PCG Agencies, Inc. Blog

PCG Agencies, Inc. Bloghttp://www.rjf-pcg.com/blog/View PCG Agencies, Inc.'s Website Blogen-uspostmaster@www.rjf-pcg.comInsurance Website Builder - www.insurancewebsitebuilder.comurn:uuid:5aac46ba-4477-46b3-b297-d5033b58b47durn:uuid:f400165b-043d-4e24-9db3-2225aef99e13Vacant HomeThe so called “silver linings” to any problems in these harsh economic times are certainly few and far between.  One silver lining in the insurance world however, is the increased focus and understanding of insurance coverage for vac...Wed, 25 Jan 2012 15:40:56 -0600The so called “silver linings” to any problems in these harsh economic times are certainly few and far between.  One silver lining in the insurance world however, is the increased focus and understanding of insurance coverage for vacant homes.  Prior to the bottom falling out of the home market and the resulting sheer number (and resulting publicity) of vacant homes, insurance for vacant homes was rarely properly written and very misunderstood.  The need for solutions for covering vacant homes is now so significant that insurance carriers and agents have been forced to deal with the issue head-on and either provide clear solutions or decline writing vacant homes.  There has been a gain in the general understanding of what defines a vacant home, what coverages are lost when a home is vacant and understanding the available solutions, but there is still significant confusion.  Hopefully this discussion will help clarify how to handle insurance on a vacant home. What is the issue? When a home is vacant (defined as unoccupied for more than 30 to 60 days depending on the carrier) several significant coverages disappear under a homeowners policy.    These coverage eliminations include coverage for glass breakage, pipes freezing and vandalism.  Glass breakage and vandalism are certainly a concern but the largest potential for loss is pipe freezing.  Water damage claims due to pipe freezing are rarely small.  This type of claim routinely totals more than $50,000.   It is important to note that carriers do not consider a cabin or vacation home to be vacant. What are the solutions? The most efficient means of solving the issues outlined above is to get your homeowners company to state, in writing, that your home is not considered vacant.  Many carriers will agree to this if, a.) you leave some personal property in the home and b.) you are checking on the home at least every two weeks.  If you feel you qualify, call your agent, explain the situation and have them secure a written statement from the carrier that your home is not considered vacant.  If you are unable to accomplish the process described above, purchasing a vacant home policy is your next best solution. There are issues to be aware of however.  Most vacant home policies are written on a DP1 basis which means only specific types of losses are covered.  The DP1 is not nearly as broad as a basic homeowner’s policy.  For example, theft of items that are actually part of the building, such as copper tubing, is not covered under a DP1.    Also, you will need to actually add vandalism coverage to the policy as it is not automatic,  and DP1s severely limit coverage for contents and other structures on the property.  Finally, and perhaps most importantly, many vacant home policies will not cover bursting of water pipes. Even when the economy improves, , covering vacant homes will remain a confusing issue.  Be careful and make sure that your home is properly covered and that you are fully aware of any significant coverage restrictions.urn:uuid:f068fc94-dd99-4f39-963b-2257b3d9ff44Replacement CostOne of the craziest results of our recent economic malaise has to do with the replacement cost of private homes.  For the past 50 years, the actual replacement cost of a home was less than the market value of the home.  After all, you weren...Wed, 25 Jan 2012 15:40:05 -0600One of the craziest results of our recent economic malaise has to do with the replacement cost of private homes.  For the past 50 years, the actual replacement cost of a home was less than the market value of the home.  After all, you weren't covering the land, landscaping, etc.  As everyone knows, market values have taken a dive over the past two to three years.  Replacement costs have not.  In fact, replacement costs have steadily risen over the same period.  Why is this the case?  The answer lies in the fact that the determination of a replacement cost and a market value are based on substantially different criteria. How is replacement cost developed?  There are three primary criteria used by insurance companies to determine the replacement cost of a home, square footage of the “finished area” of the home, the location of the home and building quality of the home. Finished area means the actual square footage of the livable area of a home, excluding any basements or crawl spaces.  The location of the home is used to develop the general construction costs of material and labor.  These costs can vary significantly in different geographical areas.  The quality of the home means the type of upgrades contained in the home (such as designer counter tops vs. builders grade, etc.) and the architectural complexity of the home. There are several “secondary “ criteria used in developing the replacement cost of the home as well, these include things such as the number of bathrooms, the size and type of garages, fireplaces, etc. The size of a home and the quality of it’s upgrades play an important rule in creating market value however much of the market value of a home is based on demand for the location and how desirable the area is (schools, shopping, security, convenience, etc.).  In essence, there are many more criteria used to create market value than replacement cost and market value can change on a whim whereas replacement cost is more stable. Many people who have some knowledge of the building industry feel that, in general, replacement costs of existing homes as determined by insurance companies are significantly higher than they believe it would take to replace the home.  They are basing this belief on the actual costs they have witnessed when building new homes.  It does cost substantially more to replace an existing home than build new and here’s why.  Economy of scale: When a contractor is building many homes at once, materials are purchased in large quantities hence the price is lower.  Delivery costs of materials decrease as well.  “Top-Down” vs. “Bottom-Up” New construction starts at the foundation and is built “up”.  Repairing a significantly damaged home usually requires repair from the top down which is far more expensive and time consuming. Demolition and Debris removal:  This is an additional and substantial cost not present in new construction. Use of labor: When several homes are being built, even if not in the same area, a builder is able to schedule sub-contractors efficiently and less expensively.  Access to the worksite: New homes normally do not have impediments to the work site such as landscaping, other homes etc.  When working around these impediments, the cost of transportation and labor increases. Undamaged parts of the home and the contents of the home must be protected. Rain damage, looting, etc. are all exposures that must be protected from causing further damage to contents remaining in the house or undamaged parts of the home.  New homes normally do not have these security issues, especially for contents.urn:uuid:b90942bc-cbc8-41ab-bb50-69689fb41619Do I need to purchase insurance when I rent a car?You’re standing at the rental car counter, the rental car agent asks if you would like to purchase the insurance on the car you are about to rent.  The insurance seems so expensive and they seem so eager to sell it.    What ...Wed, 25 Jan 2012 15:37:47 -0600You’re standing at the rental car counter, the rental car agent asks if you would like to purchase the insurance on the car you are about to rent.  The insurance seems so expensive and they seem so eager to sell it.    What do you do? The insurance the rental car companies are trying to sell you is called “the loss damage waiver” or “LDW”.   Purchasing this coverage from the rental car agency relieves you of any responsibility for damage to a rented vehicle.  Sounds good on the surface, but is it?  Turns out you have probably already purchased the majority of what the rental agent is offering.  When you purchased physical damage coverage (comprehensive and collision) for a car you own, the coverage will extend to any short-term rental vehicle or, in some states (Minnesota included) the coverage for the rental vehicle extends from the liability coverage you purchased for your own personal vehicle.  Some rental car agencies hold the driver responsible for “loss of use” of the vehicle while it is being repaired.  Most personal automobile policies only provide up to $20 per day for loss of use on non-owned vehicles.  Revenue that the rental car company is unable to charge for the damaged vehicle can run much higher than that, so clearly there is an exposure but when you compare the cost of the rental car insurance ($23 per day on average) to the cost of your own insurance ($2.70 per day on average), the risk seems acceptable to assume on your own. Insurance, in general, is designed to respond to catastrophic losses.  In the case of rental car coverage versus your own coverage the exposures just don’t seem to fit the cost of the insurance nor the chances of you even having an accident.  My advice?  Forget the LDW, drive carefully and accept the risk but save the money!  urn:uuid:8d541cb0-2375-47d6-9ef4-1080688827b3Personal ArticlesGiven the general state of the economy, many people are understandably trying to cut expenses any way they can.  Since a significant part of anyone’s budget is their home and auto insurance, this is a natural target for trying to trim cost...Wed, 25 Jan 2012 15:36:34 -0600Given the general state of the economy, many people are understandably trying to cut expenses any way they can.  Since a significant part of anyone’s budget is their home and auto insurance, this is a natural target for trying to trim costs.  Home and auto insurance is effectively a “compulsory” coverage since either a mortgage company or state law requires you to purchase coverage.  Many people are looking to reduce more “ancillary coverages” such as personal article floaters, watercraft coverage, umbrella coverage, etc.  This discussion will focus on the ramifications of reducing or removing the  personal articles floater. A personal articles floater is either an endorsement to a homeowner’s policy or a stand alone policy that supplements coverage for your possessions of higher monetary value such as jewelry, furs, guns, antiques, valuable collections, etc.  Since the vast majority of homeowner’s policies severely limit the coverage and recoverable amount for items such as these, most homeowners elect to cover these items through a personal article floater. Personal article floaters do carry a significant cost and are not required by law therefore many questions are being asked regarding continuing to pay these premiums during harsh economic times. Electing to delete items from your collectible schedule could save you significant dollars but make sure you understand what you are giving up.     <ol> <ol> <li>Mysterious disappearance (simply losing a piece of jewelry or a portion of the jewelry) is the most often claimed loss.  This coverage disappears under a standard HO-3 Homeowner’s policy without a personal articles floater. </li> <li>Deductibles do not apply to losses under a personal articles floater so any loss in the absence of a floater will be subject to the deductible.  </li> <li></li> </ol> </ol> <ol> <ol> <li>Almost all homeowner’s policies limit coverage on certain items (jewelry, guns, furs, silver, etc.) due to theft therefore without a floater, a considerable exposure to theft is present. </li> </ol> </ol> Are there solutions available for protecting your personal collections or items of higher monetary value?  While insuring these items remains the most effective and viable option the list below provides some ideas on risk reduction if one chooses not to carry a personal articles floater.   <ul> <ul> <li>Place jewelry items that are rarely if ever worn in a safe deposit box.  The box is very safe and the bank carries coverage on the items (be sure to check with your bank regarding coverage limitations).  Only insure items that are worn frequently.  The cost of a safe deposit box is dramatically lower than the cost to insure the items.</li> </ul> </ul> <ul> <ul> <li></li> </ul> </ul> <ul> <ul> <li>Place other small collectibles (stamps, coins, etc.) that are not used regularly in a safe deposit box for the same reasons as above. </li> </ul> </ul> <ul> <ul> <li>Review your floater schedule.  Delete smaller items (choose your own personal “self insurance level” and delete items below that).</li> </ul> </ul> <ul> <ul> <li>Make sure that all items on your floater are not already fully covered by your homeowner’s policy.  For example, if you own a $50k piano, more than likely your homeowners policy is sufficient to adequately cover this item.  Be sure to have pictures or other records to prove you owned the item and, be careful that the items value does not eat up too much of your total contents limit under the homeowner’s policy, if it does, you may need to reconsider adding it to the floater again.</li> </ul> </ul>urn:uuid:921d867c-d866-4661-851b-ae10b9c56fd1Insuring Difficult HomesPurchasing home insurance is often a confusing process.  Part of the confusion is due to the complexity of insurance carrier underwriting.  A home buyer may fall in love with a home that turns out to be a nightmare to insure.  The resu...Wed, 25 Jan 2012 15:30:26 -0600Purchasing home insurance is often a confusing process.  Part of the confusion is due to the complexity of insurance carrier underwriting.  A home buyer may fall in love with a home that turns out to be a nightmare to insure.  The results of this difficulty include increased cost, diminished coverages, additional time to find coverage, etc.  We have outlined several examples of homes that can be difficult to insure and may take additional time to find competitive insurance.  The faster an insurance buyer starts looking for coverage the more competitively priced and thorough the coverage could be.  <ul> <li>Homes without continuous foundations.  These are homes that are typically on stilts or some other structure that is not a typical foundation.  Insurance carriers have issues with this type of building because pipes tend to freeze easier.</li> </ul> <ul> <li>Homes with two or more non-storm claims.  Non-storm claims can include vandalism, theft, water damage, etc.  These types of claims can be avoidable hence the insurance carrier will look closely at multiple claims from these sources.</li> </ul> <ul> <li>Homes with farm or business exposures (such as home day care).  Insurance carriers are concerned about the “traffic” of third parties a home business can bring.  They are also concerned with the significant injury exposures presented by farming machinery.  Home day care carries an elevated exposure to bodily injury and other possible losses such as abuse, etc.</li> </ul> <ul> <li>Homes that have multi-layer roofs.  Some homes have new roofs that were installed over old damaged roofs.  This practice is an issue for insurance carriers because the water proof integrity of the roof is quickly compromised.</li> </ul> <ul> <li>Homes that contain fuses; not circuit breakers.  A home containing a fuse box means the electrical system of the house has not been updated for over 25 years.  Homes that contain fuse boxes suffer a much higher rate of fires than homes with circuit breakers.</li> </ul> <ul> <li>Homes that appear on an historical list.  This type of home has several limitations on what materials and workmanship can be used for repair or rebuild.  These limitations significantly increase the cost to rebuild.</li> </ul> <ul> <li>Vacant Homes.  Obviously, homes that are vacant suffer far more losses than occupied homes.  The most prevalent losses to vacant homes are frozen pipes, vandalism and theft.  Most “preferred” carriers will not write vacant homes.  Specialty carriers provide this coverage but it takes a bit longer to place coverage and the coverage is very limited.</li> </ul> <ul> <li>Homes with water slides or trampolines.  Both of these “attractive” apparatus create an enormous additional exposure to liability.  Most carriers shy away from homes that possess either of these.  There is coverage available but the options are few and the premium is very high.</li> </ul> <ul> <li>Homeowners who own certain breeds of dogs.  Breeds such as pit bulls, Rottweiler’s, Dobermans, etc. are accountable for the vast majority of serious dog attacks/bites.  Insurance carriers are understandably concerned for the increase in liability exposure.  Again, available coverage options are very narrow and the premium is certainly increased.</li> </ul> The best solution for finding affordable and broad coverage for homes in the above categories is to start early and talk to an independent agent who represents many carriers.urn:uuid:ca47ed9e-f673-4edf-9027-3e7177ef2e49Don't take it personally...It's Business!Mind numbing technology advancements and the ever-increasing number of parents of young children who choose to work from home, have played a significant role in the veritable explosion of home-based businesses.   Since the year 2000, home-b...Tue, 24 Jan 2012 16:19:36 -0600Mind numbing technology advancements and the ever-increasing number of parents of young children who choose to work from home, have played a significant role in the veritable explosion of home-based businesses.   Since the year 2000, home-based businesses in the United States have grown over 100%.  There are currently over 11 million families running businesses from their homes! The types of businesses people are operating out of their homes include about every money-making endeavor imaginable.  Many home business operators feel (or are told by so-called experts) that they can adequately cover their business exposures under their homeowner’s policy.  Why not?  It’s got to be cheaper than buying business insurance.  Unfortunately this approach, in most instances, is tragically wrong. True, there are such things as business pursuit endorsements available under a homeowner’s policy but don’t be fooled by the name.  In fact, “business pursuit homeowner’s endorsements” provide very little coverage and leave the home-based business owner very exposed to devastating loss! Let’s start with the coverage provided by a basic homeowner’s policy for a home-based business without being endorsed.  If you operate a small side business that earns less than $2,000 of revenue per year, your HO-3 policy will provide bodily injury and property damage coverage for the business pursuit.  Most “incidental businesses” of this nature do not need more coverage than what is provided by the basic homeowner’s policy.  It is a different story when the business starts to grow, however.  Let’s take it a step further to see why the solution for adequate coverage is not through endorsing the homeowner’s policy with a business pursuits endorsement. The basic business pursuit endorsement will provide coverage for bodily injury, property damage, and some property coverage for business equipment you own.  Seems broad enough, but when you stop to consider the true exposures present in most home based-businesses, you realize just how “thin” the business pursuit endorsement really is.  For instance, the business pursuit endorsement does not provide coverage for: Product Liability:  Any bodily injury or property damage your home-based business becomes liable for due to the product you sell, is not covered! Personal Injury:  Claims against your business for advertising liability, libel and slander are not covered. Worker’s Compensation:  Whether you actually employ anyone or are using independent contractors, you will most likely be required by law to provide worker’s compensation coverage.  Business Income:  If your business is unable to operate due to loss from a covered peril, there is no coverage for lost income while you are re-establishing the business income stream. Incidental Coverages:  Valuable papers/records and electronic data processing are real exposures and are not covered. There are some new home-based business endorsements available now but they still fall short of providing appropriate coverage for most home based businesses. What then is the solution?  Easy...business insurance!!  If your business is more than a small hobby, you need to talk to a business insurance professional.  They will assess your exposures and coverage needs and find you the most appropriate solution. The cost of business insurance is surprisingly reasonable.  In fact, often times business insurance is not that much more than trying to cover all important exposures via endorsing the homeowner’s policy.  By seeking business insurance you will also speak to a professional business insurance expert, not trying to rely on the advice of a personal insurance expert. As with most things in life, let the professionals do their jobs.  Don’t have your personal agent try to write business insurance through your homeowner’s policy and definitely don’t try to be a do-it-yourselfer by assessing your own risk and determining appropriate coverage.  You have far too much to lose.urn:uuid:8b3fc137-d802-4ed9-8e6d-e4620f42debaHelpful Hints for Dog OwnersFor all of us who own or owned a dog, the following quote from Roger Caras rings true: “Dogs are not our whole life, but they make our lives whole.” That sentiment is why dog ownership is at an all-time high in the United States.  U...Tue, 24 Jan 2012 15:45:57 -0600For all of us who own or owned a dog, the following quote from Roger Caras rings true: “Dogs are not our whole life, but they make our lives whole.” That sentiment is why dog ownership is at an all-time high in the United States.  Unfortunately, along with this significant growth in dog ownership comes a huge downside; dog bites causing serious injury or death are growing at a rate of 11% per year!  Short of simply not owning a dog, is there anything one can do to try and mitigate the possibility that your dog will not become part of these statistics?  Absolutely!  First, some background. Examining the problem Currently there are 74.8 million dogs as pets in the United States.  These pets cause an average of 800,000 bites per year with 18 resulting in deaths.  Seventy percent of dog bites occur on the dog owner’s property which means dog bite claims now account for about one third of all homeowner claims.  Sixty percent of all dog bites involve children which is the primary reason that in 2006, insurance carriers in the United States paid out over $250,000,000 in dog bite claims. Why the problem exists First, there are far more dogs in the United States than ever before and as a result, over-breeding and in-breeding of certain breeds can cause aggressive behavior.  More crime-cautious people seem to be breeding and training dogs to be more aggressive.  Any dog can bite for any reason at any time however the following breeds have shown to be the most frequent biters:   <ul> <ul> <ul> <ul> <li>Pit Bulls</li> <li></li> </ul> </ul> </ul> </ul> <ul> <ul> <ul> <ul> <li>Rottweilers</li> <li>Bull Mastiffs</li> <li>Doberman Pinschers</li> <li>Chows</li> <li>American Staffordshire Terriers    </li> </ul> </ul> </ul> </ul> Finally, we are crowding together more, due to community association living and people seem to simply be more exposed to dogs. Why the owner is  liable When trying to decide who is liable in any type of negligence situation, the first source is to review the prevailing law.   Minnesota and Wisconsin are called “strict liability statute states”.  “Strict liability statutes” are laws adopted to remove all doubt as to who is liable in the event of a loss like a dog bite.  If your dog bites, you are liable no matter the circumstances.  What you can do First and foremost, protect yourself by carrying personal liability coverage found within your homeowner’s or renter’s insurance policy but make sure there are no limitations or exclusions for dog bites.  Also, further protect yourself by purchasing an umbrella policy which will add appropriate layers of coverage for liability. Try to avoid owning the types of breeds listed above. You can also train your dog not to bite.  Most aggressive dogs fall victim to human short-comings.  To reduce the chances your dog will bite or reduce the chances that you or a loved one will be bitten consider the following:   <ul> <li>Consult with a veterinarian to learn about suitable breeds of dogs.</li> <li></li> </ul> <ul> <li>Spend time with the dog before buying or adopting.  Look for aggressive behavior.</li> <li>Slowly socialize a dog with children.</li> <li>Never leave infants or young children alone with dogs.</li> <li>Keep your dog around people - socialize it.</li> <li>Discourage children from disturbing a dog who is eating or sleeping.</li> <li>Play non-aggressive games with your dog like fetch.  Try to avoid games like tug-of-war as this can breed aggressive behavior.</li> <li>Avoid exposing your dog to new situations of which you are unsure of its response.</li> <li>Never approach a strange dog and always avoid eye contact with a dog that appears threatening.</li> </ul>urn:uuid:06f8d9a1-bd07-4aef-bf17-750b69abaad0Flood InsuranceMost of us saw the media coverage of the incredible devastation wrought by the floods in Southeastern Minnesota.   Homes miles away from any type of body of water were completely destroyed by floods and flood related mudslides.  Unfort...Tue, 24 Jan 2012 15:42:58 -0600Most of us saw the media coverage of the incredible devastation wrought by the floods in Southeastern Minnesota.   Homes miles away from any type of body of water were completely destroyed by floods and flood related mudslides.  Unfortunately, the vast majority of those who suffered damage did not carry flood insurance and “flood” is one of the primary exclusions on a homeowner’s policy.  Those without flood insurance are trying to rely on the dollars made available by the state and federal government.  All recipients of “disaster dollars” have one thing in common however, obtaining this money is a long arduous process and in almost 100% of the cases they never come close to being fully restored financially to where they had been before the flood.  So the answer is, carry flood insurance?  Not so fast.  The basic premise of risk management requires the question to be asked, what is the risk of suffering a loss due to flood, is there anyway to mitigate or eliminate the risk and what is the cost of the insurance?  The National Flood Insurance Program publishes a document that categorically states, “Everyone lives in a flood zone”.   This seems a bit far-fetched however many in Southeastern Minnesota felt they were nowhere near a flood zone yet their homes were completely destroyed by floods.  The simple fact is that everyone can suffer a loss due to flood or surface water.  The trick is to weigh your properties susceptibility to flood or surface water and determine the price of coverage. Purchasing flood insurance is very simple.  The federal government sponsors the “National Flood Insurance Program”.  Anyone can purchase flood insurance through this program provided his or her community is enrolled in the program (which almost all are).  To find out if you are in a flood zone, contact the city offices of your community, as they will have this information readily available. Any agent can assist you in purchasing this insurance but understand, like most federal programs, the National Flood Insurance Program does not provide automatic or perhaps enough coverage.  Contained in the policy language of the National Flood Insurance Program dwelling form is the definition of flood:  “a general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from: overflow of inland or tidal waters or unusual and rapid accumulation or runoff of surface waters from any source. There are at least two troubling issues with this definition.  First, the flood needs to include more than just your property or at least a two-acre area in order to be considered a flood.  This is rather limiting.  You have the very real possibility of suffering substantial surface water damage and not have coverage although you purchased flood coverage.  Second, the amount of coverage you can purchase can be an issue as well.  The maximum property coverage you can purchase through this program is $250,000 for a private dwelling and $100,000 for contents.  This is not a lot of money given today’s replacement costs.  While these issues are substantive, I do not want to give the impression that this program is too flawed to consider.  Certainly those that live next to or near a body of water need to purchase this coverage.  The risk is simply too great not too.  So how about the vast majority of us who either don’t live near or next to a body of water, don’t feel the amounts of coverage that can be purchased are enough but are still concerned about flood or surface water?  There is a solution…private insurance. Some private carriers are now offering their own surface water and flood endorsements on the homeowner’s policy.   Most of the private carriers are offering this coverage without the limitations of the National Flood insurance program listed above.  Private carriers are also writing insurance for flood or surface water up to the amount of coverage carried on your home.  Finally, private carriers are writing excess flood coverage over the National Flood Insurance Program, which eliminates the issue of inadequate coverage. Bottom line, if you live in a medium to heavy flood zone purchase coverage through the National Flood Insurance Program.  If you work with an agent who represents carriers offering primary and/or excess flood coverage, purchase the proper amount for your contents and dwelling over and above the amounts available through the National Flood Insurance Program. urn:uuid:98fc43ac-e497-4b09-84ad-c161334d32fbDon't let an uninsured driver steal your assets!I have to admit, many of the hundreds of automobile insurance commercials I have seen on TV lately are amusing.  Geico, AIG direct, Progressive and a host of others are spending hundreds of millions of dollars creating and running attractive, hu...Tue, 24 Jan 2012 15:36:24 -0600I have to admit, many of the hundreds of automobile insurance commercials I have seen on TV lately are amusing.  Geico, AIG direct, Progressive and a host of others are spending hundreds of millions of dollars creating and running attractive, humorous ads attempting to drive consumers to their toll free numbers or websites.   As creative as they can be, the ads are very similar in that they are sending a message that automobile insurance is a commodity and the only differentiator between policies and carriers is price.  Ouch! Ok, it is always fun to be entertained, but the fun stops when one considers how dangerous the approach of “one size fits all” automobile insurance can be to your financial security.  Let’s look at a great example of significant exposures that get lost in the message the advertising carriers are trying to sell you- uninsured and underinsured motorist coverage. Uninsured and underinsured motorist insurance provides coverage for you and your family in the event you are involved in an accident with another party who either does not carry automobile liability insurance or carries low limits of automobile liability insurance. Many states have enacted compulsory auto insurance laws, but even in these states up to 14% of all drivers do not carry insurance.  For states without compulsory auto insurance laws, the percentage is as high as 1 in three drivers.   In addition, since many of the direct carriers advertise price as the sole decision-making point, they purposely push lower limits in order to save money which creates far more underinsured motorists.  Currently almost 60% of all bodily injury related accidents involve uninsured and underinsured motorists.  It is easy to see that if you are involved in an accident, the chances of the other driver being uninsured or underinsured is highly probable.  Covering yourself properly against other drivers is growing in importance every day! Surprisingly, uninsured/underinsured motorist coverage is relatively inexpensive compared to other automobile coverages, running about $100 per vehicle per year for limits of $100,000 per person, $300,000 total per accident.  Unfortunately, $100,000 does not go very far these days therefore we recommend increasing uninsured/underinsured motorist coverage to at least $1,000,000 per person and $1,000,000 per accident.  Typically the most cost effective way to increase uninsured/underinsured motorist coverage to this limit is through an excess liability/umbrella policy.  The annual additional cost runs between $50 to $100 per car. There is no sense in trying to drive auto insurance savings by decreasing the uninsured/underinsured motorist limits.  These are critical coverages that need to be written at the proper level.  Don’t let any humorous commercial tell you differently…it’s no laughing matter.  urn:uuid:c989ee43-f238-4f43-8b49-e63cfd53a367An Important Coverage That Can Save You Money!A recent on-line survey by Google indicates that less than 30% of all renters carry renter’s insurance (also known as an HO-4).  The majority of the respondents felt that carrying renter’s insurance was important but felt it was cost...Tue, 24 Jan 2012 15:32:20 -0600A recent on-line survey by Google indicates that less than 30% of all renters carry renter’s insurance (also known as an HO-4).  The majority of the respondents felt that carrying renter’s insurance was important but felt it was cost prohibitive.   In fact, renter’s insurance is an extremely important coverage and quite affordable especially when purchased in conjunction with auto insurance.  Renter’s insurance policies cover personal property owned by the renter as well as providing coverage for personal liability.  To illustrate this point, here are two examples.  Regarding coverage for personal property, insurance will replace or repair personal property either damaged or destroyed in a covered loss such as fire or storm damage.  Regarding personal liability, if someone were to trip and fall while in your unit and sues you for their injuries, your renter’s policy will provide defense and coverage if you are found legally liable.  You might be thinking the above two examples can’t happen to you because you are careful…but what about the neighbor in the next apartment?  Through no fault of your own you could lose everything if for instance, your neighbor started the fire.  Also, if a loss to your building is your fault you can be financially responsible to the building owner for the damage.  Your renter’s policy would cover you in this instance (subject to certain exclusions). Purchasing renter’s insurance is a relatively simple process.  Almost any personal lines property/casualty agent can write renter’s insurance.  A good place to start is contacting the agent that currently writes your auto insurance. So, how can purchasing renter’s insurance save you money?  If you purchase renter’s insurance coverage from the same insurance carrier that provides your auto insurance, you will save money on both your renter’s insurance and your auto insurance.  An average renter’s insurance policy runs from $150 to $175 per year.  The average annual insurance premium on an auto is $800.  Both your renter’s and auto insurance in total could decrease by $97 per year.  This translates into an effective cost of only about $6 per month for renter’s insurance.  It certainly appears that purchasing renter’s insurance is not only a smart coverage move but can be financially rewarding! ***The purpose of the above article is to provide general information.  At all times, actual insurance policies should be thoroughly reviewed.  urn:uuid:f0cd0884-4164-483a-98d2-189fbf6ff8b3Rent BackA common occurrence when a home is sold is the buyer allowing the seller to reside in the home for a period of time prior to the buyer taking possession.  Many refer to this arrangement as a “rent back”.  While this is a common ...Tue, 24 Jan 2012 15:29:18 -0600A common occurrence when a home is sold is the buyer allowing the seller to reside in the home for a period of time prior to the buyer taking possession.  Many refer to this arrangement as a “rent back”.  While this is a common occurrence, this practice can become quite confusing when considering the liability aspects of this arrangement.  Specifically, who is responsible for losses to the home, the buyer and/or sellers contents and the personal liability for both parties? The first place to always begin with issues of this nature is reviewing any pertinent laws.  Most, if not all, purchase agreements adhere to the “Uniform Vendor and Purchaser Risk Act”.  The act states that the risk of loss transfers to the vendee (buyer) when either title or possession passes.  In the rent back situation title has transferred, therefore the responsibility of covering the home itself clearly rests on the buyer.  What then are their exposures when they rent the property back to the seller? The buyer will want the seller/occupant to sign a rental agreement clearly stating, among other things, that the renter is responsible for insuring their own contents and personal liability.  The buyer should also require the renter to add the buyer as an additional insured to the renter’s HO-6 (renter’s policy) policy.  The reason for doing this is to ensure that the buyer is covered for liability claims caused by the renter without having to use their own policy.  In addition to the above, the buyer needs to confirm that their homeowner’s insurance  carrier is advised that the home is being rented out for a period of time prior to the buyer occupying the home. Finally, the buyer should also confirm with their homeowner’s insurance carrier that any contents (typically all items that are not nailed, tacked or glued down) the buyer may have in the home, are covered during the rental period.urn:uuid:90e6c438-4d81-4295-8638-39d19006da89Non-Profit Directors & OfficersHow many of us have felt the compulsion to become active in a charity, a sports booster club, an alma mater or any number of worthwhile activities?  Once you become active, start going to events, help raise funds, eventually the inevitable quest...Tue, 24 Jan 2012 15:27:23 -0600How many of us have felt the compulsion to become active in a charity, a sports booster club, an alma mater or any number of worthwhile activities?  Once you become active, start going to events, help raise funds, eventually the inevitable question is asked….will you consent to sit on our board of directors?  Your reaction could run the emotional spectrum of “how do I get out of this”, to “wow what an honor”.   If you do decide to sit on the board, you have now accepted not only the responsibility of a board member, but also a potentially tremendous exposure to your personal assets.  Unfortunately, most members of non-profit boards of directors are blissfully unaware of the staggering exposure to economic loss they personally face. What is the exposure?  Much like a “for-profit” organization, the board of directors of a non-profit organization are charged with the ultimate responsibility of the actions and liabilities of the organization.  As a member of the board, you could be held liable for activities of the organization that cause harm to others.  Some actual losses include:   <ul> <ul> <ul> <ul> <li>Misuse of funds</li> <li></li> </ul> </ul> </ul> </ul> <ul> <ul> <ul> <ul> <li>Offensive behavior and sexual harassment</li> <li>Failing to supervise the CEO</li> <li>Waste of assets</li> <li>Misleading reports</li> <li>Libel and slander</li> <li>Acting beyond authority and scope</li> <li>Failure to deliver services</li> </ul> </ul> </ul> </ul> Pretty scary stuff, but doesn't state corporation law include language that the non-profit organization must indemnify the members of the board in the event of a loss?  True, but how many of us would trust our personal assets to the assets of the typical non-profit organization. Now that we understand the exposure,  how do we mitigate, eliminate, or transfer the risk?  Let’s assume that simply quitting the board is not an option. Many feel that elimination of the risk is found through federal and state law limiting the exposure of those serving on non-profit boards.  In fact, both federal and state laws contain language that essentially states you cannot be held liable for losses while sitting on a non-profit board.  The specific language states: “A director shall discharge the duties of the position of director in good faith in a manner the director reasonably believes to be in the best interest of the corporation and with the care an ordinarily prudent person in a like position would exercise under similar circumstance.  A person who so performs those duties IS NOT LIABLE BY REASON OF BEING OR HAVING BEEN A DIRECTOR OF THE CORPORATION.” So the State says you can’t be held liable…end of story?  Hardly.  Take special interest in the part that says you must discharge the duties of the position in good faith.  In reality, this means if you sit on a non-profit board in name only, you will not be protected by the law.  You must be active, attend meetings, and make prudent decisions.  Perhaps an even more important “requirement” for avoiding liability under the law, is that of “no compensation.”   A person must serve without compensation of any type (except for reasonable expense reimbursement) for the law to protect them.  What many people fail to realize is compensation can take many forms other than straight cash.  How about the free membership you might get for sitting on the board or the free admission to special events?  Given the wide array of “perks” for sitting on a board, the afore mentioned “prudent” person needs to be very diligent in avoiding any compensation or the law does not help him or her. We have established that although the law gives some protection, there are definitely gaps where a person could be sued.   So we need to look further. Another method for reducing or eliminating your exposure while sitting on a non-profit board is Directors and Officers insurance.  Directors and Officers insurance is purchased by the non-profit organization and is designed to cover the board and the officers of a non-profit organization in the event of a covered loss.  Unfortunately, many non-profit organizations do not purchase Directors and Officers insurance because they feel it is not necessary or is too expensive.  In the absence of Directors and Officers insurance or bountiful non-profit assets, YOU become the insurer. Ok, now what?  You’re concerned about the loopholes in the laws, your non-profit organization can’t afford Directors and Officers insurance, what do you do?  Don’t despair, there are simple and inexpensive methods for covering yourself through your own personal insurance.  Excess Liability/Umbrella policies often provide broad comprehensive coverage for those that sit on a non-profit board of directors. Ironically, the language that provides coverage on most excess liability/umbrellas is found in the exclusions.  The specific language to look for is: “We do not cover any damages for any covered person’s actions or failure to act as an officer or member of a board of directors of any corporation or organization.  THIS EXCLUSION DOES NOT APPLY TO A NOT-FOR-PROFIT CORPORATION OR ORGANIZATION, OR TO A CONDOMINIUM OR COOPERATIVE ASSOCIATION.” Making sure you carry excess liability/umbrella coverage containing the above language goes a long way to protecting you for the liability you accept when sitting on a non-profit board.  You don’t, however, want to use your coverage if it isn’t necessary.  Therefore, below is a short “due diligence check list” you should perform prior to consenting to sit on a non-profit board: <ul> <li>Check to see if the board you are considering has an active engaged board that follow “Robert’s Rules” and keeps and disperses complete board meeting minutes.</li> <li>Review the bi-laws and make sure there is a statement regarding no board compensation being allowed.  Make sure this statement is followed!</li> <li></li> </ul> <ul> <li>Review the financials and the security surrounding the financials.</li> <li>Be an active member and stay within your scope.</li> <li>Do not accept any form of compensation.</li> <li>Ascertain whether or not the non-profit organization carries Directors and Officers coverage.  Have your personal risk manager review the coverage.</li> <li>Ask your personal risk manager to review your excess liability/umbrella language to ensure it provides coverage for your actions as a member of a non-profit board.</li> </ul> The author of this document is Bruce Humphrey who is the CEO of PCG Agencies, Inc. urn:uuid:1c058040-34a7-489a-a6ac-4451968c2402Identity TheftAn incredible amount has been written about the issue of identity theft.  Despite law enforcement’s and the general public’s understanding of the issue, identity theft crimes continue to rise. The personal insurance industry has resp...Tue, 24 Jan 2012 15:21:38 -0600An incredible amount has been written about the issue of identity theft.  Despite law enforcement’s and the general public’s understanding of the issue, identity theft crimes continue to rise. The personal insurance industry has responded to this growing problem in various ways, however most carriers have created endorsements adding coverage for the following to their homeowner’s policies   <ul> <li>Costs associated with notarizing affidavits and sending these affidavits via certified mail</li> <li>Lost income due to insured’s time off of work to deal with the consequences of the loss</li> <li></li> </ul> <ul> <li>Loan re-application fees and long distance fees</li> <li>Attorney’s fees</li> <li>Services aimed at assisting insureds by directly contacting credit bureaus, creditors, etc. </li> </ul> While the insurance industry continues to improve coverage for identity theft, the best “medicine” is prevention and mitigation of the exposure.  Here are some steps that can be taken to minimize one’s exposure to identity theft loss:   <ul> <li>Never place outgoing mail in your mail box</li> <li>Never give any personal information such as your social security number to anyone unless absolutely necessary and the firm is trusted and reputable</li> <li></li> </ul> <ul> <li>Always shred all credit card offers received in the mail</li> <li>Obtain a credit report every year to ascertain that no one is damaging your credit</li> <li>Always use passwords to protect all of your accounts</li> <li>Be extremely vigilant about checking backgrounds of anyone with whom you propose to do business.</li> </ul> Should you or your client become the victim of identity theft, here is a list of actions to take:   <ul> <li>Contact the “Big Three” credit bureaus, including Equifax at 800-525-6285, Experian at 888-397-3742, and Transunion at 800-680-7289.  Alert them to place a “fraud alert” on your account</li> <li></li> </ul> <ul> <li>File a report with your local police.  This will help you deal with creditors who need proof of a crime</li> <li>Contact all your creditors, credit card companies, banks and other lenders</li> <li>Close any accounts tampered with or opened fraudulently</li> <li>Notify your bank of check theft and close the account immediately</li> <li>Complete the ID Theft Affidavit available through the Federal Trade Commission’s web site,  <a href="http://www.ftc.gov/bcp/conline/pubs/credit/affisdavit.pdf">www.ftc.gov/bcp/conline/pubs/credit/affisdavit.pdf</a></li> <li>Contact your attorney immediately to obtain professional advice</li> <li>Contact your insurance agent for possible coverage.</li> </ul>  urn:uuid:63fcc06b-5c79-495d-bd0f-3a762f6991c4HO-6 InsuranceAs many of you have experienced, Fannie Mae and Freddy Mac now require a certificate or binder of insurance be recorded at the time of closing for condominium and townhome purchases.  How does coverage work for this type of purchase and why is a...Tue, 24 Jan 2012 11:05:28 -0600As many of you have experienced, Fannie Mae and Freddy Mac now require a certificate or binder of insurance be recorded at the time of closing for condominium and townhome purchases.  How does coverage work for this type of purchase and why is a binder now necessary? An HO-6 policy provides coverage for a unit owner’s personal property and liability (for suits brought against them).  The coverage can also extend to certain “real” property found inside the unit.  This “real” property typically includes floor, wall and window coverings, cabinetry, light fixtures, molding, etc. and is often referred to as “additions and alterations.”  Historically, Associations would provide “All-In” coverage on the internal real property of a unit (also known as additions and alterations) via the Association’s master policy.  This means that an Association’s master policy would cover all additions or alterations within a owner’s unit.  Over the past several years, Community Associations have altered their governing documents with respects internal real property and have made it the responsibility of the unit owner to provide coverage  for additions and alterations.  It took years, but Fannie Mae and Freddy Mac have finally caught on that a large portion of their collateral (the unit) was uninsured if a unit owner was not purchasing a properly written HO-6 policy that provided coverage for additions and alterations. The actual Fannie Mae/Freddy Mac requirement reads: Part XII, Chapter 5,  Insurance Requirements require that lenders verify that hazard insurance for all condominium projects with attached units covers fixtures, equipment and other personal property inside individual units if they will be financed by the mortgage. The updated policy now requires that the borrower obtain a “walls-in” coverage policy (commonly known as HO-6 policy) unless the lender can document that the master policy provides the same interior unit coverage. The result of all this?  A unit owner now has to provide a binder of insurance at closing evidencing coverage for internal real property if their Association’s master policy does not extend coverage.  urn:uuid:0a7c0d42-482b-4090-b139-93044a18c366Are your guns covered?Ever wonder if your personally owned firearms are completely covered by insurance?  Or if you are paying a competitive premium for this coverage?  Both coverages and premiums vary wildly.  Here are a few thoughts to help you with this ...Tue, 24 Jan 2012 10:59:31 -0600Ever wonder if your personally owned firearms are completely covered by insurance?  Or if you are paying a competitive premium for this coverage?  Both coverages and premiums vary wildly.  Here are a few thoughts to help you with this issue. The Issues   <ul> <li>All homeowners insurance policies provide some coverage for firearms but there are severe limitations for theft of a firearm and this differs dramatically from insurance carrier to carrier.  There is typically no coverage for simply losing a firearm and policies include several other limitations or exclusions.</li> </ul> <ul> <li>All homeowners policies contain deductibles that would apply to any loss.  These deductible can often times be more than the replacement value of the firearm.</li> </ul> <ul></ul> <ul></ul> <ul> <li>     Pricing for specifically scheduling a firearm can vary by as much as 300%!   </li> </ul> The Solution Consider actually scheduling your firearms to your homeowners policy.  Scheduling means purchasing specific insurance directly for you firearms.  When you schedule firearms, you not only insure receiving either full replacement or full value for the firearm, but you also eliminate the deductible completely.  Scheduling also adds coverage to the point that almost anything that can happen to the firearm is covered.urn:uuid:c9843a45-51b1-41cb-9f4c-0743aa73e66cCredit ArticleCredit Scoring...a term that can strike terror!  How to create it, manage it, and not be hurt by it is an integral part of every consumer’s life.  I have to believe that most consumers (myself included) would put a love of credit bure...Tue, 24 Jan 2012 10:56:29 -0600Credit Scoring...a term that can strike terror!  How to create it, manage it, and not be hurt by it is an integral part of every consumer’s life.  I have to believe that most consumers (myself included) would put a love of credit bureaus right up there with the IRS.  As far reaching as credit scores have become in our life, who would have ever imagined that your credit score would have a significant impact on what you pay for auto and home insurance.  It is called an insurance score and it has significant impact on your pocketbook!  Background The use of credit scores in insurance has become very wide spread.  Over 90% of all insurance carriers operating in the U.S. use some form of credit-based insurance scoring.  While the vast majority of the insurance industry feels insurance scoring through credit is an incredibly accurate predictor of one’s propensity to loss, there is significant conflict surrounding the practice.  Detractors feel that the practice is patently unfair and targets certain ethnic groups and races.  Others feel that too many “good” insureds tumble through the insurance scoring gaps and are unfairly targeted.  Several states have taken up the anti-insurance-scoring cause and are looking deeply into the issue.   Chances are good that this issue will be around for quite awhile.  What is an insurance score? Credit-based insurance scores are confidential rankings based on your credit history.  They are not a measure of your financial assets, but supposedly measure how well you manage your financial affairs.  The insurance score is established by the insurance carriers themselves, based on your credit score.  Why are insurance scores used? Insurance carriers are convinced (via several years of statistical data) that there is a direct correlation between above average credit and low loss history.  The simple explanation is that the responsibility needed to adequately manage one’s personal finances are the same “responsible behaviors” (such as home and auto maintenance, operating vehicles in a safe manner, etc) that result in fewer and smaller losses.  In short, the data seems to show that financial stability is usually reflective of stability in the balance of one’s life. What is the net effect? Ironically, the net effect of insurance scoring has, in most instances, actually lowered the cost of auto insurance for most consumers.  If you have an above average insurance score, compare the premium you are paying today to the premium you paid for the same car three years ago.  The cost most likely has decreased at a greater rate than the cost decrease associated with the devaluation of the car.  What laws protect me? Laws are on the books both federally and state-by-state to help define, and in most instances, protect consumers from unfair credit practices.  Some of the more significant rules from laws on the books include: <ul> <li>Insurers are required to notify consumers if the consumer experiences adverse action, such as denial of coverage or increased premium due to the insurance score. </li> <li>Consumers also have the right to correct errors on their credit score and require insurance carriers to recalculate the score. </li> <li>Insurance carriers cannot reject new applications or cancel existing policies based on the insurance score alone. </li> </ul> What can you do? Obviously, keeping your credit score as high as possible will have a very positive effect on your insurance rates.  Credit scores are influenced by such things as payment history, debt owed, length of credit history, new accounts, balance on accounts, and negative records such as judgments, etc. Beyond keeping your credit score as high as possible, individuals should be pro-active in checking their credit periodically to ensure that your history is accurate.  Also be pro-active with your insurance carrier.  If you feel your credit has improved, demand that the carrier re-run your insurance score as it could lower your premium.