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INSURANCE FAQ
Why do I need to buy insurance? - Protects
your assets against attachment as a result of a court award.
- Provides
for cost of defense when you are sued.
- Allows you to purchase
such high value items as a car or a home by insuring the collateral on behalf of the financial institution that lent you the
money.
- Provides financial security for your family
in the event of your death.
- Provides for the health care of you
and your family through systematic payments.
- Allows you to save for
retirement while deferring interest payments to a time when your income is lower, thus reducing your tax payments.
- Allows you to remain financially solvent when you're ill and
can't work.
What factors affect the insurance premiums I pay? - Claims activity including such costs as medical care, auto
body repair, construction, legal defense, jury awards, claims adjustment, and insurance fraud.
- Overhead including rent, utilities, employee salaries and benefits, office supplies, equipment,
and furniture.
- Investment income.
AUTO
INSURANCE
How does where I live affect my premium?
Where you
keep your car directly affects your chances of having an accident or becoming a victim of theft or vandalism. The likelihood
of encountering these problems increases in larger, more densely populated cities, while such incidents remain relatively
low in rural areas. Additionally, the time and efficiency of police response and law enforcement,
local road and traffic conditions, and the quality of local medical services can affect regional insurance rates. Some insurers
even factor in the litigation rates in a given area (how many lawsuits are filed, go to trial, out of court settlements, and
their amounts).
Do all states require some kind of Liability insurance?
No. Although not every state requires Auto insurance, some have “financial responsibility” laws mandating
all drivers to be able to pay for any damage or injury they might cause. However, Liability insurance is still the best way
for you to meet your state's financial responsibility requirements. Auto Insurnace in the State of New Jersey is Mandatory.By law, all states offer UM and UIM policies, including no-fault states. In fact, some states require
all motorists to carry this coverage in order to gain protection from inadequate insurance coverage of other drivers.
How do I keep my insurance company from canceling my policy? Besides maintaining
a clean driving record, consider investing in special safety and security features for your car. If you've been in an
accident, consider taking a defensive driving course.
What happens when I loan
my car to someone? Is that person covered by my policy? Am I still covered? Yes. Liability
and coverage for Physical Damage (i.e. Comprehensive and Collision) always follow your car. Plus, if the driver of your car
is insured, his/her policy will also be available to cover the cost of damages and injuries. The same
rules apply when you borrow someone else's vehicle; your own insurance follows you no matter whose car you're driving.
But the vehicle owner's policy is the key coverage in the event of an accident.
Am
I covered for natural disasters or “Acts of God”? Comprehensive insurance, which covers you for fire and theft,
generally covers you against damage by flood, earthquake, hail, and other natural perils, except when your car is overturned
(which is technically considered a collision). If you have specific concerns about the safety of your vehicle in natural disasters,
contact us for information on catastrophic coverage. How can I challenge my insurers if they refuse to cover a claim? Usually, insurers that refuse to cover a claim have a strong
legal reason for doing so — even if you disagree. First, contact us if you feel you're being treated unfairly. Your
agent is your strongest advocate in insurance matters. But if it's a legal problem, you might have to hire a lawyer.
HOMEOWNERS INSURANCE
Who
decides on the type of insurance, the mortgage company or me?
You do. The mortgage company
collects a set amount from you each month in order to protect their investment. This money is put in escrow and covers your
insurance and taxes. However, the policy is still yours and you might select the insurance you feel offers the best coverage
at the best rates. What exactly does a Homeowners policy cover? “Exact” coverage is impossible to define because there are different policies and about
900 insurance companies writing Property/Casualty business in the United States. However, 80% of Homeowners policies are based
on a standard form. All Homeowners policies cover two important areas: Property and Liability. Property
insurance covers your structures and possessions. Personal Liability, as its name implies, means you're legally obligated
to pay money to another person for actions caused by you, your family, or your property. That liability extends to medical
payments to others for injuries caused by you or your family.
Are floods, earthquakes, and other natural disasters covered?
Most catastrophes are covered. Flood
and earthquake damage, however, are not covered by a standard policy and both perils are more common than many people
realize. We can advise you on such normally excluded conditions as floods and earthquakes.
Are there exclusions I should know about?
Exclusions listed
and defined in your policy might include neglect, intentional loss, “earth movement,” general power failure, and
even damage caused by war. If you fail to take care of your property (e.g., a leaky roof), you might not be covered. Obviously,
if you intend to lose an object or damage your property, there's no coverage. One other
exclusion that can be costly is the Ordinance or Law exclusion. Building codes established by governmental bodies that drive
up the cost of rebuilding or repairing after a loss occurs might not be covered by your insurance policy. Thus, if you discover
when replacing damaged property that current law demands higher grade or more expensive materials than those you're replacing,
the new materials might not be covered fully.
RENTERS
INSURANCE
How expensive is renters insurance?
Renters insurance is typically available for as little as $100 a year.
Does my landlord's insurance protect me?
Generally, no. The property owner's insurance covers
the building itself and seldom a tenant's possessions or liability. Clarify this with your landlord before signing a lease.
BUSINESS INSURANCE
I'm just getting my business started. Do I need insurance immediately?
Yes. Your chance of suffering a loss begins with the first day of business. If you suffer a loss and
have no insurance or have improper or insufficient coverage, your insurance agent can do little, if anything, to help you. Also, many states and local jurisdictions require businesses to have insurance to begin operating. And if you rent
space for your business, your landlord probably requires you to obtain adequate insurance.
I don't have any major business assets. Why
do I need insurance?
Every business has some property. When you think about it,
your business is your property. Just like your home and your car, your business needs to be protected from loss, damage, and
liability. In addition, your business is your source of income, so you need protection from the potential loss of that income.
Does
insurance coverage vary for different businesses?
It can. Many small businesses opt for package policies that cover the major Property
and Liability exposures as well as for a loss of income. A common package policy used by many small businesses is called the
Business Owners Policy (BOP). Generally, BOPs provide more complete coverage at a lower price than separate
policies for each type of insurance needed. We can help you decide which policy or policies are right for your business. You
can also purchase additional coverage for perils or conditions otherwise excluded (e.g., flood protection) as endorsements
to a standard policy or as a separate, second policy called a Difference in Conditions (DIC) policy.
We can advise you of the best policy (or policies) to protect you and your business.
Types of Life Insurance Policies
TERM
INSURANCE Term life insurance is
the simplest and least expensive type, as it pays benefits only upon the policy holder's death. With annual renewable
term insurance, the policy holder pays a low premium at first, which increases annually as he or she gets older. With level
term insurance, the premium amount is set for a certain number of years, then increases at the end of each time period. Experts
recommend that people who select term insurance make sure that their policies are convertible, so they can switch to a cash-value
plan later if needed. They also should purchase a guaranteed renewable policy, so that their coverage cannot be terminated
if they have health problems. Term insurance typically works best for younger people with children and limited funds who are
not covered through an employer. This type of policy enables such a person's heirs to cover mortgage and college costs,
estate taxes, and funeral expenses upon his or her death.
WHOLE LIFE INSURANCE With
whole life insurance, the policy holder pays a level premium on an annual basis. The policy usually covers until the end of
the person's life—age 90 or 100. In most cases, the policy holder is overcharged for the premium, and the extra
amount goes into an interest-bearing dividend account known as a cash value account. The individual can use the money in this
account to pay future premiums, or can withdraw it or borrow against it to cover living expenses. With a variable whole life
policy, the individual controls the investments made with his or her cash value account. Selecting certain types of investments,
such as mutual funds, may allow the policy holder to increase the balance in the account significantly. Regardless of the
performance of the investments, however, the amount of the insurance benefit can never drop below its original value. When
choosing a whole life policy, experts note, it is important to analyze the fund's past performance and inquire about commissions
and hidden costs. Although whole life insurance can provide added security upon retirement, it should not be considered a
replacement for retirement savings. In fact, Janecek revealed that, on the average, whole life policy holders only yielded
between 2 and 4.5 percent on their investments over a twenty-year period.
UNIVERSAL LIFE INSURANCE Universal
life insurance was introduced in the 1980s as a higher-interest alternative to whole life insurance. Universal life premiums
are based not only on the cost of the insurance, but also on the interest rate offered on investments. Still, they are usually
less expensive than whole life policies. Universal life policies provide individuals with a wider array of investment choices
and higher projected interest rates. They are essentially similar to a term policy with a fixed rate of interest guaranteed
for a year at a time.
CURRENT ASSUMPTION LIFE INSURANCE Current
assumption life insurance features a fixed annual premium for the duration of the plan. This type of policy pays a set interest
rate on premiums received, less the actual cost of the insurance. They can be useful as a tax-deferred investment vehicle,
since they usually pay 2 to 4 percent more than banks. Policy holders may elect to overpay their premiums early in the plan
period to accumulate cash value. They can withdraw or borrow from the funds later for any purpose, including retirement income,
or can use the cash value to pay the premiums for the remainder of the plan period.
RIDERS AND OPTION
Most
types of life insurance policies give individuals the opportunity to add optional coverage, or riders. One popular option
is accelerated benefits (also called living benefits), which pays up to 25 percent of the policy value to the holder prior
to their death if they are struck by a serious illness. Another option, known as a waiver of premium, allows an individual
to continue coverage without paying premiums if he or she becomes disabled. Many policies also provide an accidental death
and dismemberment option, which pays twice the amount of the policy if the insured dies or loses the use of limbs as a result
of an accident.
KEY PERSON PROTECTION
Small businesses tend to depend on a few
key people, some of whom are likely to be owners or partners, to keep operations running smoothly. Even though it is unpleasant
to think about the possibility of a key employee becoming disabled or dying, it is important to prepare so that the business
may survive and the tax implications may be minimized. In the case of a partnership, the business is formally dissolved when
one partner dies. In the case of a corporation, the death of a major stockholder can throw the business into disarray. In
the absence of a specific agreement, the person's estate or heirs may choose to vote the shares or sell them. This uncertainty
could undermine the company's management, impair its credit, cause the flight of customers, and damage employee morale.Life insurance can help small businesses protect themselves against the
loss of a key person by providing a source of income to keep business running in his or her absence. Partnership insurance
basically involves each partner acting as beneficiary of a life insurance policy taken on the other partner. In this way,
the surviving partner is protected against a financial loss when the business ends. Similarly, corporate plans can ensure
the continuity of the business under the same management, and possibly fund a repurchase of stock, if a major stockholder
dies. Although life insurance is not tax deductible when the business is named as beneficiary, the business may deduct premium
costs if a partner or owner is the beneficiary.
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