April 2012


Builder's Risk Insurance

Do you need Builder's Risk Insurance? Photo credit: monivhs1947 on Flickr

Builder’s risk coverage falls under the category of specialty insurance products and provides property insurance for buildings while they are still being built.  Standard property coverage would not cover damage to the building while it is under construction.    Once the building is complete, the property owner would purchase a more standard property insurance policy to cover any damage to the building.  It is kind of like a homeowner-to-be who has to get a construction loan in order to finance the cost of building a house and then get a mortgage once the house is complete.

This type of insurance also covers materials and equipment that are being used to construct the building and may be purchased to cover any loss exposure during renovations, not just for new construction.

Who Needs Builder’s Risk Insurance

During construction, the conditions are very different than they will be once the building is complete and there are more ways that losses can occur.  Building owners are generally liable for anything that happens on their site.  Builder’s risk offers the owner some protection from any loss of property.

What Does it Cover

Most Builder’s Risk coverage protects the land/building owner’s interest against losses resulting from fire, vandalism, lightning, wind, and other non-excluded weather conditions.  Similarly to homeowner’s insurance, Builder’s Risk policies do not generally protect against losses caused by earthquakes, flooding, acts of war, or intentional damage caused by the owner.   The timeframe of the policy generally aligns with the timeframe of the construction or renovation and expires once the work on the building has been completed.  Builder’s Risk coverage would not usually continue to offer protection to the owner after the building is certified for occupancy.

The standard Builder’s Risk policy offers site-specific coverage which means that any materials and equipment that are not onsite would not be covered under the policy.  If there are materials and/or equipment that is being stored in a different location for use on the project, a broader policy would be required.  This type of coverage can be obtained through a Builder’s Risk policy that contains Inland Marine provisions.

Although the type of coverage provided at a high level is common across the majority of Builder’s Risk policies, the actual policies are often very detailed and tailored to the specific needs of the building project that is being insured.  This ensures that the policy meets the specific needs of the individual project but also requires that the building owner and any other interested parties pay close attention to what is covered and not covered by the policy.

Who Buys Builder’s Risk Coverage

In most cases, the owner of the building being constructed would purchase the Builder’s Risk policy.  In some circumstances, building owners may require that the general contractor or the company completing the construction secure this kind of coverage as part of the contract to build the building or complete the renovation.

Sometimes, the existing property insurance will cover any losses during building renovations or while an addition is being built.  However, it is important for the building owner to verify that coverage with their current carrier prior to any work being done.  If the renovation or addition is covered by an existing property insurance policy, there is no need to purchase an additional Builder’s Risk policy.

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BOP Coverage

What kind of insurance is right for your business? Image via Grand Velas Riviera Maya on Flickr

Business owner’s policies, which are also called BOPs, can be a great fit to cover the insurance needs of many small businesses. This type of policy combines commercial general liability coverage and property coverage into a single packaged product that is generally more affordable than purchasing these coverage’s as separate policies.  Small businesses that are in the market for insurance coverage should look at whether there is a BOP available that meets their needs.

Here are 7 things business owners need to know about BOP coverage.

1.     Packaged Coverage Can Save You Money

By combining several standard coverage’s required by small businesses into a packaged product, insurers can offer that coverage at a lower price.  As long as the limits and coverage’s offered in a specific insurer’s BOP product meet your needs, this can make getting the insurance your company needs at a price that fits within your budget.

2.     Provides Business Interruption Protection

The one coverage that is frequently included in a BOP package is business continuity coverage.  This type of insurance is often overlooked but it is one of the most important kinds of insurance for small business owners.  Business interruption coverage pays you a specific amount if your business cannot be operated which can make the difference between being able to rebuild after a disaster and having to file bankruptcy.

3.     Often Excludes Professional Liability Coverage

Although BOP coverage generally provides the kinds of insurance small businesses need, one area that is not usually included isprofessional liability coverage.  This means that any business that has professional liability exposure will need to purchase that coverage in addition to BOP.

4.     Tailored to Small Businesses

BOP policies are generally only available to companies that have less than 100 employees and bring in less than $1M in annual revenue.  If your company is larger than that it may not qualify for BOP coverage and buying the specific individual policies your company needs will be more cost effective.

5.     BOP Property Coverage Will Pay to Replace Property

Most BOPs provide protection against the loss or damage of property and will cover the cost of replacing the business property.  This is an important detail to confirm with your insurance agent as the difference between replacement value and actual value can be significant.  Replacement value ensures you will have the resources to replace any lost or damaged property.

6.     Offers Protection Against Libel, Slander, and False Advertising

BOP coverage will protect your business against claims of libelslander, and false advertising in addition to shielding the business from liability for bodily injury and property damage.  This can not only save the company money in the event there is a groundless claim filed, but can also save the company in the event there is a successful claim.

7.     Lower Premium Usually Means Less Flexibility

One thing many business owners do not like about BOP insurance is the lack of flexibility these kinds of policies provide.  Business owner’s need to realize that there is a trade-off when they select BOP coverage.  Because the product is standardized and therefore easier for the company to sell and service, it is offered at a lower cost.  However, in order to maintain that standardization, BOPs don’t usually allow for any customizations or deviations from the base product.  If the BOP you are looking at doesn’t provide exactly what you need, you may need to purchase additional coverage which must be factored into your overall cost/benefit analysis.

A business owner’s policy (BOP) might be the perfect fit for your small business insurance needs.  Make sure you understand exactly what is and what is not covered and if needed, secure additional coverage to fill in any gaps.  By leveraging the cost savings provided by BOP coverage, businesses can ensure they have the protection they need at a price they can afford.

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Earthquake

Are you protected in the event of an earthquake? image via martinluff on Flickr

No matter where in the U.S. you live, there is a chance that there could be an earthquake in your area.  Of the 50 states, there are only 8 that haven’t experienced a single earthquake in the last 30 years according to the United State Geological Survey (USGS).  But even those states that have been safe the past thirty years are not immune from quakes or from damage caused by quakes occurring in adjoining states.  The simple fact is, if you live in the U.S., you run the risk that an earthquake will cause damage to your home.   If that happens, the only way that your insurance company will pay for the damage is if you have purchased additional coverage specific to earthquakes.

For those living in Hawaii, Alaska, and California, the three most seismically active states, earthquake insurance may seem to be a requirement.  However, even in those states, many homeowners haven’t purchased the extra coverage that would protect them from large losses.  According to the California Earthquake Authority (CEA), which provides the majority of earthquake coverage to California homeowners, only 12% have purchased earthquake coverage.   In Alaska, which is one of the most seismically active areas in the entire world, this number is only a little higher at about 33%.

Why Don’t Homeowners in High Risk Areas Buy Coverage

There are several reasons that even homeowners in Alaska and California don’t have earthquake insurance.  Unfortunately, one of the main reasons is that there are still people who believe that their homeowner’s policy will cover any losses resulting from an earthquake.  In almost every case, this simply isn’t true.  Other homeowners have made the conscious decision not to purchase this additional coverage because they feel the cost of the coverage plus the high deductible that is standard on earthquake policies makes the coverage unaffordable.  Still others believe that if there is a disaster, the government will be there to help make them whole and help them rebuild their house.

So, Why Do I Need it?

There are four reasons that every homeowner should look into purchasing an earthquake policy, even those who live in states that are not high on the earthquake risk list.

1.     If you live outside the big three, coverage is likely much less expensive than you think.

2.     Houses outside of the big three are rarely built with earthquake resilience in mind.  This means that if there is an earthquake, there is likely to be more damage to structures and property than there would be in California, Alaska, or Hawaii.

3.     It doesn’t take a catastrophic quake to cause catastrophic losses.

4.     Between 2001 and 2011, the USGS reports that there were more than 40,000 earthquakes in the U.S., almost 5,000 of which did not occur in the big three states.

5.     FEMA estimates that a major earthquake in a city with a large population could result in damages exceeding $200B.  Without insurance, you will be completely reliant on federal and state disaster relief for any assistance.  As the average award individual/family falls between $2,000 and $4,000 per family and the maximum grant is less than $15,000, you will be hard pressed to rebuild and recover.

Earthquake insurance is the kind of thing that it is easy to convince yourself you don’t need… until you do.  Then, it’s too late.

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Business Insurance

Is your business adequately insured? Image via cancocom on Flickr

According to the Small Business Association (SBA), small home based businesses make up more than half of all businesses in the U.S.  These types of businesses are more likely to have the wrong insurance coverage for their needs.  If you are a home-based entrepreneur, here are 6 mistakes you can’t afford to make with your business insurance.

1.     Not Having Insurance Specific for the Business
One of the most common mistakes home-based business owners make with their insurance is making the assumption that their personal insurance policies cover their business.  This is almost never true.  In fact, most homeowner’s and umbrella policies specifically exclude business activities and business property.  This means that if there is a fire in your home, your homeowner’s policy will not pay to replace the computers, equipment, and supplies belonging to your business.

2.     Not Believing that the Company Can Be Sued
It doesn’t matter if you are just starting out, don’t have any real assets, or whatever other reason you are telling yourself, if you own a business, that business can be sued.  In addition, it may be possible for you to be sued personally as well.  If you have a judgment against you, the court can seize your assets, bank accounts can be frozen, and future earnings can be garnished.

3.     Not Planning for Bad Things to Happen to Them
Another big mistake home-based business owners make is not protecting their business in the event something happens to them.  Many small business owners forego disability insurance for both the short and long term without realizing that their odds of being disabled at some point, even temporarily, are much greater than the odds of them dying.  Most home-based businesses could not withstand the loss of their entire workforce, even for a few weeks.  Most small business owners would find it difficult to pay their bills and take care of their families if a disability made it impossible for them to work in the business.

4.     Not Having the Right Insurance
Small business owners are often strapped for cash and strapped for time.  This can lead to bad decision making in the area of insurance.  Business owners cannot rush through the process of identifying their insurance needs without running the risk of buying the wrong policies and being over insured in some areas and underinsured in others.

5.     Not Verifying that All Insured, Entities, and Locations are Listed on Policy Documents
Regardless of the way you have structured your business, you need to make sure that all entities, companies, LLCs, etc. are listed on your insurance policies.  The same goes for all locations that are covered by business property and commercial general liability policies.  In order to ensure they are covered, they must be listed on the policy.

6.     Not Purchasing an Umbrella Liability Policy
Business owners, just like individuals, need umbrella coverage in order to protect themselves and their business from catastrophic circumstances.  Umbrella coverage kicks in after your standard policies hit their limits and hopefully, you will never need it.  However, this is the kind of coverage that if you need it and don’t have it, it can end your business and impact you financially for the rest of your life.
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Marriage

Are you properly insured after a major life-changing event? Image via cheesy42 on Flickr

Many people don’t realize that different life events can have an impact on their insurance needs as well as their insurance premiums.  You might think that turning 25 will bring your auto insurance down or realize that getting married means you need to combine your coverage into a single policy, but there are many other ways that major life events can impact your insurance.   A survey conducted by Trusted Choice and reported in Insurance Journal found that more than 30 million U.S. households have insurance policies and/or coverage that don’t fit their current needs.

Here are 3 of the major life events that can change what kind of insurance you need, how much insurance you need, or how much your insurance costs.

1.     Getting Married

When you tie the knot, your insurance needs and costs can change in a couple different areas.  First, your car insurance rates may go down because you are married and combining policies may qualify you for a multi-car discount.  If you are purchasing a house, you will need a new homeowner’s policy.  If you are moving in together but renting, you will want to combine your renter’s insurance and make sure the coverage limits of the policy are enough to replace both of your possessions.  Regardless of whether you are a renter or a homeowner, you may want to make sure your property replacement coverage will cover your wedding rings.  Finally, now that you are married, your life insurance needs may be drastically different and should be reviewed.  Even if you have enough insurance, you will likely need to make beneficiary changes at a minimum.  Talk to your insurance agent to make sure the coverage you have is the coverage you need and that you aren’t paying more for it than you should be.

2.     Getting Divorced or Becoming Widowed

A change in marital status can mean that you need to make changes to your insurance coverage.  Going from two cars to one, moving to a smaller house, selling valuables, and splitting assets can all result in the need for less coverage and lower limits.  This can be a big cost savings for you that you may not think of during such a difficult time.  You will also want to change any beneficiaries on life insurance or other policy payouts.

3.     Having Children

Becoming a parent for the first time or the last time is a big change and it can mean you need to make changes to your insurance coverage.  According to a life insurance fact sheet put out by LIMRA, almost 70% of U.S. Households with children under 18 would be in jeopardy and destabilized financially if the primary bread winner died.    If you have added a new family member by birth or adoption, it is a good idea to sit down with your insurance agent and make sure you have enough life insurance coverage to meet the needs of your family and that beneficiaries are designated properly.  You may also want to review your auto and home insurance policies to ensure that coverage limits are adequate for your larger family.

While these are 3 of the major life events that can affect your insurance costs and needs, there are several other events that should trigger a review of your policies with your agent.  If you have a new teenage driver, buy a vacation home, have a significant change in income, buy or inherit valuable property, or as you get ready to retire, sitting down with your agent can make sure you and the ones you love are protected.
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RV Insurance

Is your vacation insured properly? Read more to learn about RV Insurance (image via _escalade328s_ on Flickr)

The summer season is fast approaching and if you are planning to head out on the open road for a family RV adventure, make sure you take a couple minutes to ensure you have the insurance coverage you need before you leave.  Many people share the common misconception that adding their RV to their auto policy provides them with adequate protection during their trip.  While your auto policy may offer some of the coverage you need, it won’t protect you completely which is why it makes more sense to invest in an RV insurance policy.  Buying a separate policy ensures you have all the coverage you need to keep your trip on track and protect yourself while you are on the road.

What is the Difference between Auto Insurance and RV Insurance?

The primary differences between auto coverage and RV coverage result from the primary differences between your car and your RV.  An RV is more than just an RV; it is a house on wheels.  This means you need more coverage than you have on your car in order to cover potential losses that you are open to with an RV that you wouldn’t be with a car.

You keep significantly more property in your RV than you do in your car, some of which can be valuable like laptops, televisions, and other equipment.  When your house on wheels is parked at a campsite, the area around it can be considered your “yard” which makes you liable for things that happen there.  There isn’t really a situation where your car could be thought to have its own yard.  If your RV is damaged while you are on the road, you will need somewhere else to stay just like you would if your house was damaged.

If you are traveling with only your auto policy, the loss of your property, your liability for the campsite, and the expenses related to staying somewhere other than the RV won’t likely be covered which means you will be paying out of pocket.  That might break your vacation budget and force you to cut your trip short.

Common RV Coverage’s

There are several different types of RV coverage available from most insurers, although they may call the coverage by a different name.  Here are the most common coverage types:

  • Bodily Injury – Covers you if there is an accident where you are liable for someone else’s injuries including medical bills, lost wages, and other legal obligations relating to the injury.
  • Uninsured/Underinsured Motorist—Covers the cost of repairs when you are involved in an accident and the driver at fault doesn’t have insurance or doesn’t have enough insurance to cover your losses.
  • Property Damage— Covers the repair or replacement of damage done by you or your RV to other people’s property
  • Comprehensive – Covers damage or losses to your RV and/or personal property from all covered threats except collision.  This includes things like theft, vandalism, and weather.
  • Collision – Covers the cost of repair or replacement of the RV and all components if it is damaged in a collision.
  • Vacation Liability— Covers your liability for bodily injury and property damage while on a vacation site or camp site.
  • Towing & Labor—Covers the cost of towing by a tow truck capable of handling the RV.
  • Roadside Assistance—Covers the cost of roadside assistance when you break down or run out of gas.
  • Emergency Expense – Covers your costs to live outside the RV in the event it is damaged and needs to be repaired.  Generally includes lodging, meals, and travel.
  • Personal Effects Replacement Cost – Covers the expanded personal property you are likely to have in the RV against loss or damage.
  • Full Timer’s Package – Provides a package of coverage’s that usually includes liability, coverage specific to when the RV is parked and being used as a residence.

Purchasing RV insurance protects you no matter what comes your way and gives you the peace of mind to sit back, relax, and enjoy your vacation.

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Umbrella Coverage

Do you need Umbrella Coverage? Image via lladnaar on Flickr

They say that what you don’t know can hurt you and when it comes to umbrella coverage, this saying is definitely true.  Despite our sue-happy culture, many people who need the protections offered by an umbrella policy have never heard of this kind of personal liability coverage.  Even those who have heard of it often see it as something frivolous or something that only people with a lot of money need to have.  Unfortunately, these are common misconceptions about who needs umbrella coverage that can lead to serious financial consequences.   Here are four reasons almost every adult in America needs to invest in an umbrella policy.

1.     It Only Takes One Accident
It takes a split second of inattention to cause a car accident and that one accident can impact your financial circumstances for the rest of your life.  You may be one of the people who believe that having car insurance protects you if you are found liable in an accident, and it does, but only to a point.  The problem is, the point at which protection stops is often too low to protect you from the ramifications of a serious accident.  Let’s say you carry 100/300 liability insurance on your car.  This means that you have $100,000 of liability protection for each individual involved in the accident up to $300,000 total.  Medical bills add up fast and it doesn’t take a life-threatening or disabling injury to push your liability past that $100,000 milestone.  This means that if there are serious injuries that result in disability or death of another person, you will not have enough insurance coverage to pay for the resulting lawsuit or settlement.

2.     It Protects Your Future Earnings
In the event you are sued and the judgment or settlement exceeds your insurance coverage, the court can garnish your wages for as long as it takes to pay off the portion of your financial obligation that is not covered by the insurance company.  This means that you could be paying for that one split second for the rest of your life.  This can make it difficult to do the things you want in your life like travel, buy a house, or pay for your children to go to college.

3.     It Protects Your Current Assets
Just as a judgment or settlement can result in a wage garnishment, it can also affect your current assets.  If you own a home, a car, any property, or valuables like antiques or jewelry, you can be made to liquidate or relinquish these assets in order to pay for your financial obligation.  That one split second can cost you everything you have worked for to this point in your life in addition to compromising your financial future.

4.     It Protects Your Investments
Although investments are assets, most people don’t realize that in this context they are the same as everything else you own and can be used to pay for judgments against you.  This means that your 401K, retirement accounts, college savings accounts, and stock portfolio can all be wiped out by that one split second of inattention.

By increasing the limits on your liability coverage with an umbrella policy, you can protect the life you have built and the future you are building.  The right limit for you will depend on what your net worth is, how much you make a year, your age, and other factors.  Your insurance agent can help you decide if a $1M umbrella policy is adequate for your needs or if you need to purchase a higher limit.

 

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