February 2012

Worker's Compensation

Is your small business properly insured? Image via Flickr

For small business employers, understanding the ins and outs of Workers Compensation coverage and the accompanying legal requirements can be overwhelming.  Here are some of the most common questions asked by employers about Arizona Workers Compensation Insurance.

1.     How does Workers Compensation insurance help my employees?

This type of coverage protects employees who are injured on the job and ensures they will receive compensation for lost wages, payment of related medical expenses, and in some cases, monetary awards for disability and damages.  It is no fault insurance, which means payments are made regardless of who was responsible for causing the accident, injury, or illness.   Workers Compensation insurance also provides death benefits for the survivors of an employee who is killed on the job.

2.     What does Workers Compensation insurance do for me as a business owner?

While the primary intent of Workers Compensation coverage is to protect employees, it also offers some protection for companies and business owners.  If an employee is injured on the job, everything to do with that injury is handled under the Workers Compensation policy.  This means there is no need for litigation between the employee and the company and businesses don’t have to worry about or plan for the potential of huge legal fees associated with litigation.

3.     Who is required to carry Workers Compensation insurance in Arizona?

According to the Industrial Commission of Arizona, the agency responsible for the administration and enforcement of any state law that pertains to the health and safety of employees, all employers in the state are required to secure Workers Compensation coverage for their employees under Arizona Law.  The details of the law and how it is administered and enforced can be found in Article 18, Section 8 of theArizona State Constitution, Chapter 6 of Title 23 of the Arizona Revised Statutes, and the Workers’ Compensation Practice and Procedurerules outlined in the Arizona Administrative Code.

4.     If I am the only person who works for my company, do I need Workers Compensation coverage?

Sole proprietors are not required to carry Workers Compensation coverage for themselves.  However, it may not be a bad idea to cover yourself if you have an occupation that is inherently dangerous or carries a higher than normal probability of injury.

5.     What happens if I don’t have Workers Compensation coverage and an employee is injured on the job?

If one of your employees is injured on the job and you do not have the required Workers Compensation coverage, what happens next is up to the employee.  The employee can file a claim with the Industrial Commission of Arizona (ICA).  If the claim is accepted by the ICA, the state will process the claim and pay for the medical expenses and lost wages that would normally have been covered by the Workers Compensation insurance policy.  The state will then charge your company the full amount of benefits paid out to the employee plus a penalty that is equal to 10% of the amount paid out or $1,000, whichever is greater.  The other option is a civil suit.  Because you don’t have the protections provided by a Workers Compensation policy, the employee can choose to file a civil suit against the company to recover damages.  The employee’s injury is the only requirement in this type of filing to prove the negligence of the employer.

6.     Are there any penalties for not having Workers Compensation insurance if none of my employees ever file a claim with the state?

According to the ICA, the state can fine your company the same $1,000 penalty for failing to carry the required coverage regardless of whether or not a claim is filed.  If your company is found not to have insurance again within the same 5 year timeframe, the fine increases to $5,000 for the second finding and $10,000 for the third.

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Elderly Couple

What type of life insurance is right for you? Image via John Starnes on Flickr

When it comes to insurance, people often wonder how much is enough.  For life insurance, the answer can be a little more complex than for other types of insurance.   When you are looking for coverage for a car or house, you can formulate things like replacement value and estimate how long it would take to rebuild in order to determine the right amount.  But when you are talking about your life, it can be harder for people to turn the magnitude of that loss into a monetary amount.

Life insurance also differs from other types of insurance because different people have different goals and different needs.  When someone buys a homeowners insurance policy, their goal is to enable them to replace their home and belongings in the event of a catastrophic loss and to protect them from liability claims if someone is injured on their property.  Life insurance goals are not that clear cut.  Some people are looking to their life insurance to provide for their children while others may be looking at it as an investment opportunity.  There are a variety of reasons that people purchase life insurance policies, so the answer to how much life insurance do I need is- it depends.

Here are some things to consider that will help you figure out how much life insurance you need.

  1. Your Goals

The first thing you need to decide is why you want life insurance.  Ask yourself these questions to help define what you want to achieve by purchasing life insurance policies.

  • What do I want my life insurance to provide?
  • Will any of those things change as I grow older or will they be the same as they are today if I live to be 100?

Some of the most common goals people have are enabling a spouse to pay-off the mortgage or other debt, providing funds to raise children or send them to college, and supplementing their investment portfolio.  It is important to understand what you want to accomplish with your life insurance because those goals will drive the type of policies you purchase and the amount of coverage you need right now and in the future.

  1. Your Life Stage

The life insurance needs of a married couple will change over the course of their lives, even if their life insurance goals remain the same.  This is why considering your life stage is a crucial factor in determining the right policies for you.  Let’s say the life insurance goals of a married couple are to ensure there is enough money for final expenses, to pay off any debt, and to provide income replacement for at least 3 years to give the family time to adjust to the loss.  If that couple is in their early thirties with two small children, two incomes, and a mortgage, they will need a much higher payout at that point than if they are retired with no debt and two grown children.  Considering how your financial obligations will change over time ensures you buy the right amount of coverage at the right time to achieve your goals.

Once you have thought through your goals and the anticipated fluctuations of your financial obligations, sit down with your life insurance broker or agent to discuss what you want to accomplish.  They can help you find the mix of policies that will provide the protection and peace of mind you need at the best possible price.

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Small Business

Is your small business adequately insured? image via aboutTime on Flickr

One of the unfortunate realities of our world is that the threat of a lawsuit is around every corner and inherent with every employee you hire, customer you serve, or client you sign.  No matter how small your business is, what products you sell, or services you offer, there is some part of your business that is leaving you exposed to a lawsuit that could bankrupt both you and the company.

Here are 7 reasons every business needs to protect itself with the proper types of insurance.

1.     It Only Takes One

It only takes one accident, one broken contract, or one disgruntled worker to put your entire business at risk.  If your company is sued fornegligence, even winning can easily put you out of business because of the amount of money it will cost to mount your defense.

2.    Things Happen

If you own property where customers come to do business, you are open to a personal injury liability claim every minute of every day.  People fall and accidents happen but if they happen on your business premises and you don’t have insurance, you will have to pay for medical bills, lost wages, pain and suffering, and other expenses out of your own pocket.

3.   Your Corporate Shield May be Flimsier Than You Think

Many small business owners believe they have protected their personal assets from any business liability claims or judgments by using a “corporate shield”.  However, there are circumstances where that protection doesn’t stand up in court and without business insurance, you could literally lose everything you own.

4.     Exclusions Apply

If you have a general liability policy, any employment liability claims may be excluded from that policy.  If you have a commercial liability policy, property loss may be excluded.  If you are a home-based business owner with homeowner’s insurance, it is unlikely that your business assets are covered under that policy.

5.   Losses are Often Out of Your Control

If you walked in tomorrow to find your office had been robbed and every computer was gone, would you be able to replace them today and get back to business?  Losses from theft, natural disaster, and other accidents could bankrupt your business if you don’t have insurance to help replace what is lost.

6.     Accidents Happen

You may be thinking that your auto insurance policy that covers your personal auto will cover you if you are driving your car on company business.  This may or may not be true. If it isn’t true and you are in an accident where you’re at fault, you could find yourself paying for someone else’s pain and suffering out of your own pocket for the rest of your life.

7.   Other People’s Insurance Isn’t Enough

Let’s pretend you have a storefront on Main Street in your town and another person causes an accident which ends with a car coming through the front window and destroying your merchandise.  Their auto policy, if they have one, might cover the damage to the shop and for replacement products, but it may not cover or have enough coverage to compensate you for the income you lost in the four months the shop had to be closed for repairs.

Don’t wait until something happens or procrastinate at least doing something while you figure out whether or not you can afford to purchase the insurance your business needs.  The question you need to focus on is how can you afford not to insure your business.
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Auto Accident

Do you know what to do if you're involved in an auto accident? Image via 7mary3 on Flickr

Although the number of motor vehicle accidents in Arizona has been decreasing for several years, the state still averages more than 100,000 accidents a year according to the Arizona Department of Transportation.  That means that on average, a car accident is happening every 4.5 minutes; 2 more accidents will occur by the time you finish reading this page.

If you are one of the drivers unfortunate enough to be involved in an accident this year, do you know what to do on the scene and in the days following the accident?  Do you know when you should move your car out of traffic and when you should not?

For your safety, the safety of your passengers, and to ensure quick resolution to any insurance claims, here are the steps every driver should take if they are involved in an accident.

1.   Remain Calm and Assess the Situation

The most important thing you can do to protect yourself and others from further injury is to remain calm.  Turn on your hazard lights.  Check yourself and any passengers for injuries.  If you can exit your car and it is safe to do so, check on the welfare of the occupants of the other car, if there is one.

2.   Call for Help

If there are serious injuries or a continuing danger, call 911 before doing anything else.  If you cannot call yourself, ask someone else to call.

3.     Move Cars to the Side of the Road

If the accident is minor and there are no serious injuries, move both cars should as far to the side of the road as possible to clear the road and prevent additional accidents and injuries.  If there are serious injuries or one or both cars cannot be moved, all occupants should remain in their cars with their seatbelts on until help comes.

4.    Exchange Information

When it is safe to do so, exchange the following information with the driver of the other car:

  • Name
  • Address
  • Number
  • Insurance Company
  • Policy Number
  • Driver’s License Number
  • License Plate Number
  • If the driver is not the owner, get the information above for both the driver and owner of the vehicle.
  • Vehicle make, model, and year

Do not admit fault or take responsibility for the accident to the other driver or the police.


5.     Document the Accident

Draw a map that indicates the position of both cars and provides details about the scene of the accident while they are still fresh in your mind.  Take pictures of the scene and both cars with a disposable camera or your cell phone.  If there were witnesses, ask for their name and contact information.

6.     File an Accident Report

If there are no serious injuries resulting from the accident, the police may not come to the scene or create their own report.  If there is no official police report filed, file an accident report with the state police or your local police station to aid in claims processing.

7.     Contact Your Insurance Company

As soon as possible, call and file a claim with your insurance company.

Being involved in an automobile accident can be both upsetting and overwhelming.  Just remember to stay calm and put safety first.
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Living Room Possessions

Do you know everything you own? Image via Flickr

You come home from visiting your parents to a yard full of fire trucks and a pile of rubble that used to be your family home. Everything you own is gone.  Could you sit down and make a list of every piece of property that was in your house?  Do you know when you bought each item and how much you paid for it?  How would you prove to the insurance company and the IRS that you did in fact own a 57” television or an antique desk owned by someone famous?  Most importantly, do you know that if you experience a loss, you will need to be able to do these things in order to get your homeowner’s claim settled to your satisfaction?  Once you look at it from this perspective, it is easy to understand why it is so important to create a home inventory before you suffer a loss.

How a Home Inventory Helps You

According to the Insurance Information Institute, there are three circumstances in which a home inventory can help protect you.   First, a home inventory helps you understand the true value of the things you own.  This can assist you in determining how much coverage you need when you are purchasing or renewing your homeowner’s or renter’s policy.  Second, if you have a loss, a home inventory removes the need to try and remember all the details of what was lost and provides an easy way to substantiate your claim.  In the aftermath of a personal tragedy like the destruction of your home, it can be difficult to remember everything you lost. This may result in you receiving less money that your claim is worth as the insurance company can only pay for the things you remember.  Third, the information and receipts kept with your home inventory can help you substantiate your losses on your tax return.

Where to Start

Creating a home inventory will take time and effort, but it can be as simple or complex as you decide to make it.  You can start with a notebook and a camera and go from room to room documenting the contents.  You can choose one of the many home inventory software packages available online to guide you through the process.  If the task feels overwhelming, break it down into smaller pieces.  Start with a room or a category of belongings.  Whether you start with your newest possessions or the most valuable ones, how you start matters far less than the fact that you are on the way to protecting yourself and your family.

What Should an Inventory Include

There are several things you need to include for each item in your inventory.  First, you need to capture the pertinent information about the item including what it is, a short description, where you bought it, when you bought it, how much you paid for it, and any make, model, or serial number.  Next, you need a photograph or video record that shows the item.  Last, you need the original purchase receipt, if you have it or an official appraisal if the item is a big ticket or high value item.

Where Should You Keep Your Inventory

One of the most important things about your home inventory is that you cannot keep it in your home.  Store a copy of your home inventory with a friend, family member, or in a safe deposit box at the bank.  When choosing a location to store a copy of your home inventory, you need somewhere safe that is easily accessible if you experience a loss.  Don’t forget to update your inventory as time goes by and your possessions change.

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Insurance Mistakes

What mistakes might you be making with your insurance policies? Image via cybrarian77 on Flickr

When you are just starting out, there are so many new things you have to handle, things that your parents have always taken care of for you.  You may be moving into your first apartment, starting your first job, buying your first house, or leasing a new car.  It’s normal to experience a few growing pains as you make missteps and mistakes but some mistakes, the ones with a dollar sign attached, can be more painful than others.  One of the most common mistakes young adults make is not having insurance to protect the life they are building.  Insurance may seem like a luxury or like something you will worry about when you are older, but it is one of the most important things you can do now to protect yourself now and in the future.  

Here are 4 of the most common insurance mistakes young adults make.

1.    Not Having Insurance

The biggest mistake people in their 20’s can make is not having insurance.  If you live in an apartment and own anything you didn’t buy at a yard sale, you need a renter’s insurance policy.  If you drive a car, you need an auto insurance policy that covers liability and uninsured/underinsured motorists at a minimum.  If you don’t have a trust fund, you need personal disability coverage that provides income if you lose your ability to work.

2.  Not Having the Right Insurance

Another big mistake young people make is not having the right insurance.  You may have auto coverage that doesn’t protect you from an uninsured/underinsured motorist.  You might have life insurance but not disability insurance, even though you are more likely at this age to experience a temporary disability than you are to die.  Having the right insurance to protect yourself is one of the most important things you can do to protect your financial future.

3.    Not Having the Right Amount of Insurance

It is great if you have insurance, but if you don’t have the right amount, you may still find yourself in financial freefall.  For example, look at the limits on the liability coverage provided with your auto policy.  Now imagine that you are in an accident deemed to be your fault and the person in the other car dies.  Will the upper limit on your liability policy be enough to pay for a wrongful death lawsuit?  If not, your wages for the rest of your life can be garnished to pay for that one accident.  This is why having the right amount of insurance matters as much when you are 20 as it does when you are 40 with a family and a house.

4.    Not Shopping for Their Own Policies

Another common mistake people make when they are just starting out is to buy the same policies that their parents have from the same companies that their parents use.  Regardless of how great the company is or how good they have been to your family over the years, it is always a good idea to shop around for your own policies.  Some companies offer better rates for newer drivers or provide more comprehensive rental policies at more reasonable prices.  Make sure the insurance you pay for is meeting your needs and that you are getting the best possible price in the process.

One of the most challenging things about moving out and moving up in the world is avoiding the most common mistakes.  Understanding your individual insurance needs and purchasing the right policies with the write amount of coverage allows you to protect your future while you work to build it.

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Homeowners Policy Mistakes

Is your homeowners insurance enough to replace your home and possessions? image via Flickr

Homeowner’s insurance can be the best money you have ever spent if fire destroys your home or a home invader takes some stuff and trashes the rest.  But many homeowners’ make critical mistakes when purchasing their policies that only become apparent after a loss, when it is too late to do anything about them.  Mistakes like these can cost a lot of money and may leave you with an unpaid mortgage, an unusable house, and nowhere to call home.  Make the most of the protection homeowner’s policies offer by avoiding these 5 common mistakes.

1.     Not Reading the Policy Documents

This can be a costly mistake as the policy document outlines exactly what is covered and not covered by the insurance company.  The discussion you have with your agent may leave out important considerations and it is likely that you believe you are covered for things that are not actually covered by your policy.  Before buying a policy, ask the agent for a sample of the policy documents that mirror the policy you are considering.  This will give you the chance to read through the policy and ask any questions you need answered before you are committed.

2.     Not Scheduling High-Value Property

Another very costly mistake that many homeowners make is not scheduling property that falls outside the individual property limits of their policy.  If you are surprised that your policy has limits on specific kinds of property, you haven’t read your policy.  Almost every homeowner policy includes limits on the loss of specific types of property like computers, jewelry, stamps, coins, and firearms.  If the value of your property in that category exceeds the policy limit, you need to ensure that your policy has a rider that will cover the excess value if there is a loss.

3.     Not Understanding the Difference Between Actual Value and Replacement Cost

This mistake can leave you with a mortgage on a house you can’t live in and can’t afford to rebuild.  According to the National Association of Insurance Commissioners Consumers Guide to Home Insurance, actual value will only pay for your loss, which is the value of your house and property at the time of loss and includes considerations for age, wear and tear.  This means that if the value of your house is less than what it would cost to rebuild it, you will have to come up with the difference on your own.  It also means that if the actual value at the time of the loss is determined to be less than your mortgage, you will still owe the mortgage company that difference.  Replacement cost, on the other hand, pays to replace the house and property, regardless of the actual value at the time of loss.

4.     Not Having Coverage for Specific Perils

Many people think that their homeowner’s policy covers damage to their house no matter what causes that damage.  Unfortunately, this is not true on most homeowner’s policies, as any homeowner who has survived a hurricane only to find out that water damage is not covered, can attest.   While it is common knowledge that floods are not covered by homeowner’s insurance, many people don’t understand that flood and water damage are generally considered the same thing.  Unless you live in California, it is unlikely that you know that most policies exclude damage from specific perils like earthquakes, nuclear accidents, and war.  The best way to protect yourself and your property is to understand what your policy covers and purchase additional coverage for perils that could happen but are excluded.

5.     Underestimating Everything

Another costly mistake is underestimating things like how long it would take to rebuild your house, the value of your personal property, or the value of your home.  In the event of a loss, all these can seriously impact your financial well-being.  If your policy only provides for a year of additional living expenses and it takes 18 months to rebuild your house, you will have to pay for the additional 6 months out of pocket.  If you underestimate the value of your personal property, you may be unable to replace what is lost.  If you underestimate the value of your home, you may be saddled with mortgage debt for a house you can’t live in and can’t afford to repair while paying to live somewhere else.

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