May 2012


Do you know what questions to ask when buying your auto insurance policy? (image via public domain image)

Whether you are buying car insurance for the first time or shopping around for the best possible renewal price, understanding the basics of purchasing auto insurance is the key to getting the right coverage at the right price.  Here are some of the factors to consider when you are buying car insurance.

State Requirements

Unless you live in New Hampshire, you are required to have car insurance or prove your ability to cover a certain amount of liability losses in order to drive a car.  However, each state has different requirements around how much insurance drivers must carry.  Make sure you understand your state’s requirements before you start shopping around.

Your Needs

The amount of insurance the state requires is one thing, but it may not be enough insurance to meet your needs.  The liability coverage within your auto policy is there to protect you from losses incurred if you are at fault in an accident.  If you have liability coverage that is 50,000/100,000/50,000, the policy will cover a maximum of $50,000 per person who is injured in the other vehicle up to $100,000 total.  It will also cover up to $50,000 in property damage to the other vehicle.

What most people don’t consider is that any liability over that limit is your responsibility.  If you cause an accident that results moderately serious injuries to 4 people, you may not have enough coverage to pay for their losses.  If someone is seriously injured, it is very unlikely that $100,000 will be enough to pay for medical expenses, lost wages, long term disability, etc.  If the accident involves two other cars that are worth $30,000 each, you won’t have enough coverage to take care of those losses.

In the event that you are responsible for damages over and above what your policy will cover, your assets can be seized and your wages can be garnished in order to pay off the difference.  For this reason alone, it is important to understand your policy limits and purchase a policy that protects you now and in the future.

Rate Factors

Insurance rates are based on actuarial analysis and statistics and every company does this kind of pricing differently using different models.  This means prices can vary dramatically between companies.  It also means that your individual rate depends on many factors that change how you fit into the insurance company’s model.  Things like your age and the age of the other driver’s on your policy, where you park the car on the policy, the type of car, and the experience level of all drivers can cause big differences in your rates.  Your driving record also plays an important role in determining the amount you will pay for coverage.

Coverage’s

The cost of your policy will also be largely dependent on the coverage you choose.  Most states require a certain amount of liability coverage because it protects other people, but collision and comprehensive coverage’s are not usually mandated.  These types of coverage protect you from loss to your own property and will increase the cost of your policy.  The same is true for uninsured/underinsured motorist coverage.

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Do you have an adequate amount of life insurance? (image via Tetra Pak on Flickr)

1.    Your life insurance needs are as unique as you are.

There is no such thing as a one size fits all life insurance policy which is one reason it can take longer to get a life insurance policy in place.  The key to achieving your life insurance goals is to know what you are trying to achieve and then buy a policy or policies that allow you to achieve them.

2.     The life insurance you get through your employer may not be sufficient.

Many people have a basic life insurance policy through their employer and assume that this is all they need to do from a life insurance perspective.  Unfortunately, if that policy doesn’t match your needs, you may not have the coverage you need.

3.     Relying solely on employer offered life insurance may leave you with no coverage.

Even if your employer offered coverage meets your needs, if you leave your job or lose your job, you may find yourself without any coverage.  The older you get, the more your life insurance premiums will be if you purchase a new policy and if you get a serious illness, you may not be able to get coverage at all.

4.     The insurance you need will change over the course of your life.

The life insurance you need when you have small children and a mortgage is very different than what you will need when you are an empty nester on the verge of retirement.

5.     Match your policy to your needs.

The amount of insurance you need changes as you move through your life.  This is why it is important to match the amount of coverage you have to your needs.  A mixture of whole and term policies can enable you to vary the amount of coverage you need over your lifetime.

6.     Tell the truth on your application. 

You will be required to undergo some kind of medical evaluation in order to obtain most life insurance policies.  If you are not up front on your application, it may cost you your coverage right away or compromise your beneficiary’s ability to collect.

7.     Your premium will depend on your health at the time of purchase. 

The amount of your premium will depend on several factors, one of which is your health at the time of your application.  Medical conditions like high blood pressure or high cholesterol can increase your premium, even if they are controlled with medication.

8.     It saves to purchase your policies when you are young and in good health.

The amount you pay for a life insurance policy is generally set for the life of the policy when you purchase the policy, no matter how many years you have the policy.  This is one reason that it makes sense to purchase coverage when you are younger rather than waiting until you feel like you can afford it.

9.     Understand the policy terms.

In order to compare policies from different companies or even within the same company, you need to read through and understand the terms of the policy.  You also need to understand if there are any conditions so that you don’t inadvertently do anything that compromises your coverage.

10.  Shop around for the right policy at the right price.

Different companies have different offerings and use different pricing models.  You may be paying for this policy for 30 years or more and it makes sense to make sure you are getting the best price for the coverage you need.

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Commercial Auto Policy

Does your job constitute your needing a Commercial Auto Policy? (Image via Can ‘o’ Rye on Flickr)

Do you need a Commercial Auto Policy? This is a question many small business owners ask themselves, their friends, and hopefully their insurance agents.  There is a common misconception that your personal auto policy will cover any losses incurred while driving for the business if you are driving your personal automobile which is covered under your personal auto policy.  This makes a certain kind of sense on the surface.  In essence, you are buying two insurance policies to cover the same exact circumstance, you, driving your car.

Commercial vs. Personal

The main difference between the two types of coverage is how you are using the car.  If you are only using it to drive your family around or to commute to your job, you only need a personal auto policy.  This is true in almost every case, although there are some circumstances where the type of vehicle you own may require you to purchase a commercial auto policy regardless of whether or not you are using it for commercial purposes.  If, however, you are using your vehicle for business activities, you likely need some type of commercial coverage since the majority of personal auto policies exclude losses resulting from business activity.

What Constitutes Business Activity?

This can be a complex question, especially for small business owners.  If you drive your son to school on the way to an appointment with a client, it isn’t always clear which part of the trip is business from an insurance coverage perspective.  The best way to understand what is business activity and what is not is to ask your insurance agent.  If in doubt, assume that anything related to your business requires commercial coverage.

There are some things you can ask yourself that may help you determine if the driving you do would fall under commercial or business activity.

  • Do you deliver anything to customers or clients using your car?  Things like pizza, newspapers, Avon, or any other product that you put in your car and then transport for delivery can be considered commercial activity.
  • Who is driving the vehicle?  If you allow employees or contract workers to drive the car for business purposes, this won’t usually be covered by your personal policy.  Even if you are the only driver, there is a good chance that commercial coverage will be required.
  • Who is riding in the vehicle? If you are using the vehicle to transport other people and getting paid for it, you absolutely need commercial coverage.
  • What percentage of use is personal and what percentage is commercial?  Although this doesn’t always factor into coverage determinations, some insurance companies require commercial coverage if the vehicle is being used primarily for business use.  Check with your agent to see if this applies to your coverage.

The bottom line is that most small businesses cannot afford to take the chance that they have an accident or become liable for damage caused by their car that their personal auto policy carrier refuses to cover.  If there is a question in your mind about whether or not you need to purchase a commercial auto policy, the odds are that you do and you should contact your insurance agent as soon as possible.

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Homeowners Insurance

Is your homeowners policy enough to cover you in the event of a loss? (Image via PrimeImageMedia.com on Flickr)

There is no question that the volatility in the housing market in recent years has affected the price and value of almost every house in America.   Most homeowner’s have seen the value of their home drop, rebound a little, and then drop some more.   People everywhere are focused on keeping their homes or refinancing their homes to get more affordable rates.  All this change means it is time to take a look at your homeowner’s insurance in order to make sure you still have adequate coverage.  Many homeowners think their homeowner’s policy covers what they are expecting it to cover without really understanding how the kinds of economic changes we are currently experiencing can impact their coverage.  Take a few minutes to walk through your policy and make sure it still offers the coverage you need.

Here are some of the key components you need to look for to ensure you are covered no matter what comes your way.

1.     Replacement Value

Although the policy limits for your homeowner’s insurance policy are based on the estimated value of your home, the coverage you need is how much it will cost to rebuild or replace your home.  This means that a significant drop in your home’s value doesn’t necessarily equate to a decrease in the coverage you need.  It could be a big mistake to decrease your policy limit based on a lower assessment or appraisal.

Economic turmoil and inflation have taken their toll on everything we buy and building supplies are no exception.    This means that even though the value of your house has decreased, the costs to rebuild it have not.  In fact, it is very likely that the cost to rebuild your home is actually higher than it was as little as two years ago.  Check with your insurance agent to make sure your policy limit reflects a current estimate of replacement cost.

It is also a good idea to review the policy limit for replacing your personal property which is based on a percentage of the overall replacement value.  If your personal property would cost more to replace than the current limit, talk to your agent about increasing the limit or scheduling high dollar items to ensure they are covered.

2.     Improvements and Additions

If you have made significant home improvements or added an addition, the value of your home has changed and your insurance may need to change to reflect the increase.  Things like adding a bathroom, changing to a more eco-friendly heating system, or replacing the roof may increase the value of your home but more importantly, they may increase the replacement cost of your home.  Make sure you notify your insurance agent of these kinds of changes and verify that the policy limit will be enough to cover the improvements.

In order to make sure you have the protection you need, you need to review and update your homeowner’s policy regularly.  Remember that the policy limits need to cover the cost of rebuilding your home and replacing your possessions and therefore need to be based on current cost not retail value.  You don’t need to change your limits based on changes in the value of your house, but if building supplies and construction costs continue to rise, that may mean you need to make a change to your policy limits.

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Renters

Have you ever wondered why you need renters insurance? Read more to find out. (Image via Intermedia Images on Flickr)

If you are like the majority of renters in the U.S., you do not currently have a renter’s insurance policy.  In fact, the Insurance Information Institute claims that only about 43% of those who rent their living space have an insurance policy protecting their property.   The reasons so many renters are uninsured vary but there are some common themes.  Some have never really thought about needing a policy that will cover the loss of their property if the place they live is damaged.  Others assume the cost is too high and decide to take the risk rather than obtain a policy.  Another group believes that the insurance their landlord carries on the property also covers their belongings as long as they are in the rental property.

The problem with all of these reasons is that they leave renters exposed to the loss of all their property and no avenue for recovery.  Let’s look at why each reason trades short sighted thinking or misinformation for security.

1.     I Never Really Thought About It

If you are a first time renter, you may fall into this category.  Unfortunately, life doesn’t come with an instruction manual and unless someone points the need for this type of coverage out, you may not realize this is something you need.  Many people never really think about what will happen if there is a fire or a flood and they suddenly lose everything they own.  Many people assume there is some government agency or charitable organization that will help them rebuild their life.  While this may be true, they will help make sure you have clothes on your back, food in your stomach, and a roof over your head but they aren’t going to buy you a new computer, replace your designer wardrobe, or pay to repair the damage to your antique armoire.  If you live in a rental property and do not have insurance to cover your property, call your insurance agent tomorrow for a quote.  Don’t wait until you have to deal with it to do something about it.

2.    I Can’t Afford It

Renter’s insurance generally costs less than $20/month.  If there is a fire and you cannot live in your apartment, are you going to find a hotel that will cost you less than $20/month?  Replacing all your belongings, even if you don’t own anything you consider valuable, is going to cost far more than $20 or $200 or even $2000, which would cover the cost of a renter’s insurance policy for 10 years.  This is an excellent example of being penny wise and pound foolish.

3.    My Landlord has Insurance

While this is very likely to be true it is also very likely that your landlord’s coverage offers you no protection.  Most landlords have a policy that covers the structure and any property they have in the home like appliances.  It doesn’t cover your property or provide you with any liability protection if someone sues you.  If there is a natural disaster like a hurricane or a flood, you will have to bear the full cost of replacing any of your possessions that are damaged or destroyed unless you have a renter’s insurance policy protecting you.

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Liquor

Does your business need Liquor Liability Coverage? (Image via AjDele Photography on Flickr)

Liquor liability coverage is a unique type of insurance that is only needed when a business has some involvement with alcohol.  While it is extremely important that those businesses that need liquor liability coverage have it in place, many who need it don’t have it.  Some business owners forgo coverage because of the expense, but in many cases, businesses do not have coverage because they don’t know they need it, think it is already provided as part of another policy, or don’t understand the implications of not having it.

What is Liquor Liability Coverage?

This is a type of insurance purchased by businesses that offers protection from loss or damage resulting from the actions of a customer that is intoxicated.  It covers property damage and liability claims for injuries to others and for self-inflicted injuries by the drunken customer.  It can be sold as add-on coverage to a commercial general liability policy or as a separate policy all together.

One of the most common misconceptions that open business owners to huge losses is that they are not responsible for the actions of their customers including those who are intoxicated.  Unfortunately, this is not the case.  Another common misconception is that this type of liability is covered under a general liability policy.  Most business liability insurance policies specifically exclude any liability resulting from this kind of loss.

Who Needs It?

Any business that is involved in the manufacture, sale, or service of alcohol or who assists in the purchase or use of alcohol generally needs this kind of coverage.  If there is a possibility that a customer, client, or patron could become intoxicated using alcohol that a business made it possible for them to obtain, that business needs this kind of coverage.  Courts have ruled time and again that purveyors of alcohol can be held liable for the actions of their intoxicated customers which means the only way to protect the business is to have the right coverage.

What Does it Cover?

A Liquor Liability policy will generally offer the following types of coverage:

  • Liability – This coverage protects the business from losses resulting from a lawsuit filed by someone injured by the intoxicated customer.  A common example is a lawsuit resulting from a drunk driving accident.  This also covers lawsuits filed by the customer for injuries or damage they caused to themselves while they were intoxicated.
  • Property – This covers property damage caused by the intoxicated customer.
  • Assault and Battery – This covers your liability to injuries and damages caused by intoxicated patrons fighting.

What to Look for in a Policy?

When purchasing this type of coverage, make sure it includes the following:

  • Defense Costs – Make sure the policy you purchase doesn’t exclude this or decrease your limit to cover legal defense costs.
  • Employees – Make sure the policy does not exclude employees.
  • Mental Damages – Make sure that mental damages like mental anguish and stress are included in your policy.

Businesses that are involved in the creation, sale, and distribution of liquor and alcohol need to take steps to protect themselves from liability claims resulting from intoxicated patrons.  Purchasing a liquor liability policy is one of the best steps a business can take to secure this kind of protection.

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Employees

Good group benefits can help you land a great employee. (Image via Inkyhack on Flickr)

There are many factors that contribute to having a happy, productive workforce.  Human resources experts could give you a list a mile long of why things like company culture, employee appreciation, and providing meaningful work for a living wage would be near the top of that list of factors.  Group benefits, the ones that are optional, not the ones required by law, would also be up near the top of the list.  Group coverage often fulfills more than one need for your employees and can be a powerful way to express the company’s gratitude and appreciation for all the work employees do.  Providing these kinds of benefits can even be the thing that sets your company apart in the eyes of potential employees.

Here are 5 reasons small business owners should consider adding group benefits for their employees.

1.     Providing Peace of Mind

Two of the most common group benefits are life insurance and disability insurance, both of which protect the financial future of the employee and/or their family.  With these kinds of group benefits, employees can feel confident in their ability to support their family in trying times.

2.     Cost Control

The group nature of the benefits helps keep the costs down which means the company can offer things like health insurance or dental coverage because they are affordable.  It is also common practice to require that employees contribute toward the cost of many group benefits so that the costs are shared.  When you add in cost savings you may achieve by reducing turnover, benefits make good financial sense for most businesses.

3.     Tailored Solutions

Most insurance companies that provide this type of coverage will allow you to tailor the type of benefits you offer to meet the specific needs of your employees.  Additionally, there are other things, like subsidized gym memberships, which can be counted under the group benefits umbrella that are not related to or provided by an insurance company.

4.     Benefits Support

Many insurance programs offer support for their group benefits product lines that can provide real benefit to the business owner or manager.  When a group benefits package comes with this kind of support, it alleviates the need for HR staff or business owners to take time away from other things in order to answer questions.

5.     Recruiting and Employee Retention

One of the best reasons to offer group benefits is because benefits make employees happy and happy employees don’t leave for other opportunities.   The cost to the company of finding, hiring, and training a new person is likely much higher than the company’s contribution to the cost of benefits for that role.  If you are looking to attract the best and brightest people, you need to offer a work environment that doesn’t just compare with the completion, but surpasses it.  Group benefits can be the thing that turns your job offer into a candidate’s best offer.

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