Frequently Asked Questions
General Questions
What kinds of questions should I be expected to answer when I am applying
for an insurance policy? Why do insurers need so much information?
What are the advantages to using an agent to purchase insurance?
I have an older car whose current market value is very low - do I really
need to purchase automobile insurance?
What is the difference between collision physical damage coverage and
comprehensive physical damage coverage?
What factors can affect the cost of my automobile insurance?
What are some practical things I can do to lower the cost of my
homeowners insurance?
What does homeowners insurance cover?
What is the difference between "actual cash value" and "replacement
cost"?
What factors should I consider when purchasing homeowners insurance?
What are the policy limits (i.e., coverage limits) in the standard
homeowners policy?
Where and when is my personal property
covered?
Do I need earthquake coverage? How can I get it?
Life FAQs
How much life insurance should an individual own?
What about purchasing life insurance on a
spouse and on children?
Should term insurance or cash value life insurance be purchased?
How does mortgage protection term insurance differ from other types of
term life insurance?
Can an existing life insurance policy be used to provide for the
repayment of an outstanding mortgage loan?
Renters FAQs
Why would I want to buy renters insurance?
How does a renters policy protect my personal property?
Why do some apartment complexes require tenants to have renters
insurance?
What if I share my apartment with a roommate?
Do we both need to have renters insurance?
Umbrella FAQs
What is a personal umbrella liability policy?
How do I know if I need a personal umbrella liability policy?
Answers to General Questions
Q: What kinds of questions should I be
expected to answer when I am applying for an insurance policy? Why do
insurers need so much information?
A: When you apply for an insurance policy, you will be
asked a number of questions. For example, the agent might ask you your name,
age, gender, address, etc. In addition, you will be asked a number of other
questions which will be used to determine how likely you are to make a
claim.
When an insurance company is deciding whether or not to offer automobile
insurance to a potential customer, it will want to know about the person's
previous driving record, whether they have any recent accidents or tickets,
and what type of car is to be insured.
Insurance companies have different programs for different customers. Adults
with good driving records will generally pay less for auto insurance than
will a young driver with traffic tickets. In order to determine which
program you qualify for, an insurance company needs basic information about
you.
In addition to your age, gender and driving experience, information about
the vehicle you drive, and how you drive it, is also needed to determine a
fair price. For example, a large luxury car costs more to repair or replace
than a sub-compact; and, someone who commutes 30 miles each way is more
likely to be in an accident than someone who rides the bus to work and
drives only on weekends.
Q: What are the advantages to using an
agent to purchase insurance?
A: By using an agent to purchase insurance,
the policyholder receives more personal service. An agent with whom there is
direct contact can be vital when purchasing a product and absolutely
necessary when filing a claim. A local, independent agent is able to deliver
quality insurance with competitive pricing and local personalized service.
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Q: I have an older car whose current market value is very low - do I really
need to purchase automobile insurance?
A: Most states have insurance laws that require
drivers to have at least some automobile liability insurance. These laws
were enacted to ensure that victims of automobile accidents receive
compensation when their losses are caused by the actions of another
individual who was negligent.
It is often the case that the cost of repairing
the damages to an older car is greater than its value. In these cases, your
insurer will usually just "total" the car and give you a check for the car's
market value less the deductible. Many people with older cars decide not to
purchase any physical damage coverage.
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Q: What is the difference between collision physical damage coverage and
comprehensive physical damage coverage?
A: Collision is defined as losses you incur when
your automobile collides with another car or object. For example, if you hit
a car in a parking lot, the damages to your car will be paid under your
collision coverage.
Comprehensive provides coverage for most other direct physical damage losses
you could incur, including theft. For example, damage to your car from a
hailstorm will be covered under your comprehensive coverage.
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Q: What factors can affect the cost of my automobile insurance?
A: A number of factors can affect the cost of your
automobile insurance -- some of which you can control and some that are
beyond your control.
The type of car you drive, the purpose the car serves, your driving record,
and where the car is garaged can all affect how much your automobile
insurance will cost you.
Even your marital status can affect your cost of insurance. Statistics show
that married people tend to have fewer and less costly accidents than do
single people.
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Q: What are some practical things
I can do to lower the cost of my
homeowners insurance?
A: There are a number of things you can do to
lower the cost of your homeowners insurance. The easiest thing to do is get
a comprehensive review of your policy and needs from your local agent.
It is not surprising to find quotes on homeowners insurance that vary by
hundreds of dollars for the same coverage on the same home. When you shop,
be careful to make sure each insurer is offering the same coverage.
Another way to lower the cost of your homeowners insurance is to look for
any discounts that you may qualify for. For example, many insurers will
offer a discount when you place both your automobile and homeowners
insurance with them. Other times, insurers offer discounts if there are
deadbolt exterior locks on all your doors, or if your home has a security
system. Be sure to ask us about any discounts for which you may qualify
Another easy way to lower the cost of your homeowners insurance is to raise
your deductible. Increasing your deductible from $250 to $500 will lower
your premium, sometimes by as much as five or ten percent.
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Q: What does homeowners insurance cover?
A: The typical homeowners policy has two main
sections: Section I covers the property of the insured and Section II
provides personal liability coverage for the insured. Almost anyone who owns
or leases property has a need for this type of insurance. Usually,
homeowners insurance is required by the lender to obtain a mortgage.
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Q: What is the difference between "actual
cash value" and "replacement
cost"?
A: Covered losses under a homeowners policy can be
paid on either an actual cash value basis or on a replacement cost basis.
When "actual cash value" is used, the policy owner is entitled to the
depreciated value of the damaged property. Under the "replacement cost"
coverage, the policy owner is reimbursed an amount necessary to replace the
article with one of similar type and quality at current prices.
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Q: What factors should I consider when purchasing homeowners insurance?
A: There are a number of factors you should
consider when purchasing any product or service, and insurance is no
different.
Here is a checklist of things you should consider when you purchase
homeowners insurance.
 Determine the amount and type of insurance that
you need. The coverage limit of your house should equal 100% of its
replacement cost. If your policy limit is less than 80% of the replacement
cost of your home, any payment from your insurance company will be less than
the full cost to replace your home -- you'll have to pay the rest out of
your own pocket. Also, decide if the personal property and personal
liability limits are adequate for your needs.
Determine which, if any, additional endorsements you want to add to your
policy. For example, do you want the personal property replacement cost
endorsement, an earthquake endorsement or a jewelry endorsement?
Once you have decided on the coverage you want in your homeowners insurance
policy, consult us. We will be able to help you determine if there are any
gaps in coverage you might not have been aware of, explain the details of
the policy's exclusions and limitations as well as recommend an insurance
company that will live up to your expectations.
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Q: What are the policy limits (i.e., coverage limits) in the standard
homeowners policy?
A: [Note: this answer is based on the Insurance
Services Office's HO-3 policy.]
The dwelling and other structures on the premises are protected on an "all
risks" basis up to the policy limits. "All risks" means that unless the
policy specifically excludes the manner in which your home is damaged or
destroyed, there is coverage. The policy limit for the dwelling is set by
the policyowner at the time the insurance is purchased. The policy limit for
the other structure is usually equal to 10% of the policy limit for the
dwelling.
Losses to your personal property are covered on a "named perils" basis.
"Named perils" means that you have coverage only when your property is
damaged or destroyed in the manner specifically described in the policy. The
policy limit on the coverage is equal to 50% of the policy limit on the
dwelling. Limits for the coverage for the additional expenses that the
policyowner may incur when the residence cannot be used because of an
insured loss is equal to 20% of the policy limit on the dwelling.
The coverage limit on personal liability is
determined by the policyowner at the time the policy is issued. The coverage
limit on medical payments to others is usually set at $1000 per injured
person.
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Q: Where and when is my personal property covered?
A: Personal property (except property that is
specifically excluded) is covered anywhere in the world. For example,
suppose that while traveling, you purchased a dresser and you want to ship
it home. Your homeowners policy would provide coverage for the named perils
while the dresser is in transit -- even though the dresser has never been in
your home before.
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Q: Do I need earthquake coverage? How can I get it?
A: The standard insurance policy does not pay for
direct damages caused by "earth movement." "Earth movement" is a much
broader term than earthquake. It includes earthquake, volcanic activity and
other earth movement. This coverage may be available by endorsement for an
additional charge. If you live in an area that is more likely to have an
earthquake, you'll pay more than if you live in an area that is unlikely to
have an earthquake.. We can help you weigh the costs and benefits of this
coverage before you decide to purchase.
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Answers to Life FAQs
Q: How much life insurance should an individual
own?
A: "Rule of thumb" suggests an amount of life
insurance equal to 6 to 8 times annual earnings. However, many factors
should be taken into account when determining the right amount of life
insurance for you and your family.
Important factors include:
Income sources (and amounts) other than salary/earnings
Whether or not you are married and, if so, what is your spouse's earning
capacity
The number of individuals who are financially dependent upon you
The amount of death benefits payable from Social Security and from an
employer-sponsored life insurance plan
Whether any special life insurance needs exist (e.g., mortgage repayment,
education fund, estate planning need, etc.)
Calculating the correct amount of life insurance to buy is not as simple as
it appears. We recommend contacting us for help determining the right amount
of coverage. As independent
agents, we are unbiased advisors that will help you
avoid buying too much, show you appropriate
optional coverages for your need and recommend a company that will best
serve your interests.
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Q: What about purchasing life insurance on a spouse and on children?
A: In certain circumstances, it may be advisable
to purchase life insurance on children; generally, however, such purchases
should not be made in lieu of purchasing appropriate amounts of life
insurance on the family breadwinner(s).
It is of utmost importance that the income-earning capacity of the primary
breadwinner be fully protected, if possible, through the purchase of the
required amount of life insurance. This should be done before contemplating
the purchase of life insurance on children or on a non-wage-earning spouse.
Life insurance on a non-wage-earning spouse is often recommended for the
purpose of paying for household services lost due to this individual's
death. In a dual-earning household, it is important to protect the income
earning capacity of both spouses.
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Q: Should term insurance or cash value life insurance be purchased?
A: This is a difficult question -- one whose
answer will vary depending on your personal circumstances.
First, recognize that in any life insurance purchasing decision, two
questions must be answered:
"How much life insurance should I buy?"
"What type of life insurance policy should I buy?"
The first question should always be resolved first. For example, the amount
of life insurance that you need may be so large that the only way you can be
afford is through the purchase of term insurance, since term insurance has a
lower premium.
If your ability to pay life insurance premiums is such that you can afford
the desired amount of life insurance under either type of policy, it is then
appropriate to consider the second question -- what type of policy to buy.
Important factors affecting this decision include your income tax bracket,
whether the need for life insurance is short-term or long-term (e.g., 20
years or longer), and the rate of return on alternative investments
possessing similar risk.
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Q: How does mortgage protection term insurance differ from other types of
term life insurance?
A: The face amount under mortgage protection term
insurance decreases over time, consistent with the projected annual
decreases in the outstanding balance of a mortgage loan. Mortgage protection
policies are generally available to cover a range of mortgage repayment
periods, e.g., 15, 20, 25 or 30 years. Although the face amount decreases
over time, the premium usually remains the same. Further, the premium
payment period often is shorter than the maximum period of insurance
coverage -- for example, a 20-year mortgage protection policy might require
that level premiums be paid over the first 17 years.
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Q: Can an existing life insurance policy be used to provide for the
repayment of an outstanding mortgage loan?
A: Yes. An existing policy, either term or
cash-value life insurance, can be used for many purposes, including paying
off an outstanding mortgage loan balance in the event of the insured's
death. Although a lender may offer a mortgage protection term policy to you,
the lender rarely requires it.
Credit life insurance is frequently recommended in conjunction with the
taking out of an installment loan when purchasing expensive appliances or a
new car, or for debt consolidation. Is credit life insurance a good buy?
Credit life insurance is frequently more expensive than traditional term
life insurance. Further, if you already own a sufficient amount of life
insurance to cover your financial needs, including debt repayment, the
purchase of credit life insurance is normally not advisable due to its
relatively high cost.
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Answers to Renters FAQs
Q: Why would I want to buy renters insurance?
A: If you live in an apartment or a rented house,
renters insurance provides important coverage for both you and your
possessions. A standard renters policy protects your personal property in
many cases of theft or damage and may pay for temporary living expenses if
your rental is damaged. It can also shield you from personal liability.
Anyone who leases a house or apartment should consider this type of
coverage.
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Q: How does a renters policy protect
my personal property?
A: A renters policy provides named perils
coverage. This means that the policy only pays when your property is damaged
or destroyed by any of the ways specifically described in the policy. These
usually include:
Fire or lightning
Windstorm or hail
Explosions
Riots
Aircraft
Vehicles
Smoke
Vandalism or malicious mischief
Theft
Falling objects
Weight of ice, snow, or sleet
Accidental discharge or overflow of water or steam
Freezing
Sudden and accidental damage from artificially generated electrical current
Volcanic eruptions (but this doesn't include earthquake or tremors)
Renters coverage applies to your personal property no matter where you are
in the world. This means you're covered when you are on vacation as well as
at home.
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Q: Why do some apartment complexes
require tenants
to have renters insurance?
A: Owners of apartment complexes buy insurance policies for
their liability and to cover their buildings and personal property. However,
these policies do not cover any of the tenant's property or liability. By
requiring their tenants to have renters insurance, the apartment owner is
assured that the tenants will not mistakenly believe the apartment complex
owner's policy will provide coverage for a tenant's property or personal
liability. Although this type of requirement benefits that apartment complex
owner, there are benefits to the renter as well. We recommend that you
purchase renters insurance regardless of what your landlord requires.
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Q: What if I share my apartment with a roommate?
Do
we both need to have renters insurance?
A: Standard renter's policies cover only you and relatives that live with
you. If your roommate is not a relative, each of you will need your own
renter's policy to cover your own property and to provide you liability
coverage for your own actions.
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Umbrella FAQs
Q: What is a personal umbrella
liability policy?
A: The personal umbrella
liability policy is designed to increase your liability protection. This
single policy acts as an "umbrella" over all of your other personal
liability policies -- home, auto, boat, RV, etc. -- so you have a higher
personal liability limit than what would otherwise be available. In certain
circumstances, an umbrella policy may provide personal liability coverage
that is otherwise excluded from your other policies. For example, an
umbrella policy provides coverage anywhere in the world, whereas your auto
policy usually provides coverage in the US and Canada only.
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Q: How do I know if I need a personal umbrella liability policy?
A: It used to be that the only people who needed
personal umbrella liability policies were wealthy individuals who had
sizable amounts of personal assets that would be at risk in a lawsuit.
However, in our very litigious society, even individuals with modest incomes
and assets are often subjects of large lawsuits. Since they are even less
able than a wealthy individual to pay large damage awards, they recognize
the need to have coverage limits greater than what can be obtained from
their homeowner or auto policies.
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