General Insurance | Personal Insurance | Business Insurance | Life / Health Insurance | Emergencies 

The insurance industry is typified by insurers with a number of different organizational forms. Stock insurers are corporations owned by the shareholders of the firm. The shareholders hire managers to run the company, and the insurance product is sold to customers who may or may not be shareholders in the firm. Mutual insurers are companies that are owned by their customers. Any policy owner of the company also owns a portion of the company. Reciprocal insurers, or reciprocal exchanges, are insurance companies where the policy owners of the exchange agree to insure one another. They are very similar to mutual companies.

Lloyd’s associations are insurance companies where the manager who makes the decisions for the firm also has his or her own personal wealth at stake in the firm. Blue Cross and Blue Shield insurers are typically nonprofit (some may now be for-profit) community-oriented health insurance providers. The Blue Cross and Blue Shield companies typically offer traditional indemnity health insurance. HMOs, or health maintenance organizations, are companies that provide comprehensive health care coverage to their customers. HMOs, in their simplest form, provide prepaid health care coverage. Once you pay your premium, you can use the services of the HMO at little or no further cost to you.

From the customer’s point of view, the company that offers you the product and service you want at the quality you desire at the lowest cost should be the company you purchase insurance from, regardless of their organizational form. Economists have tried in numerous studies to identify which one of its organizational forms can provide the insurance product at the lowest cost, and the answers are mixed. Therefore, potential customers should probably base their purchasing decisions on other factors, such as the financial quality of the firm.

Insurers deliver their insurance products to policy owners primarily through independent agents or through exclusive agents. Historically, almost all insurance agents were independent businesspeople paid on commission. More recently, many insurance companies have adopted a system where the agent is a paid employee of the firm rather than an independent businessperson. These agents are referred to as exclusive agents.

Independent agents have the freedom to shop your insurance for you with multiple insurance companies. The reason some companies have paid employee agents is obvious. The exclusive agent companies do not want their agents to be able to compare their policies with those of other insurance companies. Also, since independent agents are not employees of the company, they have the freedom to offer more objective claims advice and more personal claims service. Many exclusive agent companies require their policyholders to call an 800 number rather than their agent. Once this number is called, the potential claim goes on the claim record, whether or not it is covered by the policy. The personal, customized service provided by independent agents has stood the test of time as the number of independent agencies has grown dramatically in the 21st century.

Many property-casualty and life insurance products can be purchased without the use of an agent. Typically, potential policyholders will either be contacted through mail or Internet ads, or they can call an 800 number to apply for the insurance product. These companies claim to have better pricing, but many times they do not. They claim to save you money by “cutting out the middleman”, but what they do not tell the consumer is that they are spending hundreds of millions of dollars on TV, radio, mail, and newspaper ads on their distribution system, as well as employee expenses. Instead of receiving personal, customized, quality local service from a highly trained insurance professional, the consumer is often buying an inferior product that is based only on price and impersonal service from distant and minimally trained employees. By purchasing one’s insurance from an independent agent, a consumer can talk to the same people every time.

Insurance is a product where the insurance company promises to make future loss payments in return for a premium you pay today. It is therefore important that you know the financial health of the insurer when you are deciding how much you are willing to pay for the product. For example, holding all other things equal, people should pay slightly more for a life insurance policy from an insurance company with a higher financial rating or slightly less for the same policy from a company that is not as financially strong.

In order to make this kind of informed purchasing decision, a number of private organizations, called rating agencies, rate the financial stability of insurance companies. Major insurance rating agencies include A.M. Best Company, Standard & Poor’s, Weiss Research, Duff and Phelps, and Moody’s. Each of these companies uses data obtained from various sources to rate the financial strength of insurance companies. It should be noted, however, that each organization has its own rating standards, and therefore the financial grades from two different rating agencies may be different. The best advice usually given to insureds is to check the financial rating of the insurer from as many rating agencies as possible to determine the range of opinions about the financial health of the company.

The monthly publication Best’s Review (Life and Health Edition) periodically contains information on assets, premium income, and products sold by most of the largest life insurance companies operating in the U.S. The sister publication, Best’s Review (Property and Casualty Edition), provides certain statistical information on large property-casualty companies. Both magazines are published by the A. M. Best Company in Oldwick, NJ. Public libraries in cities of medium to large size frequently subscribe to one or both of these magazines.

When you apply for an insurance policy, you will be asked a number of questions. For example, the agent will ask you a number of demographic questions such as your name, age, sex, address, etc. In addition to these demographic questions, you will be asked a number of other questions that will be used to determine what type of risk you are. For example, when an insurance company is deciding whether or not to offer auto insurance to a potential policy owner, it will want to know about the person’s previous driving record, whether there have been any recent accidents or tickets, what type of car is to be insured, and various other types of information.

All of this information will be used for two purposes. First, based on the responses to these questions, the insurance company will decide whether the profile of the applicant is consistent with the type of risk it is trying to attract. Some insurers specialize in offering insurance to only very safe drivers and therefore will only accept applications from people who fit the profile of a safe driver. Second, once the insurer has decided that your risk profile is consistent with the types of risks it accepts, the answers to the questions will be used to determine which rate to charge you. For example, the insurance company will decide whether you should be offered insurance at the high-risk driver rate or the low-risk driver rate.

Collectively, this entire process is known as the underwriting process. The primary function of the underwriting department in an insurance company is to decide whether or not to offer insurance to a person who has completed an application. If the answer is yes, then the underwriting department seeks to determine the “quality” of that risk so that the proper premium can be charged. That is, high-risk people should pay more than low-risk people.

Be sure to talk to your insurance agent about available discounts on car or auto insurance, such as multi-car, renewal, claim-free, student discounts, driver training, defense driver courses, anti-lock brakes, airbags, anti-theft devices, and auto/home discounts. Ask how much you can save by increasing your deductibles.

Insurers frequently award lower rates to homeowners who guard against theft, accidents, and other losses. Companies may provide discounts on the premium for customers with multiple policies (home and auto). Here are some things you can do that generally qualify for lower premiums:

• Secure your home with deadbolts and window locks.
• Install a security system with an outside signal and a connection to the local police.
• Install and maintain smoke detectors.
• Install a sprinkler system for fire.
• Install a fire alarm that automatically alerts the local fire department.
• Purchase your auto and home insurance from the same company.

Safety Equipment Discounts are available for safety equipment. If your boat is equipped with any of the following, check with your agent or broker to see if you qualify: GPS, Ship to Shore, VHF, Depth Sounder, Halon System, Fume Detector, Alarm System Loran, and Boating Safety Courses If you have taken the Coast Guard certification course, check with your current company as to the availability of a discount.

"Full coverage” is a term that means the legally required or most commonly requested coverages. The term “full coverage” does not mean that everything is covered no matter what happens. “Full coverage” typically includes bodily injury, property damage, uninsured and underinsured motorists, damage to a covered vehicle (also known as comprehensive and collision), and any other coverages available such as rental car, towing, road service, or additional equipment coverage. Your auto insurance policy declaration page lists the coverages you have selected.

The coverage provided varies from state to state, and you should consult with your insurance agent for details. Generally, you are covered only for liability to third parties unless the owner is a resident of your household or the vehicle is furnished for your regular use. In many states, you are not covered for physical damage to the borrowed vehicle. Any coverage provided is over and above the collectible coverage provided by the owner of the vehicle.

It is recommended that you keep a booklet detailing the items or a videotape of your personal property. Having a complete inventory record at the time of loss could save you thousands of dollars because no one remembers everything, and unless written down, lost items will go unclaimed. The booklet should be kept in a safe place, preferably not at home. Keep it in a safe deposit box or with your insurance agent. It is also a good idea to retain all bills for major purchases and additions to the structure of your home. These could serve as proof of purchase in the event of a claim and should also be kept in a safe place. Finally, take pictures of or videotape all these items. Lay the china and silverware on a table so that the picture will show the number of pieces and other details, such as the design. Keep the pictures and all receipts in a safe place.

If you have auto insurance protection on a personal vehicle that has full coverage and rental reimbursement, you may not need to buy extra insurance. However, be sure to verify this with your insurance company.

Rental car coverage is only for vehicles with rental reimbursement coverage that have been in an accident, not for cars experiencing mechanical failure.

Yes. All licensed drivers living in the household need to be listed on the auto policy unless they have their own auto insurance elsewhere.

An auto insurance liability policy usually covers the following people:

• Named insured: the person or persons named in the policy, no matter what car they are driving.
• Spouse: even if the spouse of the named insured is not named on a policy, liability insurance almost always covers him or her, unless the couple does not live together.
• Other relative: anyone living in the household with the named insured who is related to the insured by blood, marriage, or adoption, usually including a legal ward or foster child.
• Anyone driving the insured vehicle with permission is covered; someone who steals the car is not covered.

This question has received considerable attention over the years by insurance professionals and legal advisors without resulting in definite answers. The question is somewhat akin to posing the query “How high is up?” Nevertheless, there are some perspectives that may be helpful in determining the amount of liability insurance limits to purchase. These might include:

• Attempt to ascertain the largest judgment rendered against your type of business within the judicial area in which you are located or in which you sell your product or service. (Even then, you may not be willing or able to afford the cost of purchasing insurance to provide sufficient liability limits to cover any such awards.)
• Examine your balance sheet (assets vs. liabilities) to determine what you have to lose and thus need to protect. Remember, however, that liability losses resulting in judgments or out-of-court settlements generally have no respect for wealth or lack of it.
• Similar to setting liability limits based on your balance sheet, use your income statement for the same purpose. However, the same concern regarding losses vs. wealth still applies.
• Consider liability limits you can afford or with which you feel comfortable. Unfortunately, this practical approach does not provide “a quiet night’s sleep” for most business owners, especially if you realize that the next verdict could easily exceed your limits several times over.
• Review all business contracts you have signed, including premises and/or equipment leases, etc. for their specific liability limit requirements – most contracts will have them! This may determine at least the minimum liability limits you should carry just to comply with the contract provisions.
• Consider what level of liability protection is being carried by other area businesses and competitors similar to yours. While we cannot disclose confidential client information, our agency is a good source of general information of this nature because of the number and cross-section of businesses we insure.

All of this causes one to ask what a business owner can do to determine proper liability limits if the techniques previously listed are filled with uncertainty. There is no one acceptable and simple method. It requires an examination of the legal climate, or perhaps various legal climates, the type of exposures presented, and all of the previously suggested parameters.

Yes, there are various “package” policies available. Programs such as the Business Owners Package (BOP), Special Multi-Peril (SMP), and insurance company-designed packages are constantly being marketed. Many insurers design packages to meet specialized needs, such as those of auto garages, auto dealers, jewelers, furriers, barbers, beauty salons, and apartment buildings.

In general, the current workers’ compensation system represents a compromise between employers and employees regarding employment-related injuries or illnesses. Basically, employees relinquish their right to sue employers if they suffer a job-related injury or illness. In return, employers agree to provide state-mandated benefits if such injuries or illnesses occur. To ensure employers will have the money to pay these mandated benefits, most states require that employers demonstrate that they have the financial ability to pay any claims that may arise. Typically, this financial ability is demonstrated through the purchase of workers’ compensation insurance.

Your business liability coverage and your workers’ compensation insurance do not pay these types of claims, but you can buy insurance coverage called Employment Practices Liability Insurance, or EPLI. This insurance protects your business from employees’ allegations against you and your business. Especially important is the legal defense aspect of the policy because the legal bills can often be higher than the amount of the claim itself.

Many life insurance companies issue non-medical life insurance, where you simply have to answer a series of questions in an application. However, depending on your answers, the company might require you to take a physical examination for any of the following: seriously impaired health, the existence of a terminal illness, or a request for an unusually large amount of coverage. If you refuse to take an examination, then the company has the right not to sell you a policy.

Yes, a company can reject you for a preexisting condition with almost no exceptions. A preexisting condition is a medical condition that the insured knows about before applying for coverage. Such a condition might affect either insurability or the premium amount.

Before buying life insurance, you should gather personal financial information and review your family’s needs. There are a number of factors to consider when determining how much protection you should have. These include:

• Any immediate needs at the time of death, such as final illness expenses, burial costs and estate taxes;
• Funds for a readjustment period, to finance a move or to provide time for family members to find a job; and
• Ongoing financial needs, such as monthly bills and expenses, daycare costs, college tuition, or retirement

Although there is no substitute for a careful evaluation of the amount of coverage needed to meet your needs, one rule of thumb is to buy life insurance that is equal to five to seven times your annual gross income.

People in their prime working years are more likely to become disabled than to be fatally injured. Thus, depending on your personal circumstances, one potentially excellent way to protect you, your family, and even your business is to acquire disability insurance. In essence, disability insurance provides “backup” income if you are temporarily out of work. Most disability insurance plans are somewhat flexible, and you can buy coverage for a variety of illnesses or injuries or exclude specific injuries, such as a bad back.

Within certain participation guidelines, two participants are the minimum number required to set up a group health policy.

Property

• Report the loss to your insurance agent as soon as possible, providing the date of the loss and a description.
• Take photos or videotape the damage.
• Keep records of your expenses for emergency or temporary repairs. Separate the damaged items from the undamaged items. The insurance company adjuster will want to inspect the damaged items, so don’t dispose of them without the adjuster’s consent.
• Make a detailed list of all damaged or lost property, including when and where it was purchased. If possible, provide the original receipts for each item.
• Obtain estimates for repairs and/or replacement of the damaged or missing items. Should the loss involve theft or vandalism, contact your police department immediately.

Auto / Car

• When possible, report the accident to the presiding police department and forward a copy of the report to your agent.
• Contact your agent, providing the date of the accident and details surrounding the incident. Obtain a written estimate for damages from the body shop of your choice.
• You will be contacted by your insurance company to make arrangements for an inspection of your vehicle. No repairs should be made without the insurance company’s authorization.

General Liability

• Contact your agent, providing the date, time, description of the incident, and names and addresses of all injured parties and/or owners of property damaged. Also provide the names and addresses of any witnesses.
• Should you be served with suit papers or any other legal document, forward them immediately to your agent.

Workers’ Compensation

• Provide for immediate medical services as required by workers’ compensation law.
• Contact your agent for claim reporting procedures. You will need to provide the date, address and Social Security number of the employee, nature of the injury, etc.
• Upon notification of the claim, the insurance company will contact you with further instructions.

Note: If the claim involves a death, be sure to file OSHA reports within eight hours.

If anyone is injured, immediately render any possible first-aid assistance and call emergency services.

Exchange names, addresses, and insurance information with the driver of the other car. Record the following information: date, time, and place of the accident; the name and address of the owner of the other car, if different from the driver’s Social Security number and driver’s license number; the names and addresses of passengers and witnesses; the license number of the other car; and the cars of witnesses. Report the accident to the nearest police station and file any necessary reports. Cooperate fully with the police, but do not make any admissions about your liability. Don’t sign any statements for anyone other than an authorized representative of your insurance company. Promptly report the claim to your agent. Note: If you plan to travel by car in Canada or Mexico, check with your agent for insurance requirements.

If anyone is injured, immediately render any possible first-aid assistance and call emergency services. Take appropriate steps to avoid further damage to the property. Promptly report the claim to your insurance agent.