FAQ
 | How much life insurance should an individual own? "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:
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| Should term insurance or cash value life insurance be purchased?
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:
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. |
| How does mortgage protection term insurance differ from other types of term life insurance? 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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| What are the advantages to using an agent to purchase insurance? 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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| Why do some apartment complexes require tenants to have renters insurance? 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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| How do I know if I need a personal umbrella liability policy? 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. |
| I have an older car whose current market value is very low - do I really need to purchase automobile insurance? 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. |
| Are there some optional coverages I should consider?
Special protection for computers, coverage for business property off premises or in transit, and employee benefit plan liability are the most common options. Most don’t cost very much.
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| 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? 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. |
| What is the difference between collision physical damage coverage and comprehensive physical damage coverage?
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. |
| What are some practical things I can do to lower the cost of my homeowners insurance? 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. |
| What does homeowners insurance cover? 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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| What is the difference between "actual cash value" and "replacement cost"? 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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| What factors should I consider when purchasing homeowners insurance? 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.
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| What are the policy limits (i.e., coverage limits) in the standard homeowners policy? [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. |
| Where and when is my personal property covered?
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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| Do I need earthquake coverage? How can I get it?
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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| What factors can affect the cost of my automobile insurance?
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. |
| It seems package policies come with a lot of frills - can I save money by deleting coverages I don't want? A Business Owner Package (BOP) includes the most common coverage extensions that a business needs but might not have asked for. There is no extra charge for and no way to drop what you don't need.
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| Why does my lessor or my clients require evidence of my coverage and want to be named as an additional insured? Is this difficult? Does it add to my cost? They (and their insurance company) want to be sure that you are insured and that your policy will respond to any claims which arise from your occupancy or your work. By being named in your policy, they become an “insurance partner” and have the right to submit a claim directly to your company. Most BOP policies will let you add such certificate holders or additional insureds without charge. Specialty policies DO have an extra charge and require pre-approval. |
