FAQs
You may have many questions about insurance coverage. Below you will find answers to a few of our most frequently asked questions. If you do not find the information that you need, please contact us. We are happy to respond to your questions.
My homeowners insurance is part of the payment I make each month to the mortgage company. Who decides what insurance to get?
You do - it is your home and your insurance policy. As a means of protecting their investment, the mortgage company collects a set amount from you each month, puts it in escrow, and then pays your insurance and taxes when they fall due. However, the policy is still yours and you may select the insurance you feel offers the best coverage at the best rates. In fact, if you allow the mortgage company to choose, you might well end up paying more for your homeowners insurance.
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What kinds of perils am I protected against?
Remember that policies vary but homeowners insurance usually covers damage to both structures and personal property caused by:
- Fire or lightning.
- Windstorm or hail.
- Explosions.
- Riot or civil commotion.
- Aircraft.
- Vehicles.
- Smoke.
- Theft or vandalism (sometimes called malicious mischief).
- Falling objects.
- Weight of ice, snow or sleet.
- Freezing of a plumbing, heating, air conditioning or other such household system.
In fact, your coverage is most likely even more comprehensive than the above list. Many homeowners policies cover damage by "just about everything," unless the coverage is specifically excluded. In these cases, it is even more important to understand what is not covered.
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What about floods, earthquakes and other catastrophes?
Most catastrophes are covered; for example, wind damage from hurricanes and tornadoes come under the windstorm peril listed in the previous question and so are included. Flood and earthquake damage, however, are not covered by a standard policy.
Be careful not to be lulled into a false sense of geographic security. Flood and earthquake activity is more widespread than many people realize. For example, almost 90 percent of the U.S. population lives in seismically active areas. Since 1900, earthquakes have occurred in 39 states and caused damage in all 50. And if your home is located in a flood-prone area, you are 26 times more likely to suffer a flood loss than a loss from fire.
You may want to check with your agent about special catastrophic policies for normally excluded conditions like floods and earthquakes. Of course, the cost of such extra coverage may reflect the high risk involved. If you live along a shoreline, for example, expect to pay a higher premium for flood coverage than someone living on a mountaintop would pay.
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Is there anything I can do to lower my premiums?
Because your premium is based partly on the level of risk the insurance company must take, there are things you can do to lower your premium. Installing deadbolt locks (to discourage theft), fire extinguishers, smoke alarms, and burglar and fire alarms that alert your local police and fire stations can often save you up to 15 percent on your premium. Check with your agent before purchasing any of these items to see if your insurance carrier has specific requirements to qualify for the discount.
We offer discounts if you insure both your home and automobile with the same company. Another way to save may be to increase the deductible on your homeowners policy. If your deductible is $100, it means that you agree to pay this amount first, and your insurance company will pay for damages that exceed this deductible. By increasing your deductible from $100 to $250, or even $500, this decreases the insurance company's risk, which may mean a savings in your premium.
Your insurance agent can help you evaluate the different policies and companies to find the one most suitable for you.
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I am a renter, not a homeowner. Do I need insurance?
The same rule of thumb applies to renters as to homeowners. If catastrophe struck tomorrow, could you afford to replace everything you own? Or if you were sued, would you have enough money to pay legal fees and possibly settle the suit? If not, chances are you would benefit from the protection that renters insurance brings.
Renters insurance offers the same general personal property coverage and liability protection as a homeowners policy. Thus, your camera is insured while you are on vacation, and you are covered if your grandfather clock crashes into the apartment lobby's wall and leaves a gaping hole. In fact, most policies are surprisingly extensive and may include additional living expenses (also called loss-of-use coverage) if you are forced by fire or other damage to live elsewhere.
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What are the different types of policies and what do they cover?
Auto insurance is divided into several different types of coverage:
- General liability covers damage you may cause to other people's property and injuries to the people themselves.
- Collision covers damage to your own vehicle in an accident.
- Comprehensive (other than collision), i.e., fire, theft and other non-collision damage, covers fire damage to your vehicle, break-ins, vandalism or theft, as well as natural disasters (earthquake, hail, hurricane, flood, etc.—unless the vehicle is overturned, then it is considered a collision).
- Personal Injury Protection (P.I.P.) insurance, usually in the range of $10,000 to $35,000, covers medical expenses for injuries. This "good-faith" coverage guarantees immediate medical payments for you, your passengers and other parties, regardless of who is at fault. It also covers you and members of your household in any accident involving an automobile, whether you are on foot, on a bicycle, in a friend's car, etc.
- Uninsured motorist (UM) and underinsured motorist (UIM) coverage protects you if you are injured in an accident with others who themselves carry insufficient or no liability insurance.
- Extra coverages include expenses for towing, labor, temporary replacement vehicles, etc. These are generally defined as add-ons or endorsements to your policy.
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Why and how are policies priced for different drivers?
Drivers are grouped according to the level of risk each one poses, i.e., the amount of loss incurred by insurers within various categories of policy holders. For various reasons, drivers are categorized by:
- Sex—Men have more accidents on the road than women.
- Age—Drivers under 25 (and, for some insurers, under 30) are considered at higher risk of having an accident.
- Marital Status—Married drivers tend to have fewer accidents than single drivers.
Personal Driving Record—Years of driving experience, accidents, speeding tickets and drunk-driving offenses are all factors in determining how much of a risk you pose as a motorist.
- How You Use Your Vehicle—If you commute by car during rush hours, you're at greater risk of having an accident than if you only drive for errands and recreation on the weekends. Drivers who use their own vehicles for business also are considered to be at greater risk.
- Type of Vehicle—The value, size, weight, age of your vehicle—even the cost of replacement parts—are essential to determining the price of your insurance. Larger, heavier vehicles are considered at lower risk than smaller, lighter ones. Plus, more expensive cars are costlier to have repaired than economy models.
The cost of your insurance policy is based on the average cost of covering actual losses, spread out over your particular "rating group" as a whole. Of course, you may never have an accident or have your car stolen, and therefore will never need to be compensated. But others in your category may not be so lucky. Your premium will help to pay for their losses, just as their premiums would help to pay for yours. In other words, you are investing a little today in case you need a lot tomorrow; your investment is pooled with others, and the pool pays for your loss.
For example, if you are a 23-year-old man and you park your new sports car on a downtown street in a large city, you will likely pay more for insurance than a 37-year-old woman who parks her four-wheel-drive in the suburbs, simply because—based on average losses—you have a greater chance of having an accident or being the victim of auto theft.
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What happens if I have an accident with an uninsured driver?
First, call the police to the scene to be sure all pertinent information is properly recorded. Your nerves will be shaken right after an accident, and it helps to have a calm and knowledgeable person walking you through the necessary details.
Then, contact your agent immediately and ask about filing a claim. If you followed all the recommended guidelines when you bought your policy, you should be covered within the limitations of that policy. Remember, your insurance policy is designed to protect you.
If the cost of your damages or injuries exceeds the amount your policy will pay out, it may be time to take legal action against the other party. Even if you have no-fault insurance, sometimes the only way to be compensated is to place blame and responsibility where it belongs.
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What happens when I loan my car to someone?
Is that person covered by my policy? Am I still covered?
Yes. Liability and coverage for physical damage, i.e., comprehensive and collision, always follow your car. So, if a friend borrows your car and has an accident, you're still protected against the cost of damages or injuries. Plus, if the driver of your car is insured, his/her policy will also be available to cover the cost of damages and injuries.
The same rules apply when you borrow someone else's vehicle—your own insurance follows you no matter whose car you are driving. But the vehicle owner's policy is the key coverage if you have an accident.
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