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COMMON PERSONAL LINES INSURANCE
QUESTIONS FOR OUR COASTAL AREA:
Q: What is REPLACEMENT COST?
A: The cost, at the time
of the loss, of a new article identical to the one damaged,
destroyed or stolen. When the identical article
is no longer manufactured or is not available, replacement
cost shall mean the cost of a new article similar to
that damaged or destroyed and which is of comparable
quality and usefulness.
Q: How does replacement cost apply to buildings?
A: The replacement
cost of a building would be the amount of money it would
cost to repair or replace the building with similar
material at today's prices without depreciation.
Q: What is ACTUAL CASH VALUE (ACV)?
A: For a building,
this figure is determined as a replacement cost less
depreciation. The calculation of the replacement
cost is developed by building cost manuals which include
the material and labor costs for construction in that
geographical area. The depreciation figure that
is subtracted from the replacement cost is based upon
various depreciation guides and typically includes a
visual inspection of the property. Factors that
affect a building's ACV include: year of construction,
type of construction, repairs made to the building over
its life, and the present condition.
For contents, ACV is the replacement cost less depreciation
for the article that is damaged, destroyed or stolen.
Q: What is LIABILITY insurance?
A: The purpose of liability
insurance is to provide personal liability and medical
payments to others. The policy usually offers
a minimum amount of $100,000 and maximum amount of $500,000.
It includes the following coverages: damage to property
of others, first aid expenses, and (personal liability)
claim expenses. Liability coverage pays on behalf
of the insured the sums which the insured shall become
legally obligated to pay as damages because of bodily
injury or property damage, to which the insurance applies,
caused by an occurrence.
Q: What is a PERSONAL ARTICLES FLOATER (PAF)?
A: Homeowners insurance is
designed to cover general possessions, not valuable
collections like antiques, jewelry and artwork.
Most insurance companies limit their coverage of expensive
possessions so that household premiums are more affordable
to everyone. A homeowners policy lists the specific
monetary limits for personal property under the section
"Special Limits". If the limits seem
low to you, you may wish to schedule your valuables
on a PAF. By providing your agent with an appraisal
or a bill of sale for your valuables, you will be able
to schedule that article. In the event of a loss,
the article is replaced at the scheduled amount.
Generally, no deductible is applied.
Q: What is a PERSONAL UMBRELLA POLICY?
A: It is an excess liability
policy that provides coverage over your personal property,
home, automobile, boat, motorcycle, etc. Generally,
the policy limits are offered between $1 million and
$10 million. The underlying insurance on your
personal property must meet the specific guidelines
set forth by the insurance carrier. Liability
coverage pays on behalf of the insured the sums which
the insured shall become legally obligated to pay as
damages because of bodily injury or property damage.
COMMON COMMERCIAL LINES INSURANCE
QUESTIONS:
Q: What are the essential coverages for small
businesses?
A: All small businesses should
have Business Owners / Package Policy, Workers Compensation,
Auto, Flood, and Umbrella policies. A Business
Owners (or Package Policy) can provide special property
coverage on your building, contents, business income
and computers. It can also provide crime / fidelity
and equipment coverage. The policy will include
liability coverage for your premises, operations, product
and completed operations tort liability exposures.
Workers Compensation: statutory limits
for accidents, disease or illness which occurred on
the job and are incidental to your job. Employers
liability provides coverage for your company if a tort
claim is presented for a job-related injury.
Auto: if necessary to cover both liability
and physical damage for owned autos or trucks used in
the business.
Flood: Hilton Head Island is in a
100 year Flood Plain as designated by NFIP and the US
Corp of Engineers. Therefore, it is necessary for
all properties to be covered by Flood insurance.
Coastal Plains Insurance can place National Flood, Excess
Flood and Difference in Conditions flood coverages to
protect your investment.
Umbrella: This is excess liability
over and above your primary liability coverages.
Limits are usually available to $5 or $10 million.
Higher limits may be purchased at reasonable costs.
Other coverages to consider: Life,
Accident and Health, Disability, Long Term Care, Retirement
Plans, Dental Plans.
Q: Can Coastal Plains Insurance insure our
large commercial business?
A: Yes, Coastal Plains Insurance
has designed, marketed, serviced and placed coverages
on large commercial accounts. Our company has
placed multi-million dollar property values coverage
for both local and out-of-state companies. Coastal
Plains has written business in the states of GA, SC,
FL, NC, VA, TN, TX, NY, OK, AL, CA, CO, and UT.
We can place coverage for any company headquartered
in the Southeast with operations throughout the USA
and internationally.
Q: I'm just getting my business started. Do
I need insurance right away?
A: Yes, because the chance
that you could suffer a loss begins with the first day
of business. You can't get help after the fact. If you
suffer a loss and have no insurance or have improper
or insufficient coverage, there is very little, if anything,
your insurance agent can do to help you. You must be
prepared for the risks that are inherent in any business
and the losses, sometimes catastrophic, that they can
cause.
Also, many states and local jurisdictions require that
businesses be insured to begin operating. And if you
rent space for your business, your landlord probably
requires that you be adequately insured as well. Is
insurance coverage different for different businesses?
It can be. Many small businesses are now insured under
package policies that cover the major property and liability
exposures as well as loss of income. A common package
policy used by many small businesses is called the Businessowners
Policy (BOP).
Generally, these package policies provide the small-business
owner more complete coverage at a lower price than separate
policies for each type of insurance needed. Your agent
can help you decide which policy or policies are right
for your business. Additional coverage for property,
liability or perils or conditions otherwise excluded
(e.g., flood protection) can be purchased as endorsements
to a standard policy or as a separate, second policy
called a difference-in-conditions (DIC) policy.
Because businesses vary, it is impossible to have a
standard policy to cover all contingencies. Also, some
businesses, regardless of their size, do not fit the
profile of a standard businessowners policy. For example,
restaurants, wholesalers and garages have special liability
needs that are not met in the standard businessowners
policy. Your insurance agent can advise you of the best
policy (or policies) to protect you and your business.
Q: What types of property do I need to insure?
A: Your business may not
possess all the following types of property, but you
can use this list to make sure that you have considered
all the property categories and any insurance coverage
that may be warranted:
- Buildings and other structures (owned or leased)
- Furniture, equipment and supplies
- Inventory
- Money and securities
- Records of accounts receivable
- Improvements and betterments you made to the premises
- Machinery
- Boilers
- Data processing equipment and media (including computers)
- Valuable papers, books and documents
- Mobile property such as automobiles, trucks and
construction equipment
- Satellite dishes
- Signs, fences, and other outdoor property not attached
to a building
- Leased equipment
To establish the amount of insurance you need on each,
your insurance agent can help you review the types of
property you own and their uses. Some of these items
are covered in the basic policies. For others, coverage
can be added by an endorsement, or rider. And some,
like money and securities, may not be covered by a standard
commercial policy and may require a second, separate
policy.
Q: What types of property insurance should
I consider buying?
A: The best thing to do is
to take a complete inventory of all your business property,
determine their value and decide if each is worth insuring.
Then check to see that the items on the inventory list
are included in the basic business property policy and
covered for the correct amount. If not, ask your agent
about the cost of purchasing additional coverage to
meet your needs.
You also need to consider your business situation.
Are you planning a major expansion? Does your inventory
have a decidedly peak season (like a toy store in December)?
Or does it fluctuate throughout the year (like a clothing
store)? Is your liability limit high enough in light
of the new job contract you just signed? Business policies
are designed to be added to or subtracted from to meet
your needs. Be sure to discuss changes to your business
with your agent so that he or she can be sure your policy
still provides adequate coverage.
Some common additional coverages for business property
include (although this list is by no means all-inclusive):
Boiler and Machinery Insurance
Even if you do not own a boiler, you may need this coverage.
The term "boiler and machinery insurance"
is gradually being replaced with terms such as "equipment
breakdown" or "mechanical breakdown"
coverage. This insurance provides coverage against the
sudden and accidental breakdown of boilers, machinery
or equipment, including computer systems and telephones/communication
systems. Coverage usually includes reimbursement for
property damage, expediting expenses (e.g., express
transportation charges), and business interruption losses.
Builders Risk Coverage
Covers buildings in the course of construction. Depending
on the policy, this coverage can be for either the building's
value at the time of loss or its full value at the time
of completion.
Building Ordinance Coverage
Provides coverage when a community has a building ordinance
stating that when a building is damaged to a specified
extent (usually 50 percent), it must be completely demolished
and rebuilt in accordance with current building codes
rather than repaired. Special attention is required
when establishing the amount of insurance.
Business Interruption Insurance
Covers the loss of earnings as a result of damage or
loss of business property. Reimbursement for salaries,
taxes, rents, and other expenses plus net profits that
would have been earned during the period of interruption
can be included.
Commercial Crime Coverages
Covers money and securities, stock and fixtures against
theft, burglary and robbery both on and off the insured
premises and from both employees and outsiders.
Debris Removal Coverage
Covers the cost of removing debris after damage from
fire or other covered peril that requires debris removal
before reconstruction of the damaged building can begin.
This is not part of fire insurance coverage and must
be added as an endorsement.
Fidelity Bonds
Covers business owners for losses due to dishonest acts
by their employees.
Glass Coverage
Provides coverage for glass breakage such as store windows
and plate glass on office fronts.
Inland Marine Insurance
Primarily covers property in transit such as from warehouse
to warehouse or warehouse to retail store, as well as
other people's property left on your business premises,
such as clothes left at a dry cleaning business or an
employee's personal effects left in the company locker
room.
Insurance for Loss of Lease Income or Value
Covers the loss of income when rental property is damaged
or destroyed and the loss of value when the owner of
the rental property also used some of its space for
business. If the tenant of the destroyed or damaged
building is forced to rent space elsewhere at a higher
cost, this is called loss of lease value.
Q: Who decides how much my business property
is worth?
A: Property insurance
can be purchased on the basis of the property's actual
value, on its replacement cost, or on an agreed amount.
The differences between the three are:
Actual Cash Value
The replacement cost of the item minus depreciation.
For example, a new desk may cost $500. If your 7-year-old
desk gets damaged in a fire, it might have depreciated
50 percent. Therefore, you would be paid $250 for it.
Replacement Coverage
The cost of replacing an item without deducting for
depreciation. So today's cost for a desk of a size and
construction similar to the 7-year-old one damaged by
fire would determine the amount of compensation. If
it costs $500 today, that would be the replacement coverage.
Agreed Amount
Art objects, antiques and other unique items are usually
insured at an amount agreed upon when the policy is
being written. An appraiser values the goods to be insured
and the business owner and the insurer agree upon an
amount that the insurer will pay if the goods are destroyed
due to an covered peril.
Check your policy. If you prefer replacement coverage
and do not already have it, this coverage can be added
to your policy. Inflation-guard coverage, which automatically
increases your insurance amount a certain percentage,
protects against rising construction costs. Your agent
can advise you of the costs involved.
Q: What kinds of events does business insurance
cover?
A: Basic property
insurance policies generally cover losses caused by
fire or lightning and the cost of removing property
to protect it from further damage (e.g., removing inventory
or equipment from a damaged building so it won't be
stolen). "Extended perils," including windstorm,
hail, explosion, riot and civil commotion, and damage
caused by aircraft, automobiles or vandalism, are usually
covered in a standard policy. Other important perils,
often not covered and considered "optional"
in almost all standard policies, include earthquake
and flood damage, building collapse, and glass breakage.
Property insurance can be written as either "named
peril" policies or so-called "all risk"
policies. A named peril policy provides coverage for
those perils specifically named in the policy. An all
risk policy covers loss by any perils not specifically
excluded in the policy. The term "all risk"
does not mean that all perils will be covered and, to
avoid confusion, is often replaced with the term "special
form" or "special causes of loss" coverage.
Check with your agent on the perils covered by your
policy. If you wish, additional coverage can be added.
Q: Everybody seems to be suing everybody else
these days. What if someone sues my business?
A: No business can afford
to be unprepared for a lawsuit. Liability insurance
protects your business assets when the business is sued
for something the business did (or failed to do) that
contributed to injury or property damage to someone
else. Liability coverage extends not only to paying
damages but also to the attorneys' fees and other costs
involved in defending against the lawsuit - whether
valid or not.
The standard businessowners policy provides liability
coverage, as does a separate policy known as a commercial
general liability (CGL) insurance policy. Generally,
commercial liability insurance, whether purchased in
a separate policy or as part of a standard businessowners
policy, will cover bodily injury, property damage, personal
injury or advertising injury. The medical expenses of
a person or persons (other than employees) injured at
the business or as a direct result of the operations
of the business are also covered.
Usually excluded from both types of liability insurance
policies are suits by customers against a business for
nonperformance of a contract and by employees charging
wrongful termination or racial or gender discrimination
or harassment.
Check with your agent about the best liability protection
covering all types of situations that may arise in your
business.
Q: Will I need to protect my employees in the
event they are injured on the job?
A: Yes, and in most states
there are legal requirements that must be met, and for
which you may be responsible. State laws vary, but most
states require that you carry some form of workers compensation
insurance. This protects the employee and also offers
you the business owner a degree of immunity from lawsuit
by an injured employee.
Q: I keep one auto strictly for business. Do
I need a separate policy?
A: Yes. Whether you have
one vehicle or several, you will need a business automobile
policy. Such a policy covers any motor vehicle used
in your business including cars, vans, trucks and trailers
pulled by trucks, and offers coverage if they are damaged
or stolen. It also covers liability if the business
vehicle is in an accident and the driver is at fault.
This policy is not for truckers or commercial garages.
They have special liabilities and must secure special
policies that deal with their different needs. Businesses
that have a fleet of vehicles will of course have different
needs than a business with one or two, and their policies
will reflect these differences.
Q: I work out of my home. Will my homeowners
insurance cover my business?
A: Yes, but on a very limited
basis. Loss of business property is usually reimbursed
up to $2,500 in the house and up to $250 for business
property damaged or lost away from the premises. Even
if your business is a sideline such as a craft studio,
these limits may be too low to cover all the equipment
and materials you have accumulated. It's also important
to know that no business liability coverage is included
in a standard homeowners policy. Your insurance agent
can help you ascertain what, if any, additional coverage
you need. This additional coverage may be added to your
homeowners policy or found in a separate commercial
policy.
Q: What is coinsurance all about?
A: Most business policies
include a "coinsurance" clause stipulating
what percentage of the total value of your property
must be insured in order to be fully reimbursed for
a loss, even a partial one. (Most losses are partial.)
If you insure for less than that amount, your insurance
company may impose a "coinsurance penalty"
on your claim.
Here's how coinsurance works:
Let's say you have a building insured that you believe
would cost $100,000 to replace and a coinsurance penalty
in your policy of 80 percent. You insure the building
for $80,000, thinking you have fulfilled the coinsurance
clause. A fire loss causes $60,000 worth of damage,
so you submit a claim. Your insurance company subsequently
determines that the replacement cost of the building
is actually $150,000. To determine how much to pay on
the claim, the insurer divides the amount of insurance
you purchased ($80,000) by the amount you should have
purchased (80% of $150,000 or $120,000). The result
(two-thirds, or $40,000) is the amount of your claim
the insurer will pay.
Thus, even for a partial loss within the monetary limits
of your policy, you will receive only two-thirds of
the amount claimed. If the building had been insured
for at least $120,000, the insurer would have reimbursed
you for the full amount of the loss.
You should check with your agent to make sure you have
adequate coverage. Adding an endorsement to the policy
that automatically increases policy limits to keep pace
with inflation is a good idea.
Q: Can I do anything to lower my insurance
premiums?
A: Remember that all insurance
premiums are based on the risks involved. The insurance
company evaluates the situation to determine the risks
- or potential for losses - and bases its rates on the
results. Therefore, deliberate steps you take to lower
your risks not only can help safeguard your business
but also may make you eligible for lower insurance rates.
Consider these steps:
- Maintain adequate lighting throughout your business
premises.
- Keep electrical wiring, stairways, carpeting, flooring,
elevators, and escalators in good repair.
- Install a sprinkler system, smoke and fire alarms,
and adequate security devices.
- Keep only a small amount of cash in the cash register.
- Keep good records of inventory, accounts receivable,
equipment purchases and the like. Consider keeping
a second set of records off-site, such as with your
accountant, insurance agent or at home.
- Make sure your employees have good driving records.
- Make sure your employees know how to lift properly
and use all necessary safety equipment, such as goggles,
gloves, and respirators.
- Consider using the services of a risk manager. Such
an outside consultant can advise you of any safety
or environmental regulations you may have overlooked
or not been aware of and talk to your employees about
safety practices.
- You may also wish to raise your deductible where
appropriate to lower your insurance premiums. How
high to raise the deductible should be governed by
how much you can afford to pay out of pocket. Be careful
not to raise it so high that you cannot cover it should
a loss occur.
- Finally, make sure your agent is familiar with your
business and the risks inherent in it. He or she should
be able to advise you on risk management techniques
and their benefits to both you and the insurer.
Q: What should I look for in an agent?
A: Agents are there to help
you. At the most basic level, any agent should be able
to answer all of your questions about insurance, provide
you a thorough assessment of your insurance needs, and
offer you a choice of insurance products to meet those
needs. Also, any insurance agency should provide you
with prompt, quality service in the case of a claim.
Just as important is the level of professional confidence
and personal comfort you feel with the agent. Many people
stick with the same insurance agent for decades, even
generations. It helps to find an agent you can get to
know and trust.
An important, but sometimes overlooked, factor to keep
in mind is that there are two kinds of insurance agents:
those who represent only one insurance company and those
who represent more than one insurance company.
Agents offering through their agencies only the policies
of one insurance company often are referred to as "captive
agents," because the company they represent does
not allow them to offer their customers competitive
alternatives.
By contrast, agents offering through their agencies
the policies of more than one insurance company are
called "independent agents," because they
can shop around for their customers for the best insurance
values among a variety of competing companies.
A nationwide survey in 1994 showed that Americans prefer
to work with independent insurance agents by a 2-to-1
margin over captive agents. You can be sure you are
dealing with an independent agent when you see this
symbol on the agent's signs, letterhead and business
cards.
COMMON
LIFE AND HEALTH QUESTIONS:
If you have additional questions that you would like
us to answer, please call or e-mail
us and we will be more than glad to assist you. |
