Managing Insurance Payments in a Difficult Economy

by Alan Long of Eldredge & Lumpkin

The difficult economy is not just visible in the headlines but a reality that most of us face daily. Over the last several months we have seen many customers lose their jobs, retirees watch their income from stocks and pensions disappear and contractors lose jobs. These have had a very decided trickle down effect and, as a result, many of our clients are having difficulty keeping current on their premium payments.
Insurance assumes an unwanted connotation in times like these. It is an intangible that can prompt the reaction, why put my dwindling assets towards something that may not ever be used? Unfortunately, driving a car requires insurance, carrying a mortgage requires insurance and success in bidding for jobs requires insurance. So there is a need to find a palatable way to manage these payments. This is where your insurance agent will help.
A policy review with your agency’s customer service representative (CSR) will help determine if you have the most cost-appropriate coverage to fit your individual needs. The key is finding ways to make it work for you.
When you speak with your CSR before a cancellation occurs, you can actually save money and grief. Here’s why:

  • Each time you receive an insurance cancellation notice (even if you get your payment in before it is actually canceled) the company charges a late fee. These range from $20-$35.
  • If your policy is canceled because of non-payment – even for the first time – most companies will require a replacement policy to be paid in full up front.
  • If your policy is canceled and has to be rewritten, you will lose all grandfathered benefits; these may include preferred credits, loyalty credits and pre-insurance exemption status.
  • Losing a policy can be costly to the Cape Cod homeowner. We have seen companies decline to renew homeowner policies that have received too many cancellation notices.
  • Even though Massachusetts does not allow credit ratings to be used as a factor in setting insurance rates, the number of issued cancellations can affect the rate you receive.
  • Cancellations will affect your credit rating and have a ripple effect on your general credit standing.

Find easier ways to pay your bills. Getting organized can take away some of the stress and avoid late fees. Here are some suggestions:

  • Keep a list of your policies and their effective dates. Renewed policies require at least a down payment by the effective date.
  • Get a list of your installment dates. Most companies charge a fee from $4-$8 per installment. If you pay in 10 installments, you could be paying an extra $80 per year in installment payments for your insurance.
  • Pay the bill at a time of year when payment is easier to manage.
  • Pay bills online. Using the mail could result in late payments.Companies will consider your premium paid on the date they receive it at their place of business; afterward it is considered “late”.

Be sure to communicate with your agent and company. That’s the best way to save money and time on your insurance premium payments.

Survey: Americans flunking insurance

Most Americans flunk when it comes to basic insurance knowledge, according to a recent survey conducted for the National Association of Insurance Commissioners (NAIC). Despite this, about 56% of the survey respondents felt “very confident” about making insurance decisions. In a 10-question insurance quiz, the average score was a dismal 40%.
But wait – before you learn more about the results of the survey, why not take the insurance IQ Test yourself and see how you fare?
Having a basic knowledge of insurance can mean the difference between overpaying for coverage and saving money. Misconceptions can also mean that a buyer doesn’t secure adequate coverage to protect them in the event of a loss. For example, only 4 in 10 respondents knew that auto insurance doesn’t automatically cover a rental car and only 14% were aware of the amount of life insurance that is typically recommended.
Given the test results, it is fortunate to learn that 61% of the respondents said that they use an insurance agency when purchasing insurance outside of employment. And we were happy to hear that 80% of the respondents said they had a good relationship with their agent and that 82% trust their agent to help them make the right choices.
Survey results: Executive Summary (PDF)

Why Use an Independent Insurance Agency?

by Joe Harrington, Markham Priest Insurance
For some people it does not matter where they buy their insurance. That decision could be costing them money, service and proper protection. Buying insurance is not like buying gasoline at a gas station. It is an important financial decision in protecting those things that are important to you such as your family, home, autos and business.
Independent agencies differ greatly from direct insurance carriers or the internet based insurance companies. In brief, here are the three ways to buy insurance:
Captive Agents: Insurance agents that sell you the insurance policy of one (1) direct carrier.
Internet Based Agents: Agents who potentially represent multiple insurance carriers, but are unable to provide the best customer service and personal knowledge to properly protect you with your changing needs.
Independent Insurance Agents: Agents who represent an average of six – eight insurance carriers. Independent agents are able to research these carriers to find you the best combination of price, coverage and services to properly protect your assets.
Your Independent Insurance Agent:

  • Is a licensed professional with strong customer and community ties
  • Provides excellent customer service and competitive premiums because your agent can access coverage from multiple insurance carriers
  • Because an independent agency represents multiple carriers, the agent can provide flexibility as your insurance needs change. If your insurance needs no longer match your present insurance carrier, the independent agent can easily transition you to another carrier
  • Assists you when you have a claim
  • Is your consultant, working with you to determine your proper insurance needs
  • Saves you premium by looking at the best combination of price, coverage and service
  • Provides full service by offering a full range of insurance products such as home, renters, condo, auto, business, life and health
  • Knows you by name and not by a policy number. An independent agent treats you like a person

Do I Need Condo Insurance?

by Christian Dexter of Carroll Steele Insurance

I just got off the phone with a potential client who, during our conversation, told me he didn’t have a condo insurance policy because he no longer had a mortgage. I asked why he thought this way and he told me it was no longer necessary because he didn’t have a mortgage and the bank no longer required it. After taking a deep breath out of concern I slowly explained the importance of a Condo Insurance policy whether or not you have a mortgage.

It seems that quite a few people don’t understand what condo insurance provides and as our conversation continued I began to understand why. One reason, at least in this instance there is some confusion about the Condo Associations Master policy and its level of coverage when it comes to condo owners and their condos within the association. The bottom line is some Condo Associations will set up the Condo Association documents to cover loss to the structure as a whole – including the individual condominiums. This means that if there was a total loss, the Condo Association’s Master Insurance policy would cover the cost to rebuild the entire structure including all the condominiums within it. However, not all Condo Association documents are written this way and sometimes it is up to each individual condo owner to cover their condo unit from loss. This is a very important factor that all condo owners need to be aware of and something I’ll talk further about later in this article.

Condo Insurance coverage – Liability coverage
Before we even begin dissecting what a Condo Association master policy may or may not cover, let me first make the point that you will always need a condo insurance policy to provide you personal liability coverage. There are three main points of coverage in a condo policy: dwelling (covers the inner structure of your condo unit), personal property and personal liability. Sometimes a Condo Association Master Insurance policy will provide dwelling coverage. Personal property and personal liability, however, can only be covered under a personal condo insurance policy.

Personal Liability is financial protection for actions by you that might harm another. For example, let’s say you have a party in your home and a friend of a friend (we assume a friend would never sue) trips over your coffee table and tumbles down the stairs. A few days later you receive a letter from his attorney stating he wants to sue and is asking for $100,000 to cover his injuries. If you have a condo insurance policy with at least $100,000 in personal liability coverage you are financially protected. However, without a condo policy you are on your own and will continue to be at risk and vulnerable when ever someone walks into your condo.

Condo Insurance Coverage – Personal Property
Personal property covers all your personal items. A washer and dryer, clothes, computers, television and your beloved Wii would all be covered under personal property insurance under a condo insurance policy. Other things like jewelry and money is also covered, but with limited coverage amounts for each. When I get people to actually think about it most are amazed how much personal property they have and what it would cost to replace it. On average, most people carry $25,000 to $50,000 of personal property coverage, however, everyone’s situation is different and it’s recommended to do an assessment of your personal property to determine a level of coverage.

Condo Insurance Coverage – Dwelling
A Condo Insurance policy also provides coverage for damage to your condo from covered perils such as a fire. So let’s say you had a terrible kitchen fire and your cabinets and appliances were completely destroyed. If you had dwelling coverage on your condo policy then this coverage would pay to restore your kitchen – assuming you carried enough coverage. Determining the right level of dwelling coverage depends on several factors. For a rough estimate of how much dwelling coverage you need estimate anywhere between $100 and $300 a square foot. The amount per square foot depends on where you live and the cost of construction. In Massachusetts, I usually use $200 per square foot for average and $250 per square foot if the condo has a custom kitchen or other above average amenities. I like to play it safe so I over estimate when it comes to condo insurance. The premiums are relatively lower compared to home insurance so it’s financially feasible to be safer than sorry.

Isn’t My Condo Covered Under The Condo Associations Master Policy?
Maybe. And even it does, no condo association master insurance policy covers your personal property, or personal liability risk within your condo.
A Condo Association Master policy purpose is to provide liability and building coverage for the general structure of the condominium complex and its surrounding property. If someone were to get injured in a common area or maybe out in the back lawn of the property, the Condo Association Master insurance policy would cover any resulting liability claims or damage to the building.

Is It An ‘All Inclusive’ Master Policy?
Recently, Condo Associations have been buying policies that are ‘All Inclusive.’ What this means is that the policy considers the building along with the individual condominiums within it as one. Therefore, an ‘All Inclusive’ master policy will cover damage to your condo from an insured peril such as a fire. If the policy does not have this type of coverage then it is up to you the condo owner to add dwelling coverage to your policy. However, it’s still important to have some level of dwelling coverage especially if you’ve made some improvements to the condo that might increase its value beyond the average condo in the complex might have (ie: custom kitchen). Furthermore, Condo Associations try to determine the proper coverage for the building, but if they happen to fall short of the actual cost to replace the entire building including your condo, it’s a nice safety net to have that additional $50,000 or so dwelling coverage on your own condo insurance policy.
It’s important to remember that even if your Condo Associations master insurance policy covers your condo for fire and other covered losses it still does not protect your personal property or provide personal liability. You will be taking a huge financial risk if you don’t have condo insurance.

Study: Identity fraud is on the upswing, but per incident rate is dropping

The bad news is that the number of identity fraud victims in 2008 increased 22%, encompassing 9.9 million U.S. adults. The good news is that because consumers and businesses are detecting and resolving fraud more quickly, consumer costs dropped from $718 to $496 per incident in 2008, a 31% decrease. The 2009 Identity Fraud Survey Report, which was conducted by Javelin Strategy & Research, also found that most compromised data is due to low-tech methods, such as lost or stolen wallets, checkbooks, and credit and debit cards. One other notable trend was that women were 26% more likely to be victims than men in 2008, and this is attributed to women making more in-person purchases. Also noteworthy is that 14% of the female victims experienced a lag time of one year or more before their data was compromised.
Experts suggest the following six steps to prevent identity fraud:
1.Be Vigilant – Monitor your accounts regularly online at bank and credit card websites, ATMs or by phone and set up alerts that can be sent both online and to a mobile device.
2.Keep Personal Data Private — Do not provide Social Security Numbers, passwords, PINs or account numbers by phone or online unless you initiated the interaction to a verified and trusted location.
3.Online is Safer Than Offline – Paperless transactions that are conducted in a secure online environment (keep browsers, anti-virus and anti-spyware software updated) reduce the potential for fraud. Instead of paper invoices, statements and checks, replace them with electronic versions.
4.Be Aware of Those Around You — Be alert to those around you when giving out financial information over the phone or by text. Note that more than 10 percent of victims knew their fraud perpetrator.
5.Ensure Credit and Debit Cards are Protected — Obtain credit and debit cards from financial institutions that provide zero liability if a card is ever lost, stolen or used without authorization.
6.Learn About Identity Protection Services — At a minimum, consumers should review their credit report no less than once per year, either for free at or through many financial institutions’ websites.
Identity Theft Insurance
The National Association of Insurance Commissioners has a Consumer Alert about Identity Theft Insurance, noting that while policies are available, they do not protect you from becoming a victim of identity theft and do not cover direct monetary losses incurred as result of identity theft. Rather, they insure you for any costs that might be incurred in reclaiming your identity, such as hiring an attorney, taking time from work, and any administrative costs such as the cost of phone calls or postage. Before purchasing, NAIC recommends checking with your current Homeowners policy to see if it already includes such coverage. If not, NAIC offers suggestions for things to consider before you purchase.
For more resources on identity fraud, see the Federal Trade Commission’s Identity Theft Site.