.
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Q: What is the difference between
collision physical damage coverage and comprehensive physical
damage coverage?
A: Collision is defined as losses you incur when your automobile
collides with another car or object. For example, if you hit a car
in a parking lot, the damages to your car will be paid under your
collision coverage. Comprehensive provides coverage for most other
direct physical damage losses you could incur. For example, damage
to your car from a hailstorm will be covered under your
comprehensive coverage.
It is important to know the differences between the collision
and comprehensive coverages for a couple of reasons.
In order to make an informed purchasing decision about these
optional coverages, you need to know the difference between
them.
The deductibles under the collision and comprehensive coverages
are often different in amount.
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Q: What factors can affect the
cost of my automobile insurance?
A: A number of factors can affect the cost of your automobile
insurance - some of which you can control and some which are beyond
your control. The type of car you drive, the purpose the car
serves, your driving record, and where you live can all affect how
much your automobile insurance will cost you.
Even your marital status can affect your cost of insurance.
Statistics show that married people tend to have fewer and less
costly accidents than do single people.
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Homeowner FAQ's
Q: What is homeowners insurance
and who should buy this type of coverage?
A: Homeowners insurance is one of the most popular forms of
personal lines insurance on the market today. The typical
homeowners policy has two main sections: Section I covers the
property of the insured and Section II provides personal liability
coverage to the insured. Almost anyone who owns, rents or leases
property has a need for this type of insurance. And many times,
homeowners insurance is required by the lender as part of the
requirements in obtaining a mortgage.
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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.
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Q: What factors should I
consider when purchasing homeowners insurance?
A: There are a number of factors you should consider when
purchasing any product or service, and insurance is no different.
Here is a checklist of things you should consider when you purchase
homeowners insurance.
First and foremost, purchase the amount and type of insurance
that you need. Remember that if your policy limit is less than 80%
of the replacement cost of your home, any loss payment from your
insurance company will be subject to a coinsurance penalty. Also,
determine the amount of personal property insurance and personal
liability coverage that you need.
Second, determine which, if any, additional endorsements you
want to add to your policy. For example, do you want the personal
property replacement cost endorsement or the earthquake
endorsement?
Finally, once you have decided on the coverage you want in your
homeowners insurance policy, you can now decide which insurer you
would like to purchase the insurance from.
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Q: What are some practical
things I can do to lower the cost of my homeowners
insurance?
A: There are a number of things you can do to lower the cost of
your homeowners insurance. The best thing to do is to shop around.
It is not surprising to find quotes on homeowners insurance that
vary by hundreds of dollars for the same coverage on the same home.
When you shop, be careful to make sure each insurer is offering the
same coverage. Many insurers use the ISO policy forms, but this is
not always the case.
Another way to lower the cost of your homeowners insurance is to
look for any discounts that you may qualify for. For example, many
insurers will offer a discount when you place both your automobile
and homeowners insurance with the them. Other times, insurers offer
discounts if there are deadbolt exterior locks on all your doors,
or if your home has a security system. Be sure to ask your agent or
company about discounts any that you may qualify for.
Another easy way to lower the cost of your homeowners insurance
is to raise your deductible. Increasing your deductible from 0 to 0
will lower your premium, sometimes by as much as five or ten
percent. However, be careful to make sure that you have the
financial resources necessary to handle the larger deductible.
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Q: What are the policy limits
(i.e., coverage limits) in the standard homeowners
policy?
A: [Note: this answer is based on the Insurance Services
Office's HO-3 policy.]
Coverages A and B provide protection to the dwelling and other
structures on the premises on an "all risks" basis up to the policy
limits. The policy limit for Coverage A is set by the policyowner
at the time the insurance is purchased. The policy limit for
Coverage B is usually equal to 10% of the policy limit on Coverage
A. Coverage C covers losses to the insured's personal property on a
named perils basis. The policy limit on Coverage C is equal to 50%
of the policy limit on Coverage A. Coverage D covers the additional
expenses that the policyowner may incur when the residence cannot
be used because of an insured loss. The policy limit for Coverage D
is equal to 20% of the policy limit on Coverage A. The coverage
limit on Coverage E - Personal Liability - is determined by the
policyowner at the time the policy is issued. The coverage limit on
Coverage F - Medical Payments to Others - is usually set at 00 per
injured person.
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Q: Where and when is my
personal property covered?
A: Coverage C, which provides named perils coverage, applies to
all your personal property (except property that is specifically
excluded) anywhere in the world. For example, suppose that while
traveling, you purchased a dresser and you want to ship it home.
Your homeowners policy would provide coverage for the named perils
while the dresser is in transit - even though the dresser has never
been in your home before.
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Q: Do I need earthquake
coverage? How can I get it?
A: Direct damages due to earthquakes are not covered under the
standard homeowners insurance policy. However, unless you live in
an area that is prone to earthquakes, you probably do not need this
coverage. If you do live in a part of the country with high
earthquake activity you may want to consider adding an earthquake
endorsement to your homeowners insurance policy. This endorsement
will cover damages due to earthquakes, landslides, volcanic
eruptions and other earth movements.
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Q: Do I need Flood
Coverage?
A: That depends on whether your properties lies in a flood plain
as determined by US Government Flood Maps. We have these maps
available and can provide flood coverage should it be required or
desirable.
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Small Business General FAQ's
Q: What is fire legal
coverage?
A: Fire legal coverage provides coverage to for you if you rent
a business space and are held responsible for fire damages to that
rented space. It does not apply to all business risks.
Q: What is the difference
between Replacement Cost (RC) and Actual Cash Value
(ACV)?
A: Replacement Cost is the current cost to replace property.
Actual Cash Value is the replacement cost less depreciation.
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Q: What does 80% co-insurance
mean?
A: Insurance carriers require that an insured party pay 80% of
the replacement cost in order to collect a partial loss in full.
This is the way the insurance company encourages all insureds to
adequately insure their property in relation to other insureds.
Q: Does my policy cover
physical damage to a vehicle I rent?
A: This damage will be covered only if that type of coverage is
purchased.
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Q: Can other people drive my
business vehicle?
A: Other people may drive your vehicle with your permission. It
is important that they be listed on your policy if they are regular
drivers of the vehicle.
Q: How does an audit
work?
A: At the end of the policy term, the insurance company will
review the policy and either charge or credit the policyholder
based upon an audit of estimated figures. Examples of estimated
auditable items include sales and payroll. Audits can be performed
onsite by an auditor or via mail or telephone. A premium is charged
for audit estimations.
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Q: Why do I need certificates
of insurance from sub-contractors?
A: An audit may require you to show proof that sub-contractors
had their own insurance coverage. The sub-contractors' certificates
of insurance will prevent you from being charged for their
exposure.
Q: What is General
Liability?
A: General Liability provides coverage for other individuals who
are on your property and/or exposed to your operations.
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Q: What does Products/Completed
Operations mean?
A: Products/Completed Operations refers to the liability
coverage for damages caused by your operation or products after the
point at which you no longer have control of them.
Q: What is Business
Interruption/Extra Expense coverage?
A: Business Interruption/Extra Expense coverage provides
coverage for income loss and the expense of establishing a
temporary site during repairs due to damages related to a fire or
compensable loss.
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Q: What is the difference
between "Named Insured", "First Named Insured" and "Additional
Insured?"
A: Named Insureds are those listed by name in the relevant block
of the policy's declaration page. Although the named insured is
commonly one person, partnership, corporation or other entity with
insurable interests, multiple named insureds may be included. The
First Named Insured is the first "named insured" listed on the
policy declarations (front page of the policy). This insured acts
as the legal agent for all named insureds in initiating
cancellation, requesting policy changes or accepting any return
premiums. The first named insured may also be responsible for
payment of the premiums.
An additional insured is an entity to which a policy's coverage
is extended. An additional insured must be added to the policy
prior to a claim being paid. There must be a tied to relationship
between the additional insured and named insured. Being an
additional insured on another's policy does not eliminate the need
for someone to have his/her own Commercial General Liability
policy.
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Small Business Property Insurance FAQ's
Q: What is a
peril?
A: A peril is the cause of a possible loss (examples include
fires or windstorms).
Q: What is Business Income
Coverage (Time Element)?
A: Business Income Coverage provides coverage for loss of
earnings and ongoing expenses when operations are curtailed or
suspended due to property damage resulting from a covered cause of
loss.
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Q: Should I purchase special
coverage for my computer equipment?
A: Electronic Data Processing (EDP) equipment can be covered as
unscheduled business personal property in "commercial property"
forms such as the building and personal property coverage. An EDP
equipment floater can provide added benefits. Many EDP floaters
cover special perils such as mechanical or electrical breakdown and
typically cover property in transit.
Q: What is
co-insurance?
A: In property insurance, co-insurance is a clause under which
the insured shares in losses to the extent that he/she is
underinsured at the time of a loss. You may have heard of
co-insurance relative to health insurance; this is a provision in
which the insured and the insurance company will share covered
losses in an agreed proportion.
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Small Business General Liability FAQ's
Q: What is a third party
claim?
A: A third party claim is a claim brought against you by someone
other than an insured.
Q: Does my General Liability
Policy provide coverage if my company is sued for
pollution?
A: This insurance does not apply to bodily injury, property
damage, advertising injury or personal injury arising out of the
actual, alleged or threatened discharge, dispersal, seepage,
migration, release or escape of pollution.
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Q: Does my General Liability
Policy provide Liquor Liability Coverage?
A: Yes, your General Liability policy provides liquor liability
coverage unless you are in the business of manufacturing,
distributing, selling, serving or furnishing alcoholic beverages.
These types of businesses need to purchase additional coverage
specific to liquor liability coverage.
Q: What is Fire Legal Liability
coverage?
A: Fire Legal Liability provides coverage against liability for
fire damage to premises rented to the named insured or temporarily
occupied by the named insured with the owner's permission. Most
Commercial General Liability policies provide a separate limit of
,000 to cover this exposure.
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Q: Will my liability insurance
cover me if I am sued in another country?
A: Most liability policies provide coverage for lawsuits only if
they are brought in the United States, its territories and
Canada.
Q: What is the difference
between Employee Benefits Liability Coverage and a Fiduciary
Bond?
A: The Employee Benefits Liability policy was designed primarily
for a variety of benefit plans to provide coverage for
administrative errors and omissions. The Fiduciary Bond policy was
designed to cover a fiduciary's ERISA (Employee Retirement Income
Security Act) exposures that are caused by a "wrongful act."
Fiduciary coverage responds to claims for damages arising out of
improper investments as well as plan and employee advice.
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Q: What is an Umbrella
Policy?
A: An umbrella policy provides additional limits of insurance
over and above underlying coverages found on a General Liability,
Automobile or Workers' Compensation policy. If there is a claim,
the underlying policy will pay its limits of liability and the
umbrella policy coverage would then be activated.
Q: When do I need to purchase
Workers' Compensation Insurance?
A: Most states require an employer to purchase workers'
compensation insurance as soon as they have employees. These states
also consider a corporate entity to have employees from the moment
the corporation is formed. Workers' compensation insurance will
provide medical expense and disability income for injured employees
as required by the laws of each state. In addition, the insurer
will defend any claim proceeding or suit against the insured for
benefits payable under the policy.
Premium shall be computed on the basis of the total remuneration
(payroll) paid or payable by the insured for services covered by
the policy.
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Q: What should be included in
the remuneration?
A: In addition to ordinary wages or salaries, remuneration
includes several other types of compensation. These include:
Bonuses
Extra pay for overtime work except as provided in Rule V-E
Pay for holidays, vacations or periods of sickness
Payment by an employer of amounts otherwise required by law to
be paid by employees to statutory insurance or pension plans
Payment to employees on any basis other than time worked, such
as piece work, profit sharing or incentive plans
Payment or allowance for hand tools or power tools used by hand
and provided by employees and used in their work operations for the
insured
The rental value of an apartment or house provided for an
employee based on comparable accommodations
The value of lodging received by employees as part of their
pay
The value of meals received by employees as part of their pay to
the extent shown in the insured's records
The value of store certificates, merchandise, credits or any
other substitute for money received by employees as part of their
pay
Items not included are:
Tips and other gratuities received by employees
Payments by an employer to group insurance or group pension
plans for employees other than payment covered by Rule V-B.2e
The value of special rewards for individual invention or
discovery
Dismissal or severance payments except for the time worked or
accrued vacations
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Life FAQ's
Q: How much life insurance
should an individual own?
A: Rough "rules of thumb" suggest an amount of life insurance
equal to 6 to 8 times annual earnings. However, many factors should
be taken into account in determining a more precise estimate of the
amount of life insurance needed. Important factors include:
Income sources (and amounts) other than salary/earnings
Whether or not the individual is married and, if so, what is the
spouse's earning capacity
The number of individuals who are financially dependent on the
insured
The amount of death benefits payable from Social Security and
from an employer sponsored life insurance plan
Whether any special life insurance needs exist (e.g., mortgage
repayment, education fund, estate planning need), etc.
It is recommended that a person's insurance advisor be contacted
for a precise calculation of how much life insurance is needed.
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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 before contemplating the
purchase of life insurance on children or on a non-wage earning
spouse. In a dual-earning household, it is important to protect the
income earning capacity of both spouses. Life insurance on a
non-wage earning spouse is often recommended for the purpose of
paying for household services lost at this individual's death.
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Q: Should term insurance or
cash value life insurance be purchased?
A: Although a difficult question--one whose answer will vary
depending on circumstances--several principles should be followed
in addressing this issue. It must first be recognized that in any
life insurance purchasing decision, there are at least two basic
questions that must be answered:
"How much life insurance should I buy?" and
"What type of life insurance policy should I buy?"
The question contained in (1) involves an "insurance" decision
and the question contained in (2) requires a "financial"
decision.
The "insurance" question should always be resolved first. For
example, the amount of life insurance that you need may be so large
that the only way in which this needed amount of insurance can be
afforded is through the purchase of term insurance with its lower
premium.
If your ability (and willingness) to pay life insurance premiums
is such that you can afford the desired amount of life insurance
under either type of policy, it is then appropriate to consider the
"financial" decision--which type of policy to buy. Important
factors affecting the "financial" decision include your income tax
bracket, whether the need for life insurance is short-term or
long-term (e.g., 20 years or longer), and the rate of return on
alternative investments possessing similar risk.
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Q: How does mortgage protection
term insurance differ from other types of term life
insurance?
A: The face amount under mortgage protection term insurance
decreases over time, consistent with the projected annual decreases
in the outstanding balance of a mortgage loan. Mortgage protection
policies are generally available to cover a range of mortgage
repayment periods, e.g., 15, 20, 25 or 30 years. Although the face
amount decreases over time, the premium is usually level in amount.
Further, the premium payment period often is shorter than the
maximum period of insurance coverage--for example, a 20-year
mortgage protection policy might require that level premiums be
paid over the first 17 years.
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Q: Can an existing life
insurance policy be used to provide for the repayment of an
outstanding mortgage loan?
A: Yes; the purchase of a new mortgage protection term insurance
policy is usually not required by the lender. An existing policy,
either term or cash-value life insurance, can be used for many
purposes, including paying off an outstanding mortgage loan balance
in the event of the insured's death. 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.
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Umbrella FAQ's
Q: What is a personal umbrella
liability policy?
A: The personal umbrella liability policy is an insurance
contract designed to accomplish two goals. First, it increases the
liability protection beyond what the policy owner already has in
his or her homeowners and automobile insurance policies.
Second, the personal umbrella policy is designed to fill in the
gaps in a policy owner's liability coverage since several types of
liability exposures exist that are not covered by automobile and
homeowners policies.
Together with homeowners and automobile insurance policies,
broad personal liability protection is attained through the
purchase of a personal umbrella policy.
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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, many people are
realizing that they have a need for more liability insurance than
what is provided under their homeowners and automobile insurance
policies. The personal umbrella policy is ideally suited to provide
this protection.