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If a tree falls down in the forest with no one around to hear it, does it make a sound? Although no one knows the answer to this mystery, you can be sure that if your tree falls on your neighbor’s property, you’re going to hear from your neighbor. Sure enough, he says it’s your responsibility to pay for the removal of the tree and pay for any damage caused by your falling tree. But are you responsible? The short answer is NO.
Although common sense might tell you that you’ll have to pay for the damage and removal of your tree, this is actually an Act of God for which you are not liability or responsible. Had you been taking the tree down with a chainsaw and it fell the wrong way onto your neighbor’s fence, car or shed, then yes, you would be responsible because God didn’t bring down your tree, you did. Now you’re responsible. That’s the difference.
Often times in conversation with our clients, I hear them say Acts of God aren’t covered. That simply is not the case. If God and Mother Nature team up to send a lightning bolt, hail or hurricane force winds at you and your house, your homeowner insurance policy will pay you for the damage. Of course, you suffer your deductible and other factors might come into play, but you are definitely insured against these Acts of God when filing a first party claim directly with your own insurance carrier. What is true to say is that your insurer will refuse to pay your neighbor when your tree blows over onto their property and causes damage because it was an Act of God. Your neighbor will have to use their own insurance if they want any satisfaction.
So now you know.
Do you realize that if your child has a serious accident while driving your car that the victim’s lawyer will sue not only your child, but you as well, since you owned the car involved in the accident? So how do you avoid this potential financial disaster? Easy, don’t own the car.
More times than I can remember, parents have called our office to announce that their child is coming of age and will soon be licensed. We joke and laugh and even recall when we got our own driver’s license for the first time. But, when we discuss this impo9rtant matter with our insurance clients, we always suggest that the parent consider registering and titling the vehicle to be driven by the child in the child’s name. The reason is simple. We want you, the parent, to avoid the liability exposure that exists when your child, their friend or roommate puts you in when they drive “your car.” Oh, but I love and trust my child and I made them promise not to let anyone else ever drive that car. That’s so sweet. I’m sure it will make for a wonderful defense when you go to court. Then again, maybe not.
But, you ask, won’t the auto insurance cost more if my child owns the car and has their own policy? Probably not. The reason is because auto insurance carriers insist that each driver be rated as a primary driver on at least one vehicle. So, if you already have 2 vehicles on your policy with one for mom, one for dad and then add a third vehicle for your child, the insurer will insist we rate your child as a primary driver on one of your vehicles. Let’s face it, mom and dad can only drive 2 cars at once, not 3, leaving a third vehicle available to the child. Since the child is going to be rated as a primary driver on one of the vehicles anyway, why not set them up with their own policy? By the way, you are more than welcome to pay for it.
Now that your child has their own auto policy you are avoiding the liability that comes with the use of that vehicle. In addition, your child will now be covered operator while driving any of your vehicles at little or no extra cost to you since they have an auto policy in their own name. Everybody’s happy now. Maybe you even use this as a learning experience to teach your child a little something about financial responsibility, managing your money, etc. As a parent and as an insurance agent, I did it with all 3 of my sons and I recommend it to you as well.
So now you know.
Your bags are packed, your flight’s on time, your trip is right on schedule. You’ve planned everything down to the last detail so as to enjoy a stress free trip away from home and work. Then you arrive at your destination, with bags at your feet, standing at the car rental booth where the car rental agent is working overtime to get you to buy the insurance coverage option on the rental. Should you cave and purchase it or not?
Several times through the years, we’ve had clients call us right from the car rental booth at the airport to ask for our advice. And our advice is this: If you have “full” coverage on your insured car with us and you are a named insured on that policy then your short-term car rental will be covered exactly the same as the car we insure for you on your policy back in Bellingham. This is true as long as your regularly insured car is being parked and your short term rental can be considered a temporary replacement for it.
Your Massachusetts auto policy actually defines “your auto” as the vehicle listed on your policy (obvious) but also any short-term rental to replace the vehicle listed on your policy (not so obvious). This extension of coverage would also apply to rental cars that you operate because your vehicle is in the shop for repairs or has been stolen.
We state this “courtesy” coverage that travels with you is no better or worse than the coverage on your car back home. It has deductibles and exceptions to coverage that would apply just the same as if you had an auto accident or claim back home. If you choose to buy the car insurance rental option, do it because you want to avoid any deductible or out of pocket expense on your stress free trip. That is essentially what the rental car insurance option provides to you. Rental car companies are sticklers for who you name as potential drivers of the rented car. Be exact in your naming of drivers with them.
If you are traveling to a busy city with crime just around the corner, that insurance option might look like a pretty good idea. Other than that, I think you ought to take a pass on the insurance option and go start your vacation. We hope you have a wonderful trip.
So now you know.
Recently one of my almost-adult sons was driving to Cape Cod for a fun weekend with a friend when he called me to say, “Dad, I have good news and I have bad news.” When he told me the good news was that he was almost at his destination, I realized he was actually just calling to give me bad news.
Sure enough, he said that he had just gotten a speeding ticket, his first ever. Now, if I didn’t happen to be his insurance agent as well as his father, Im not sure he would have called me. His concern, like that of all the others who call our office after such an occasion, is one thing and one thing only: What is this going to do to my insurance?
Well son, “I have good news and I have bad news.” The good news is that you will technically not get a surcharge. The bad news is that your insurance premium is going up, and it’s going to stay up for at least 5 years as a result of your ticket.
Although my son had a perfect “99” driving record before the ticket, he will now be slotted as a “0” step driver. This neutral “0” step rating, or driving code, generates neither a surcharge nor the good-driver discount that he enjoyed when he was a “99” step driver. But, should he get another ticket any time soon, he’ll get 2 points and start paying a surcharge on top of his premium.
As to having at-fault accidents, they will saddle you with 3 or 4 surcharge points depending on how much your insurance company pays out to you and the other guy as a result of your at-fault accident. To avoid at-fault accident surcharges, you have basically 3 choices: (1) never have any at-fault accident, (2) settle the property damage claim directly with the other party without involving the insurance company, or (3) appeal the surcharge with the Merit Rating Board (DMV) as soon as you receive the dreaded surcharge notice following your at-fault accident.
We frequently recommend to our clients that they attempt to work out a deal with the other party if their accident was a simple one and the other party is a reasonable person. Through the years, I’ve personally helped those wonderful boys of mine do this at least twice. On another occasion, one of my sons had a total loss when his Jeep slid off the road during an icy snowstorm. He successfully appealed the surcharge, in large part because the police officer noted the icy conditions on his report. In fact, nearly 50% of all drivers who appeal their surcharge have their surcharge “vacated.” So, there is hope: but, in the meantime, our advice is that you go with option (1) and never have an at-fault accident.
So now you know.
I’d like to have a nickel for every homeowner client who told me their homeowner policy was insuring their house for more than it’s worth. And you know what, just about every one of them was probably right. Here’s the problem: Your homeowner insurance carrier has only one consideration and that’s insuring your house for a value reflecting what it would cost to clear away the devastated remains of your destroyed house and replicate your existing structure. This represents the Replacement Cost Value of your house. Even if you insist that you would build a “lesser” house in it’s place, your homeowner carrier is obligated by policy language to insure your house for what it costs to replace what you have, not what you might build in it’s place.
When you agree to their Replacement Cost value, it means your Co-insurance value is 100%. If you only agree to insure your house for 80% of their replacement cost value then you are meeting the minimum Co-insurance percentage that most insurers expect you to carry. The key word and concept here is Co-insurance, which is a fancy word for percentage of replacement cost value. If you agree to insure your house for what the insurer believes is the true Replacement Cost Value of your house then they will probably offer you Replacement Cost Coverage. When you have replacement cost coverage, your carrier promises to pay you EVEN MORE than the face value on your policy in the event of a total loss. Our agency has had two clients suffer total fire losses to their houses in recent years. BOTH collected even more than their policies face value.
Not that your insurance carrier would knowingly allow it, let’s say you insured your house for only half it’s replacement cost (co-insurance) value. That means you were only insuring your house for HALF of what it would cost to rebuild it. You then suffer a fire loss of “only” $10,000.00. Since you carry well over $10,000.00 in coverage on your homeowner policy, you assume there will be plenty of coverage to pay your $10,000.00 claim. Guess what? Your insurer has other ideas. They bring up this clause in your homeowner insurance policy about Co-insurance and say that since you only insured 50% of the replacement cost value of your house, they are only going to pay half of your claim. Ouch!
It’s a difficult concept to insure anything, including your house, for more than it’s market or cash value. Somehow we just want to believe that all repairs can somehow be made affordable. You know, like when your car has a little ding that you just know can be fixed for a few hundred dollars and then your body shop says a few thousand dollars will make it just right? But, my car’s not even worth a few thousand dollars!
And then it comes up again. Your body man starts talking about the Replacement Cost Value for the parts to fix your car.
So now you know.
As we all know, a deductible represents the dollar amount that you must put forth first, before your insurance company starts contributing towards your claim. The insurer deducts your deductible from the covered portion of your claim and pays you the difference. Given that, it would seem to make sense that carrying a low deductible is the way to go, but I say no.
Unless you know you are going to have a claim, you should always choose a deductible that is as high as you can financially stand it. The higher the better. But, that said you should also ask how much you will save on your premium at the different deductible levels. For example, a young driver may save as much as $300-$400 per year to raise their collision deductible from $500 to $1,000. However, a senior citizen with inexpensive rates may save as little as $50.00. The cost/benefit is much better for the person who has a higher premium or multiple vehicles. A good insurance agent will help you decide what makes the most (dollars and) sense for you.
As far as your homeowners insurance policy is concerned, carrying a low deductible with the intent to make a series of small dollar claims with your homeowner carrier is a great way to get yourself Non-Renewed and end up in the assigned risk pool due to claims frequency problems. That’s when you find yourself in The Fair Plan high risk pool paying higher rates for several years, maybe longer. As a general rule, my advice is to take the higher deductible so as to keep your premium lower. The savings guaranteed, whereas you may never even have a claim.
Another deductible pitfall you want to be wary of is percentage (%) deductible on your homeowner policy. Typically, Fair Plan (assigned risk) homeowner policies and other policies that insure houses on or near coastal areas have separate, wind deductibles. These separate, wind deductibles work on a percentage basis. For example, your policy may say that in the event of a wind or hail claim, your deductible is 2%. That means if your policy is written for $250,000.00 then your 2% wind deductible equals $5,000.00. Ouch. I’ve even seen voluntary insurers use this wind deductible for houses here in Bellingham even though we’re miles from the coast. Do yourself a favor and check your homeowner policy to make sure it doesn’t have a separate WIND deductible. If it does, start asking questions.
On a good note, many of our auto insurance carriers are now offering Deductible Dollars and other goofy name benefits to long time auto insurance clients. Let’s say you’ve been insured with a certain auto insurer for 2 or 3 years, many are now “banking” deductible dollars for you to use in the event of a future claim. Typically, the most you can borrow in deductible dollars when you have acclaim is $250.00. Still, it helps to reduce your real deductible from what is shown on your policy to a lesser amount.
And now you know a lot more about that pesky deductible.
Is “it” Covered?
Even after 35 years in the insurance business, I still have to remind myself not to rush the answer when I talk to clients who want to know if “it” is covered. Like most of us, my caller wants a simple explanation that hopefully ends with a resounding YES! Often when our client gets a disappointing NO, the reason has less to do with what “it” is and more to do with how “it” met it’s demise.
In the insurance world, the way something is lost, damaged or destroyed is referred to as a peril. In simpler terms, we would call it the cause. For example, what caused “it’s” demise or destruction. If the cause or peril isn’t cited as a covered peril in your policy the “it” won’t be covered no matter what “it” is. HOW the loss happened is critical.
To give you an example of this insurance logic, let me explain a loss that one of our long-time clients suffered many years ago. Chuck called me during the middle of winter to ask if his gas powered auger would be covered or not. He said he had just accidentally dropped it to the bottom of Uncas Pond in Franklin. After Chuck explained to me what an auger is and how helpful it is to drill holes in the ice to get to the fish, I soon got the picture as to how he dropped his auger to the bottom of the pond.
As to whether there would be coverage for “it,” I think I mumbled something like “I think so because your auger is part of your contents and your homeowner policy insures your contents. But, let me check with the insurance company first and then get back to you.” After checking with an experienced claims examiner at the insurance company I got my education regarding the important role that perils play in settling a claim.
Although Chuck’s gas powered auger would have been covered had it been stolen, vandalized, burned or run over by a vehicle, there was no peril if he accidently dropped “it” into a pond. The fact that it was a gas powered auger had nothing to do with the denial of coverage. It was HOW it was damaged or destroyed that led to the denial of his claim.
The next time you or a friend wonder if “it” is covered, keep in mind that the answer is probably going to have less to do with what “it” is and more to do with HOW it happened.
So now you know.