Personal Finance Tips

Insurance can be so confusing. You get so tired and bored reading the policy that when you get to the end you tend to skim over the last parts. One of the most important parts of the insurance policy is at the end though – the endorsements section. Here is why you should pay close attention to this section.

Most policies’ basic coverage forms end with a section called endorsements. Endorsements add to, take away or change provisions contained in your basic insurance policy form. Endorsements are typically one, two, or three pages long each.

One reason insurers use endorsements is to save money. If they have new provisions or have changed provisions in their policy, using an endorsement will allow them to save on re-printing costs. The insurance company simply adds an endorsement at the end of the policy to incorporate the new or changed provisions. So be to sure to check this section when you are purchasing insurance..

Endorsements are often used to restate a policy provision after a court decision interprets the provision in question in a different way than the insurer has been interpreting it. So you can see why you need to read this section carefully after you have finished looking at the basic policy.

Most commonly, endorsements add exclusions not stated in the basic insurance policy form. For example, in home owners insurance policies these often include such things as dog bites and home daycare services performed for a profit. Also typically flood and earthquakes are excluded from most home owners polices. Separate policies can be purchased elsewhere.

Knowing what the coverage is excluded by an insurance policy is very important, especially when comparing insurance policy quotes.

Insurance claim advance payments are not widely known by people who file claims. Often, when an insured has a loss of significant size, such as a flood, tornado, wildfire, hurricane loss or a big water damage loss, an advance payment of a portion of the anticipated settlement is issued by the insurance company. This situation also happens regularly when a business has a loss and needs money up front.

It is a customary and widely accepted practice for the insurance company to issue an advance payment in this type of instance. Be aware that there’s nothing in the standard property insurance policy that deals with advances. It is usually just a courtesy that the insurance company extends to their policyholder.

However, they don’t usually offer to do it. You have to request the advance.

Here’s an example. Joe Smith’s house is hit by lightning, and a fire damages most of the house. Joe’s policy has Building limits of $100,000, Contents limits of $50,000, ALE limits of $20,000. The house can be repaired for $70,000, which is less than the policy limits. However, the adjuster expects that the Contents loss will exceed the policy limits of $50,000, and the ALE loss will be $15,000. The adjuster sends in his first report to the insurance company, and tells them to expect the loss to be approximately $135,000 on these three parts of coverage.

The insurance company could easily issue an initial advance payment of $25,000 to $35,000 for Contents and ALE, and $40,000 to $50,000 for the Dwelling loss.

So, what do you do if your Contents are damaged and you need the most basic things, like a change of clothes and shoes? What if you need to have a contractor secure the building and put tarps on the roof to keep further rain out of the building? Most people do not have tens of thousands of dollars just lying in their bank accounts that could be used to begin repairs, or begin replacing personal property. That’s when the insurance company issues an advance.

It’s best to make your request in writing. Even if it’s just a hand-written letter, it’s best if it’s in writing. Write or type your request, keep a copy for your records, and give the copy to your adjuster. It’s also a good idea to send a duplicate copy to the claims department of your insurance company. Send it by overnight courier or certified mail. NEVER rely on the adjuster to ask for an advance on your behalf. He might get delayed with other work and it could be days before he asks. DO IT YOURSELF.

Take control of your claim, my friend! Make an EARLY request in the claims process for your advance payment!

For most of us purchasing a home is the biggest investment to mike during the whole lifetime. And it’s reasonable that such an important investment needs reasonable coverage. That’s why you need homeowners insurance.

What’s included in homeowners insurance?

In case you finance your house purchase through a mortgage, your lender is most likely to require you buying basic homeowners insurance. The basic homeowners insurance includes coverage against the following risks:

• Theft
• Fire and lightning
• Smoke
• Frozen pipes
• Ice and snow

Basic insurance policies also include liability coverage for cases when someone is injured in your house. In case there are legal actions taken against you it will also pay for court fees. Basic insurance will also cover your costs in case it’s impossible to live in the house due to fire or any other damage.

What’s left out of coverage?

To learn what is not included into the coverage you should read through your policy, especially the Exclusions part. Things not covered by standard policies vary from one company to another, but most likely they will include damage due to earthquake, flood, nuclear accident, war, act of terrorism and similar. Still, you can purchase additional coverage for such events to be included into your home insurance policy. Wear and tear damage is never included into the policy because it’s considered to be maintenance, which is the owner’s sole responsibility.

How much coverage do I need?

When buying a house through mortgage loan your lender will require you to purchase minimum home insurance coverage (which is usually the purchase value of your home). However, it’s usually not the amount of coverage to meet your insurance needs. Instead, try calculating how much money it would require to rebuild your house entirely and use this amount as the base for getting the right coverage amount. Speak to your agent when completing the insurance policy to calculate the exact amount, or even run a full inspection for qualified appraisal.

Typically, liability limits are around $100,000, however it’s too little to protect your assets in case of legal action. You may opt to raise your limits up to $500,000 for an additional price. Sometimes it may be useful to get umbrella coverage, which pushes your limits beyond $1 million, however such coverage is typically offered only when you have both your auto and home insurance from the same carrier.

Money saving tips

Of course homeowners insurance can be quite costly sometimes. Especially when you have many items under additional coverage. In order to keep the coverage you need while still having reasonable rates you might want to consider raising your deductibles first. Deductibles are the amount of money you will have to pay out of your own pocket for the damage before the insurance policy kicks in. and the higher is that amount the lower will be your premium. The usual deductible within standard policies is $250. Try raising it to $500 or even $1000, and your rates will go down by up to 15%.

Another good way to make your home insurance cheaper is installing security features such as alarm or video, special locks and so on. This way you protect your assets and the insurance company is likely to give you a good discount for that.

It’s easy to say what the law is – legislatures must write it down and publish it for all to read – but harder to live with its consequences. Looking across the US, all but three states have laws setting mandatory insurance levels for all vehicles on the road. Almost without exception, all these states also have laws making it a crime to drive a vehicle on a public road without a valid policy in force. This gives all drivers a simple choice. Either carry the minimum insurance or risk fines and, in some states, the confiscation of the vehicle. All these laws are a compromise between the interests of drivers and the interests of people who may be injured in traffic accidents. The more Libertarian view is personal responsibility. If you do something, you should be prepared for the consequences. That would mean every driver having enough cash in the bank to pay out every time their driving injures someone else or damages their property. But not everyone can afford to pay the medical costs for treating those they injure. This would be seriously unfair. Suppose you were walking along the sidewalk and a car knocks you down. Surely you should not have to pay your own medical costs? The answer is mandatory insurance so there is always some money to pay out to the innocent victims.

Most people agree this is a good idea but there’s a problem. Almost all these states set the mandatory amount forty or fifty years ago. What was an adequate amount then is a drop in the ocean today. So this February, Wisconsin bit the bullet and increased the mandatory rates both for liability insurance and for insurance against uninsured or underinsured drivers. The governor signed the bill into law and everyone sat back and awaited the results. The mail boxes have recently experienced a flood of renewal notices showing significantly higher premiums for the mandatory minimum cover. Needless to say, the Republicans are now promoting a bill to repeal the law making liability insurance mandatory. As it stands, about 14% of all drivers are uninsured. These premium increases during a recession are likely to increase this percentage significantly.

This review of the minimum amounts after forty years was perfectly reasonable. Most other states will have to follow Wisconsin’s example sooner or later. It’s just not acceptable to have such low minimums when medical and repair costs have risen so sharply. But the timing is unfortunate. Insurers had invested their funds in the stock and bond markets. When the recession hit, they lost a hefty slice of their capital reserves. There’s another law requiring insurers to have enough capital in hand to pay out all the expected claims. To build their capital back up to the required levels, all insurers are therefore raising their premium rates. Each state’s insurance department is insisting on putting more money into the reserves. This means you must shop around. Get auto insurance quotes from as many companies as possible to find the best prices. Not all companies lost heavily. Equally, the smaller companies will have to raise the cash from smaller groups of policy holders, i.e. more from each individual. So get the maximum possible number of auto insurance quotes to survey the market before buying.