This is a guest post by Gordon Insurance Agency, a Renaissance Alliance member agency. It is a post that was previously featured on the Agency’s Personal Insurance Blog.
Insurance can be puzzling- the more you know, the better. As surprising as this may sound, insurance is not entirely about the price. Thus, we’ve created a list of things-to-know about insurance for your convenience.
1. Amount of coverage
What do you want to protect? That’s the overall question for deciding the amount of coverage you need. The best advice we can offer you is for you to think about all the things that could potentially happen. Or consult a professional agent who will ask lots of questions to uncover areas you need to pay special attention. Although you might want to push these thoughts to the side (i.e. “that could never happen to me!”), someone has to think of these situations. Nobody plans for a car accident or a guest being injured at his/her house, yet these sorts of things happen all the time. A good way to cover a lot of these is by running down a prepared list such as this checklist for your homeowners insurance.
2. Risk level
The amount of risk you take sometimes depends on one aspect of your life: money. If you have available money, then choosing a policy with high deductibles is probably the best option for you. Remember, “Insure only what you can’t afford to lose.”
Obviously, this part of our list is also going to discuss risk. Some policies cover more than other policies do, so be informed on what risks you can afford to take, as well as what is the cost of transferring that risk (via insurance)? An example of this is would be a dog with a biting history. The only company that will offer coverage after a dog has bitten someone (resulting in an insurance claim) is the Massachusetts Fair Plan (MPIUA). But they might do so with a $25,000 limit of liability for dog bites. So you have to ask, is the dog worth that much to me that if he/she bites someone and it results in a $100,000 claim (we’ve had one here that exceeded that, and not even from a dog ‘on the list’), are you prepared to pony up the next $75,000? Make sure you know what is covered on your policy, and be careful with what chances you take where insurance doesn’t go.
3. Insurance company
People often assume that the insurance company will be able to handle anything and everything- you should never assume. If the company goes under, or even if the company stays around but has poor finances, then you won’t get what you need. The best way to make sure that your company will be able to provide for you is to check a credit rating agency. We recommend A.M. Best Company for this. Other credit rating agencies include Fitch Ratings and Standard & Poor’s.
Everybody loves saving money; discounts can be available all around you, and you might not even know it! For a list of most prevalent (MA) auto insurance discounts, click our video and list. For homeowners discounts, visit our short video on homeowners discounts here. Account discounts, where you have two lines or more (such as home and auto), are often the most compelling.
Always ask your agent questions, he/she is there is serve YOU.
5. When do I need to look at new insurance?
Certain life changes will cause you to look at new insurance. These changes include:
- Starting a new business
- Buying an additional home
- Adding a driver to the auto policy
- Changing jobs (especially if you leave a rich benefits plan for a bare bones benefits employer)
- Volunteer work (such as serving on the board of a non-profit organization)
This list just helps prove a very important point: insurance is not only about the price. For a few extra dollars, you can have all sorts of things protected. Think back to the dog example- imagine how expensive it would be to defend a bad dog bite without insurance! When it comes to insurance, price is important, but it’s not the only thing that matters.
In this internet age of immediate access to wholesale prices and discount merchandise, many consumers may be tempted to buy insurance the same way they buy music: immediately downloaded from the source. While with some purchases it can make sense to cut out the middleman, so to speak, insurance is not the same as a new mattress or a DVD. Would you dispense with a lawyer at a real estate closing? What if you’d been unjustly arrested? Expert advice is important and your independent insurance agent can provide that, along with a layer of protection you can’t get in any other way. We’ve spoken about the value of local, independent insurance agents before, but it’s always worth rethinking.
Most people realize that insurance can be purchased in three separate ways:
- Directly, from an agent of the insurance company
- From an internet or telephone agent who may represent several different companies
- Through an independent insurance agent in your community.
Purchasing directly from one insurance company means that you’re not getting any comparison to other policies that might serve you better. It’s not in the company’s best interest to steer you to another company, after all.
Internet and phone agents may represent several different companies, but they are not members of your community. Not only does this mean that they simply may not be aware of specific state and local conditions and laws, it also means that they are just not as accountable as someone you can visit at any time. If you’re purchasing insurance directly, you’re also directly responsible for the level of coverage you may or may not have. That can mean that you’re not covered when it counts, because no one can be an expert in every field.
A local independent insurance agent is an expert and is your representative. They are licensed professionals who know local conditions intimately. They can recommend the coverage that will keep you, your family and your property safe. It’s in their best interest to keep you happy and they can shop around several different companies to find the policies to fit you best. When your life changes, they can help you change your insurance policies to reflect your new circumstances. Your agent knows you and will recommend policies that suit your lifestyle. All too often, people shop for price and sometimes unknowingly sacrifice coverage, a point this writer for Insurance Agents magazine makes. How good is it to save a few dollars if you risk a loss that costs you thousands?
Your insurance agent can also help when you need to file a claim. They act as your agent and not for the company. That can offer a lot of peace of mind at a time when you may need it most.
Don’t have an agent? Here’s a list of New England independent insurance agencies.
While you most likely have insurance on your home and car — and you do, don’t you? — you may not be completely covered. If you were the target of a multi-million dollar liability lawsuit, what would happen when your insurance coverage was exhausted? Could you lose your home and all your assets? The answer to the last question, sadly, is yes and that is the point of umbrella insurance policies – they kick in after traditional insurance policies have been exhausted. An umbrella insurance policy helps to protect you from being completely wiped out even if you get sued for an automobile crash or an accident at your home that costs more than your liability insurance company is willing to pay.
Traditionally, these were the choice of wealthy individuals and families, but umbrella policies are gaining in consumer popularity and are increasingly being purchased by the middle class. In this litigious society, a nip from the family hound or a fall on the family trampoline can lead to enormous liability lawsuits that can quickly exhaust even comprehensive insurance policies.
Who should have umbrella coverage? Some experts recommend that anyone with dogs, teenage drivers in the family or high risk yet attractive recreational facilities like pools, trampolines or ATVs should consider an umbrella policy. This handy worksheet from Smart Money (PDF) can help you figure out if an umbrella policy is right for you. We recommend that you talk to your independent insurance agent in the context of your total coverage needs, which should be reassessed periodically. Your agent can help you assess whether such a policy would us right for you and can find the right insurance policy, if so. Sometimes, you can even cover the cost of an umbrella policy simply by raising the deductible on your home or auto policies.
According to the Insurance Information Institute, umbrella policies are typically sold in $1 million increments and cost on average between $150 to $300 a year for the first $1 million in additional coverage. The next million will typically cost about $75 annually and about $50 for every million after that. Most insurance companies will not write one unless you already carry liability insurance of about $250,000 on your auto policy and $300,000 of liability insurance on your homeowners policy.
Just like knowing that you always have an umbrella in the car on a rainy day, an umbrella insurance policy can give you extra peace of mind. In this uncertain world, that might be worth a couple hundred dollars a year.
The U.S. Small Business Administration reports that there are 29.6 million small businesses in the U.S. of which 52% are home-based — and this trend is only expected to increase, according to Network Solutions Small Business Index research. We even have a new word for this vital rising demographic: “homepreneurs” — but some home-based small business owners make the dangerous assumption that their homeowners insurance will cover their business needs. In fact, it’s critical to consult with your insurance rep to understand the limits of your homeowner’s insurance in regard to your home business.
For example, many homeowners policies provide a maximum of $2,500 coverage for business equipment (computers, fax machines, etc.) in the home — while your actual investment may far exceed this figure, so you may need business property insurance to adequately cover equipment and any inventory. Additionally, depending on the nature of your business, you may require liability insurance: “If you are sued because of your home-based business activities — the company that hired you as a consultant believes your advice was dead wrong; the computer equipment you “fixed” doesn’t work; the cookies you baked made someone ill — your homeowners policy won’t protect you.”
Finally, you may want to insure against loss of income in the case of fire or natural disaster.
If you are like millions of other home entrepreneurs, your business is too important to risk with sup-optimal coverage; here are some items to consider when consulting with your agent:
- Equipment and furniture
- Business items belonging to others in your care
- Accounts receivable
- Important records, documents and reference material
- Electronic data
- Liability for personal injury, products, services and contractual obligations.
- Auto — be sure your existing policy covers all business uses
And you may have special considerations for disability, life, and health insurance. Your agent can help tailor your coverage to your specific needs, and protect your important home business. See also, our Small Business Insurance Tool Kit.
Two common insurance questions we hear: “What’s an umbrella policy?” and “Do I need one?”
An umbrella policy is an added layer of liability insurance protection that goes above and beyond your policy’s stated coverage limits. This coverage is designed to kick in once any other coverage has been exhausted. Umbrella policies can extend your liability coverage for personal policies, such as your homeowners and auto, and they can also add a layer of liability protection for commercial and business policies. In the commercial arena, umbrella policies may also be referred to as “umbrella liability” or “excess liability” policies.
Your standard insurance policies should provide adequate liability coverage for most situations that would arise, but in today’s lawsuit-happy age, an umbrella policy can provide an added layer of protection. Should a problem arise, this secondary coverage would pick up where your primary coverage stops.
The Insurance Information Institute talks more about personal umbrella coverage: Should I purchase an umbrella liability policy?
Financial Web offers more on business liability umbrella insurance: Commercial Umbrella Insurance: is it indispensable for your business?
Just a reminder that this is only a brief informational overview. As with any insurance issue, coverage specifics will vary by policy and by insurer. If you think that you or your business might benefit by umbrella coverage, pick up the phone and have a talk with your independent agent. Be it personal or commercial matters, your agent can help you to plan the best combination of coverages to meet your specific and unique needs, and can also shop around to find the best available coverage at the best price.