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The following topics cover often asked questions. Insurance policies and laws vary from state to state. For any specific questions, consult your Independent Insurance Agent or your State's own Department of Insurance. See the links page for assistance. These are the opinions of the owner of the McHugh Insurance Agency Inc, solely. Check with your agent, attorney or insurance policy.
Believe it or not, I get asked this question most often. When a client calls, I ask if they want the long explanation, or the short explanation. Here is the long one:
First, you should check your policy or call your agent. I would not want to say categorically that a rental car. Some personal auto policies do not allow for coverage for a Temporary Substitute Automobile. That having been said, here is what I tell clients.
Most likely, your policy does provide for physical damage and liability coverage for a temporary substitute automobile i.e.) a rental car. It is covered the same way as your regular vehicle - the one that is in your garage, or at the airport, or at the body shop. However, you must have comprehensive (other than collision) and collision coverage on that vehicle, for your policy to work covering a temporary substitute automobile.
Case in point: You take the family to Disney World. From the airport, you rent a car. You have a glorious 5 days with Mickey. The night after you arrive, someone steals the rental car from the parking lot of your hotel. You call the police to report the theft, your insurance agent and the car rental company. Your insurance company starts adjusting the claim by either handing it off to a local adjuster (if they do not have a claims adjuster in the area), or if they do, it gets put in line with the rest of the claims that have been filed.
This is what happens if you decided to use your own insurance policy to cover the rental:
Your insurance company processes the claim. You will have to pay your deductible depending on whether you had a theft (Comp) or an accident(Collision). Your company will charge this to your driving record, increasing your auto rates. Meanwhile, the rental company was expecting to have you return the car on a certain date, so it is charging the daily rental rate onto your credit card, which may be heavily stressed because of the entire vacation. You may get embarrassed by going over the limit.
This is what happens if you decided to purchase the rental company's insurance policy:
You call the rental company, report the theft or accident, and tell them to bring you another car. You generally pay no deductible. Your own auto policy does not become involved, so your rate does not go up. You are free to max out your credit card with silly hats and souvenirs rather than putting more money into the rental company's pocket.
This is what I do: purchase the rental company's insurance:
I rent a car rarely, once or twice a year. I am usually on vacation, intent on having a good time. What's another couple of dollars for the rental insurance. I figure that the odds of my being in an accident are a lot higher on strange roads in a different state than they are within my normal driving radius. My record with the company does not get involved in the event of a claim, and I can enjoy my vacation.
However, if I rent a car locally, I figure I am familiar enough with the territory, and the odds are against my having an accident so close to home. I do not buy the insurance; I use the automatic coverage provided on my personal auto policy.
What about renting a van or truck to move to a new house?
This further muddies the water. Some companies exclude coverage for anything but private passenger automobiles, pick up trucks and vans. A one ton box truck would not qualify. Other companies will cover a box truck the same way as they cover a private passenger auto, if it is damaged on a rental basis. It is best to check your policy and call your agent.
I hope this has told you everything you wanted to know about renting a vehicle, but there are still more considerations. This rental coverage is usually good for only 30 days at a time. It also only applies in the United States, Canada and Puerto Rico, NOT Mexico or Ireland !. Consult your policy and agent!
Why do I need Uninsured / Underinsured Motorist coverage?
| Illinois' mandatory auto insurance requires: | Georgia's mandatory auto insurance requires: |
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You buy a brand new Plymouth Minivan for $ 32,500.00. On the way home from the dealership, you are hit broadside by a motorist fleeing the police. The airbags go off, but you are bounced around the interior like a tennis ball. The paramedics cut you out of the car with the 'Jaws of Life'. A couple of months later, just when you get out of the hospital, the insurance company for the other driver interviews you, and then pays the limit of their policy, $20,000 for your bodily injury, and 15,000 for the damage to your brand new minivan.
You have in excess of $ 100,000 in medical bills, and $17,500 remaining to be paid on the van totaled in the accident. Where do you go? Your own policy requires you to carry Uninsured and Underinsured motorist coverage. This is where your loss will be made up, provided you have sufficient limits to cover them.
In Illinois you are not required to carry the same limits for UM-UIM as you do for your own BI & PD. You could be carrying the same state mandated limits as the other guy had, in which case, your company would only pay $ 20,000 for your bodily injury. The damage to your vehicle would be covered by your collision coverage, in this case.
As an agent, I get a lot of calls from people asking me to quote on their auto insurance. The first underwriting question out of my mouth is "Who are you currently insured with?". You would be amazed how many people kind of stammer and then admit that they have no policy in force!
You need Uninsured/Underinsured Motorist coverage. It protects you from the deadbeats of the world.
I make craft items to sell at fairs and craft shows. Why won't my homeowner's policy cover them?
This activity brings up a whole can of worms, and a lot of issues that most people probably never think about. As far as the general public seems to be concerned, anyone at a craft fair is a business person, not just some well meaning grandma who likes to sew.
As discussed under the in-home business, a homeowner's policy can't respond to a person who makes and sells craft items in the home. Look at the worst case scenario-- You make a decorative teddy bear. A customer buys it. The grandchild comes over, removes one of the button eyes and swallows it, choking to death. You can bet that the parents are going to go after whoever made the bear and was negligent in not sewing on the eyes with metal cable or something.
You might be able to endorse this exposure onto your homeowner's policy. I have one company that will. It does not, however, pick up the exposure for the products, but it is a cheap "band aid" to the problem of organizers wanting a certificate of insurance before you exhibit.
Consider the following examples of things that can happen at a craft fair:
As you can see, a lot can happen to you at a craft fair, and that is why many promoters are now requiring that a Certificate of Liability Insurance (indicating that you have liability insurance), be issued to them prior to the show. Certain risks you could be willing to assume yourself; others you may not, and want to an insurance company to assume that risk for you.
The recent trend of running a business out of your home raises quite a few insurance questions. Is my computer covered? What if a client slips on my sidewalk, or falls down the stairs on the way to my basement office? What if someone steals my cellular telephone?
And now for the answers: A homeowner's policy has two parts, the Property section, often referred to as Section I, and the Liability part, Section II. Each section addresses having a business in the home, and the coverage goes from slim to none, depending on the section involved.
From a coverage standpoint on the Property side of the homeowner's policy, a little coverage is provided for an in-home business. It is addressed in the exclusions portion of the policy, where a certain amount of business property is covered on the premises, usually $2500. The policy further excludes coverage for business personal property away from the premises to $ 250.00. Actual ownership does not make a difference, as long as it is in your care, custody and control. This would cover a leased fax machine cell phone or computer, for example.
The Liability section (Section II) on a homeowner's policy clearly addresses a business in the home. The language is quite clear. There is NO coverage provided in the event that a liability claim arises on the insured premises. In Section II, exclusion#1B, the policy clearly excludes any business exposure. The company is insuring the usual liability exposures for a single family residence, not a main-street place of business.
To further complicate the issue, if you hire a part-time file clerk, secretary, you are responsible for their health and welfare, while on the job. You need some sort of workman's compensation policy, because your homeowners policy only covers you for negligence. A businessowner's policy excludes it forthrightly.
To summarize, then, there is no liability coverage provided for an in home business and very little coverage provided for business property in the house.
Knowing there is a problem does not give you an answer, however.
How do you get insurance to cover the business you run out of your home? There are several ways. If your business qualifies, you can purchase a Businessowners Policy, or BOP. Like a homeowner's policy it covers both property an liability. Generally "Main Street" businesses qualify. You can pick the amount of business personal property and a limit of liability, and you then have the business covered.
If your business does not qualify, you should be able to get a Commercial General Liability policy in a package with property coverage, robbery, and whatever else you want. There are many options available, so you must pick and choose. Ask questions when you buy.
Depending on the business, you might even need professional liability. Doctors, Lawyers, Accountants, Computer Consultants and Insurance Agents, to name a few, need to cover their errors and omissions.
Why you should have a Personal Umbrella?
As I see it, the primary purpose of purchasing any type of insurance is to protect your assets. Your insurance protection, then should increase as your assets increase. After you reach a certain limit of auto liability, for example, it is often less expensive to purchase an umbrella policy, rather than buying, 500,000/1,000,000 liability limits.
You also get covered for things which sometimes fall between the cracks of your homeowners policy, like libel, slander, false arrest and so forth.
In Illinois, automobile owners are required to carry Public Liability Insurance. One of the biggest reasons for carrying a personal umbrella is to have it go over the uninsured motorist coverage. Not every company, however offers this coverage.
Consider this case in point: You are hit by a motorist who has the state mandated minimum limits of liability. You are almost killed. His insurance company approaches you, and says that they admit liability, and pay you the limit of their policy. Because their insured carried the state minimum limits (20/40/15), they cut you a check for $ 20,000, and close their file. You have $300,000 in medical bills, and $ 50,000 in lost wages as a result of this accident. You turn to your own auto policy for the Underinsured motorist. They will pay your per-person limit of $ 250,000. Do the math. This leaves you $ 80,000 short of breaking even on an accident you did not cause.
The personal umbrella you had the good sense to buy picks up the excess, and pays you the $80,000 defecit.
Why buy an Inland Marine Floater ?
The term "Inland Marine" is an anachronism. It refers to coverage of personal property on sailing ships, and harkens back to the Lloyds Coffee house in London. Some companies use the term "Personal Articles Floater". The terms mean the same thing. Why should you have one?
Every homeowner's policy covers your personal property for an additional percentage of the insurance value of the house. The house may be insured against all risk of physical loss (a HO3 policy), but the personal property is insured for Named Perils. Loss, breakage and mysterious disappearance are not Named Perils. According to the "common man" principal, the insurance companies give you a fixed amount under your personal property limit for jewelry, guns, fine arts and so forth.
You may have more than that minimum limit, so you should "Schedule" that article of personal property on an Inland Marine floater, if you want coverage.
This inland marine "mini-policy" gives you better coverage for these valuables -- it gives you All Risk coverage on the articles you specifically insure .
The inland marine "mini-policy" also allows you to select a lower deductible on these scheduled articles than you have on your homeowner's policy.
Many people put engagement rings on this personal articles floater. I suggest getting the jewelry re-appraised every couple of years so that the value of the jewelry will be covered if the ring is lost. Because jewelry appreciates in value, your $5000 engagement ring in 1990 may be worth $ 10,000 in today's market. If you don't increase the insured value on the policy, the insurance company will pay a maximum of $ 5000!
I often get calls in my agency. The panicked homeowner identifies himself and then tells me he has a flood in his basement. Is he covered?
I often wonder how many agents apologies when denying the claim, that the policy clearly does not cover flood. It does not seem fair to deny a claim out of hand like that.
First, I try to determine the cause of flood. An insurance policy is a legal document, and as such has a number of definitions in it. For the insurance company, a flood means "surface water ... or water below the surface of the ground seeping or leaking through a building..." What caused the 6 inch pool of water in the basement?
If we get 6 inches of rain and it comes through a crack in the wall and destroys your basement, you do, indeed have a flood. No coverage is provided on the standard Homeowner's policy.
The Federal Emergency Management Agency (FEMA) provides insurance against the peril of flood, to pick this exposure up. The cost of this insurance policy varies widely, depending on your flood zone. It is usually about the cost of your homeowner's policy, and all it covers is the peril of flood.
If, however, the 6 inches of water in your basement was caused by the clothes washer hose rupturing, you do have coverage! Likewise, if a pipe bursts, you do have coverage.
On the other extreme, if the sump pump can't keep up with the flow of water into the house, and it fails, you may have coverage if you purchased an endorsement called "Sewer and Water Backup". This endorsement usually costs $ 25.00 to $ 100.00 gives you limited coverage if the sump pump gives out. Ask your agent if this would be of benefit to you.
The typical Homeowner's policy comes in two basic forms, nowadays, an HO2 and an HO3. For better or worse, an HO3 policy is referred to in the business as an "All Risk" policy. This is really a misnomer because it does not cover everything that can happen to your house. It should have been dubbed a "Named Exclusion" policy. In contrast, a HO2 policy is a Named Peril policy.
The HO 2 Policy says that if any of the following perils happen, they will consider it a claim:
| Fire | Lightning | Wind | Hail | Explosion |
| Riot/civil commotion | Aircraft | Vehicles | Smoke | Theft |
| Vandalism/Malicious Mischief | Glass Breakage | Pipe Freezing | Volcanic Eruption | Falling Objects |
| Weight of Ice, Sleet, Snow | Collapse | Electric Current |
This seems like it covers about everything that could possibly happen to a home. It isn't. Flood, earthquake and Ice Dam are just a couple of perils that the HO2 policy does not cover. The important concept here, is that the perils are named. Hence, it is a Named Perils Policy.
The HO3 Policy, on the other hand, covers you for all risk of physical loss Except for the following:
| Ordinance of Law | Earth movement | Governmental Action |
| Nuclear Hazard | Power failure | War / military action |
| Water (Flood) | Inherent defects | Vermin |
It should have been called the tongue tripping Named Exclusion policy instead of All Risk, for it invites consumer confusion.
Note, however, that even an HO3 policy covers the personal property on a named peril basis.
After a devastating tornado went through a town on the other end of our county, one of my policyholders called me up and asked: "I finally read my policy, like you told me to, and nowhere, that I could find, does it say that I am covered for Tornado. Am I?"
Even with a Named peril policy (see discussion above) Tornado is not specifically mentioned. It is considered wind, at least in this part of the country. As insurance laws vary from state to state, however, you should read your policy and check with your agent.
Answering Machines / Voice Mail / eMail
Situation: I am not always able to call my agent during 'normal business hours'. I call the agent to leave a message on his answering machine, but he does not have one. Why not?
No, it is not because he is too cheap to buy one. Some agents have a very good reason for not having answering machines hooked up to their telephone system. It has to do with the nature of the insurance policy. As I have stressed over and over again, your insurance policy is a legally binding contract. If you pay the premium, the insurance company will pay the claim (according to the terms and conditions set out in their policy).
Part of this contract, or any contract for that matter, is that there has to be an offer by one party, and an acceptance by the other party for the contract to be valid. The insurance company offers their contract, the insured pays the premium. The policy is the offer, and the payment is the acceptance.
Suppose you contact an agent on the telephone to get a quote for auto insurance. He checks a couple of companies, and finds one that will insure you at an agreed upon price. This is the company's offer. You stop in his office, sign the application and give him a check. This is your acceptance. You have a valid contract, and you are insured.
On the other hand:
You get the quote, but finally decide to switch to the new company after business hours? You call the agent up to leave a message on his answering machine, with your credit card number and all of the other information needed. Are you covered?
NO. There is no acceptance on the part of the agent (company representative) of your intention to be insured by them. If there is no acceptance on the part of the agent, then there is not a valid contract, and consequently, no coverage applies.
I know of law firms that turn off their fax machines 30 minutes before quitting time. I know of agents who forsake customer service and convenience for this small point of law. My answering machine says that coverage can't be bound by leaving a message, which should stand up in court.
The same point of law applies to using fax machines, and email. Just because you offer to insure your cars does not mean that the company will accept it if there is no human to do the accepting. Contract law goes back one thousand years, to days with no fax machines or email. It will probably take another thousand for it to catch up and readily address situations like these.
Identity theft is the fastest growing crime in the United States.
Insurance companies look upon identity theft as sort of a hybrid peril. No insurance company can prevent an erstwhile crook from stealing your confidential information. No more than a smoke detector can prevent a house fire. Buying an insurance policy to protect you from this is really locking the barn door after the mare is gone, for the policies reimburse you for your loss to real property, rather than do anything to protect you from it. As with any other type of insurance, it works reactively, not pro actively.
Simple things you can do to prevent Identity theft:
• Buy a paper shredder. Shred any documents listing your Social Security number and other financial information such as your bank account numbers and credit card numbers. This is the number one way of preventing identity theft.
• Don't carry your Social Security card with you or use your Social Security number as your driver's license number.
• Don't carry a checkbook. Pay by cash or credit card.We welcome your input as to some other ways to prevent this. Please contact us with your ideas for posting.
What it will do is:
reimburse you up to the limit of coverage purchased (or given)
Provide counseling for the necessary steps to take to lock down your information
monitor your credit, looking for unwarranted breaches in your security shield.
internet purchases
make sure there is a little lock on the browser window. This indicates that the server is encrypted. This means that it is almost impossible to get the sensitive information with which you are providing the site.
Never... never use your social security number as a means of identification. Even if the company asks for it. Find another site to buy the stuff, even though it may cost more. Your social security number is to be viewed as an asset.
Credit bureau phone numbers:
Equifax: 800-525-6285
Experian: 888-397-3742
Transunion: 800-680-7289
SSA Fraud Hotline: 800-269-0271
http://clarkhoward.com/topics/identity_theft_guide.html
http://www.Annualcreditreport.com
Horror stories about. This is really scary stuff, like a widowed senior citizen, not even on the internet, looses her house by having the title via quit claim deed taken from her.
Insurance Regulation
Every insurance web site I visit talks about the way it is in
individual states. Isn't there something that is true about insurance on a
national level?
Perhaps there is. At this point, Insurance Law is governed by each individual state. Each state has a department of Insurance, which monitors insurance companies, responds to complaints and authorizes companies to do business.