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Frequently Asked Questions Aviation Insurance FAQ Q. I’m making repairs to my plane including replacing the engine with one with more horsepower. Will this impact my coverage? A. Probably yes. First of all, if you carry hull coverage, then if the value of the plane changes, the amount of hull coverage would need to be increased. Secondly, there may be underwriting issues involved, and the company will want to approve the modifications. If the plane is changed to what is considered a complex aircraft, then they may require some additional dual instruction training on the part of the pilot. Q. Why have my rates increased? I haven’t had any claims in years. A. From an experience standpoint, there are two facets to the rates you pay. First of all, your individual claims experience will affect the rate you pay in the form of loss free discounts. Secondly, the claims experience for the company as a whole is considered when they set the rates. This may be broken down into claims by type of aircraft, type of use, or by pilot experience. For instance, the company may identify that over a period of time, losses on a particular type of aircraft are higher than for other similar aircraft. This being the case, the company will likely use higher rates when quoting this particular type of airplane. In addition, other factors can affect what rates you pay. Most insurance companies use investment income to offset insurance rates. This is good when the stock market is booming, however, when bond yields are low, and the stock market is declining, there is very little of investment income to offset losses, and consequently rates must increase to make up for the loss in investment income. Most insurance companies purchase reinsurance. Reinsurance contracts are set to reimburse the insurance company if losses exceed a certain amount in a year. The cost of reinsurance can vary from year to year, therefore when reinsurance rates increase; insurance premiums are bound to go along. Finally, insurance companies oftentimes charge what the market will bear, particularly when there are fewer options for consumers. In other words, just like in other industries, more competition lowers the cost. Q. I never carry any passengers. Can I reduce my liability coverage and save some money? A. Yes, but you must first remove all the seats from your plane except the pilot’s seat. Then your seat qualifies to be rated as a one-seater, and this will reduce your liability premium. Q. Will my aircraft coverage cover items like luggage that might be lost or damaged as they being transferred to my plane from a boat? A. Usually not. Normally you will have to look to your Homeowners policy to cover your personal belongings. Damage to your passenger’s luggage might possibly be covered under property damage liability, assuming you were responsible for the damage. Q. Are faulty repairs covered? A mechanic did some work after hours as a favor to me, so his shop won’t take any responsibility for his mistake. A. Faulty repair work is not covered under hull policies, however, if the plane crashes or is damaged because of the faulty repair work, the subsequent damage is covered, all but the faulty repair. Q. When I fly a plane I don’t own, whose insurance provides the primary coverage—mine or the owner of the plane? A. Generally, pertaining to liability coverages, the policy covering the specific plane involved will be primary, and the policy of the pilot, if different will be excess. As to hull coverages, only the policy covering the plane specifically will respond. Your policy as a non-owner pilot usually contains no coverage for damage to the hull of a borrowed airplane. However, if you have a renters policy you may be able to add hull coverage as an option. Q. What is an “Open Pilot Warranty”, and how does it affect me? A. The standard, unendorsed aviation insurance policy does not allow un-named pilots to fly the covered airplane. The “Open Pilot Warranty” is an endorsement added to the policy by the insurance company that allows any pilot meeting the stipulated qualifications in the warranty to fly the aircraft, as long as they have your permission. Q. What are Medical Payments, and how does that coverage differ from Liability? A. Liability coverage is based on negligence or liability, whereas Medical Payments coverage can be used regardless of fault. For instance, if someone trips over their own feet while getting into, or out of your plane and they are injured, then you could offer to have your insurance company cover their medical bills up to the limit of your Medical Payments coverage, even if you were not at fault. It can be looked at as a goodwill payment. On the other hand, your insurance company will not offer payments under the liability section of your policy unless they feel you are somehow responsible.
Automobile Insurance FAQ Q. When renting a vehicle on vacation or for non-business use, should I purchase the coverage the car rental people always want to sell me? A. This is a difficult question. Most personal auto policies provide basic liability and physical damage coverage for the rental of a vehicle. The problem is, the rental contracts you sign frequently hold you responsible for more than your policy will pay. For instance, many contracts now call for “loss of use” damages, and “diminution” damages. Loss of Use occurs because when a rental vehicle is in the shop being repaired, it is not available for rental. Diminution occurs when a relatively new vehicle is wrecked and repaired, but now worth less than it was before being wrecked. Most insurance companies are not covering damages for Diminution and only a few are covering Loss of Use. Therefore, if you want to be fully covered for any possible rental car damages, you must buy their daily insurance that is quite expensive. Q. Why did my auto insurance premium go up? I haven’t had any accidents or tickets. A. Automobile insurance rates go up almost every year, regardless of your driving record. They must increase because the costs the insurance companies incur are always increasing. Factors making up auto insurance losses such as crash parts, health care costs for treating injuries, and injury awards from juries all have been increasing at a higher pace than the core rate of inflation, therefore, it is logical to assume that automobile insurance rates will follow in step with the cost of losses that are covered. Q. I'm planning to buy a new vehicle. How can I find out what the insurance will costs will be before I make the purchase? A. Insurance costs vary greatly for different vehicles. It is worth your while to contact your Customer Service Representative for assistance when you are going to buy an auto. If you contact us before you look around, we can suggest different models with the lowest insurance costs. If you contact us after you have been shopping, we can help you choose from among several different models you are considering. Q. Can I make a change to my auto policy using the web site or e-mail? A. This is a difficult issue. Although we would prefer to make it easy for you to communicate your automobile changes electronically, in practice it is impractical to do so. First of all, we do not have the authority to automatically bind coverage when you send an electronic message. Secondly, because of the complicated nature of insurance, often times you will require different coverages when you change vehicles. We feel we cannot do an adequate job of servicing your insurance needs electronically. Please call us when you need to make a change. Q. What does my credit rating have to do with the cost of my auto insurance? A. According to a study by Conning and Co., more than 90 percent of auto insurance companies, and an increasing number of home insurers, use your credit information, filtered through a formula to create an "insurance risk score," to determine how likely you are to file a claim on an insurance policy. More than half of those insurers use that information to determine how much to charge you in premiums, while others use the information solely to determine if you are an acceptable risk. Insurance risk scores are similar to credit scores
because both look at your credit information, but the two are not the
same thing. While
both
insurance scores and credit scores look at the same characteristics
of a person's credit report, the categories are weighted differently.
Therefore,
a person might have a high (good) credit score, but have a poor insurance
score. Q. What Factors Are Considered In Computing An Insurance Score? A. The five categories of considered are:
Insurers place importance on the factors that show long-term stability, so by demonstrating responsible use of credit and keeping your balances low, you should be able to improve your insurance score. That could translate into lower insurance premiums, if you've been impacted by a negative credit history in the past.
Business/commercial Insurance FAQ Business Insurance 101: Top Questions answered Q. What is the difference between Replacement
Cost and Actual Cash Value? The determination of ACV is subject to many variables, but ACV is often interpreted as meaning the cost of repairing or replacing property at the time of loss, less depreciation and obsolescence. Some insurance people, particularly property claims adjusters, explain ACV as not including any "betterment" accruing to the insured through repair or replacement. Differences of opinion often arise between insured and adjuster concerning the extent of depreciation or other factors, resulting in the insured's dissatisfaction. In addition to these problems, ACV loss settlements may not cover an element of property loss, i.e., the value of the present use of the property. The factors above helped lead to the development of RCV insurance, but the primary reason was that unless the insured has a cash reserve for depreciation, paying for the difference between ACV and the cost to replace the building after loss can present a painful financial problem. RCV insurance first came about shortly after World War II. It was initially available as a separate policy offered by specialty insurers, and was called depreciation insurance, sold as a supplement to the conventional ACV coverage of the standard insurers. This insurance covered the difference between the cost of repair or replacement and the ACV of the damaged property and it covered only buildings and other structures, not personal property. This type of coverage has evolved from that beginning to the broad, readily available coverage including both buildings and contents that is the standard today. Underwriting attitudes about RCV insurance have been subject to changes that more or less coincide with the cycles in underwriting profitability. There are valid arguments both favoring and opposing broad use of RCV coverage. The concept has great customer appeal. By carrying enough RCV insurance, an insured can be certain that in event of a severe loss, funds will be immediately available to restore the property quickly and completely. Unlike the early version of RCV, the current version does not require rebuilding on the building's original site, so the insured has the choice, after a total loss, of moving to a new location to rebuild, although the time to decide if you are going to do this may be limited. An innovation in the late 1980's and now generally accepted by the entire industry, is guaranteed replacement coverage for dwellings. Under this coverage, the insurer guarantees the replacement of the dwelling even if the cost is greater than the amount of homeowners insurance carried on the dwelling. For this coverage to be written, there must be agreement when the policy is written that the amount of insurance reflects the current RCV of the building. An annual percentage increase in the amount of insurance is generally used to keep insurance in line with the property's value. Some automobile insurers even offer RCV personal auto physical damage coverage. To be eligible, the insured must buy the coverage when the automobile is purchased new or at the time it is leased, and the coverage must be maintained continuously thereafter. If you are interested in this feature, please let us know. As underwriting cycles reverse, the negative aspects of RCV coverage are given greater emphasis. New restrictions tend to be imposed, particularly in areas where RCV coverage results in obviously excessive payment of loss. Recent natural disasters have brought to light underwriting deficiencies and have cost insurers greatly. For example, after Hurricanes Hugo and Andrew, the supply of both lumber and trade contractors rapidly dried up, causing the cost of construction to skyrocket. Insurers have already started charging more for Homeowners coverage because of years of high losses. Even though replacement cost provisions apply to most types of personal property, some types of property still are generally not covered for full RCV. Most Homeowners policies have a payment limit of four times ACV or full RCV whichever is less. Both commercial and personal forms require ACV loss settlement on antiques, and works of art. Both forms also require that the item be replaced before the RCV provisions are recognized. The commercial forms require ACV loss settlement on manuscripts and property of others, while the personal forms require ACV loss settlement on memorabilia, souvenirs, articles not maintained in good or working condition, and outdated articles that are stored and not being used.
Homeowners Insurance FAQ Insurance 101: top 19 insurance questions and answers Q. What is the difference between Replacement
Cost and Actual Cash Value? The determination of ACV is subject to many variables, but ACV is often interpreted as meaning the cost of repairing or replacing property at the time of loss, less depreciation and obsolescence. Some insurance people, particularly property claims adjusters, explain ACV as not including any "betterment" accruing to the insured through repair or replacement. Differences of opinion often arise between insured and adjuster concerning the extent of depreciation or other factors, resulting in the insured's dissatisfaction. In addition to these problems, ACV loss settlements may not cover an element of property loss, i.e., the value of the present use of the property. The factors above helped lead to the development of RCV insurance, but the primary reason was that unless the insured has a cash reserve for depreciation, paying for the difference between ACV and the cost to replace the building after loss can present a painful financial problem. RCV insurance first came about shortly after World War II. It was initially available as a separate policy offered by specialty insurers, and was called depreciation insurance, sold as a supplement to the conventional ACV coverage of the standard insurers. This insurance covered the difference between the cost of repair or replacement and the ACV of the damaged property and it covered only buildings and other structures, not personal property. This type of coverage has evolved from that beginning to the broad, readily available coverage including both buildings and contents that is the standard today. Underwriting attitudes about RCV insurance have been subject to changes that more or less coincide with the cycles in underwriting profitability. There are valid arguments both favoring and opposing broad use of RCV coverage. The concept has great customer appeal. By carrying enough RCV insurance, an insured can be certain that in event of a severe loss, funds will be immediately available to restore the property quickly and completely. Unlike the early version of RCV, the current version does not require rebuilding on the building's original site, so the insured has the choice, after a total loss, of moving to a new location to rebuild, although the time to decide if you are going to do this may be limited. An innovation in the late 1980's and now generally accepted by the entire industry, is guaranteed replacement coverage for dwellings. Under this coverage, the insurer guarantees the replacement of the dwelling even if the cost is greater than the amount of homeowners insurance carried on the dwelling. For this coverage to be written, there must be agreement when the policy is written that the amount of insurance reflects the current RCV of the building. An annual percentage increase in the amount of insurance is generally used to keep insurance in line with the property's value. Some automobile insurers even offer RCV personal auto physical damage coverage. To be eligible, the insured must buy the coverage when the automobile is purchased new or at the time it is leased, and the coverage must be maintained continuously thereafter. If you are interested in this feature, please let us know. As underwriting cycles reverse, the negative aspects of RCV coverage are given greater emphasis. New restrictions tend to be imposed, particularly in areas where RCV coverage results in obviously excessive payment of loss. Recent natural disasters have brought to light underwriting deficiencies and have cost insurers greatly. For example, after Hurricanes Hugo and Andrew, the supply of both lumber and trade contractors rapidly dried up, causing the cost of construction to skyrocket. Insurers have already started charging more for Homeowners coverage because of years of high losses. Even though replacement cost provisions apply to most types of personal property, some types of property still are generally not covered for full RCV. Most Homeowners policies have a payment limit of four times ACV or full RCV whichever is less. Both commercial and personal forms require ACV loss settlement on antiques, and works of art. Both forms also require that the item be replaced before the RCV provisions are recognized. The commercial forms require ACV loss settlement on manuscripts and property of others, while the personal forms require ACV loss settlement on memorabilia, souvenirs, articles not maintained in good or working condition, and outdated articles that are stored and not being used.
Medical Professional Liability Insurance FAQ Q. We're expanding our practice into a neighboring state. Will our coverage needs change? A. Most likely. Some states, like Indiana, have a Patient Compensation Fund which requires lower limits of $250,000/$750,000 with the PCF providing the excess coverage. Q. Should our policy include "consent to settle"? A. Yes, this provides you with the greatest involvement in settlement issues. The policy should not have a hammer clause, which can cause you to forfeit consent. Q. Will my coverage protect me in retirement? A. If you have the occurrence form, coverage will remain for any prior acts. If you have the claims made form, most companies will issue an extended reporting endorsement (tail) at no charge subject to time and age requirements with the company, to provide coverage for prior acts when you retire. If they don’t, then you will need to purchase a tail when you retire. Q. How do I know if my limits are high enough? A. This is a personal decision, based on your practice and your level of comfort. Most physicians carry limits of $1,000,000 per occurrence and $3,000,000 aggregate per year. Q. If I have time gaps in my coverage, can it become a problem for me later on? A. Yes, if you want to change carriers, most require there have been continuous coverage, so no potential claim issues can arise without certainty which carrier is providing the coverage. Q. We haven't had any claims, but when we merged with another practice our rates went through the roof. What are our options? A. You should work with an agent who has experience and represents multiple carriers. Review coverage options with several carriers and consider options such as deductibles. Q. If I decide to change carriers, what happens with my retroactive date? A. Your new carrier should pick up your current retroactive date. If not, you will need to purchase an extended reporting endorsement (tail) from your current company. Q. Are Best's ratings and other financial information important? A. We are in a very difficult market for Medical Professional Liability insurance companies. Your coverage should be with a financially stable company. I like to compare insurance companies to banks. Basically, you are giving your money (premiums) to an entity to hold for you until you need it at a later time (claims). What good does it do you if there is not money left when you need it? Q. My renewal premiums are increasing. Is there anything I can do? A. Medical Professional Liability insurance premiums are increasing across the country and in every specialty. This is a reflection of increased severity of claims, loss of investment income and increase in reinsurance premiums. The market will not change until these factors make a turn around. Life/Health Insurance FAQ
Worker's Compensation Insurance FAQ We have questions about audits for workers compensation
on almost a daily basis. The following should give some insight to the
workers compensation audit questions. A. To insure that each employee is assigned to the correct classification code as set out by the National Council on Compensation Insurance (NCCI) regulations. Improper classification can result in additional cost. To check actual payroll figures as compared to the estimates
used at the beginning of the policy period. This can result in a
return or additional premium. A. The gross payroll for the entire policy period. This
includes all pay, including but not limited to, vacation, holiday, sick,
bonus, 401k, Section 125 Cafeteria Plan and terminated employee pay. A. Employees gross pay is the base used for computing
workers compensation disability pay. Therefore, the gross payroll
is used for the premium basis. A. Yes. The elimination applies only to the “premium
pay” amount, not the “regular pay” portion. A. Yes. For officers the minimum is $207 per week
and the maximum is $1,700 per week. For sole proprietors and partners
the premium determination is $28,800 per year. These maximums and
minimums change frequently. A. Yes. The entire amount of reported tips shown on the
federal tax form 941 is excluded. A. The NCCI “Scopes” manual is used
to determine correct classifications for each exposure. The NCCI
Division responsible for your area has the final say in interpreting this
manual as it applies to your business. The payroll auditor will review
these classification codes with you at the annual audit based on his understanding
of your operations and will make the initial determination. A. Yes. The NCCI can be contacted for a formal review
or you can handle this with your agent or a representative of your insuring
company. A. This is a form used to decline workers compensation
coverage. Only a bonafide officer of a corporation or an owner can
reject this coverage. This eliminates the payroll from the audit
for the person that rejected coverage. (please note that sole
proprietors and partners are not automatically covered. They must
be added to the policy! Therefore, there is no need for a form 4
in that case.) A. This is used to determine the payroll of an independent
contractor who did not provide a certificate of insurance proving he had
workers compensation insurance. The independent contractors payroll
will then be placed in the proper class code and a premium will be charged
for providing coverage. If the independent contractor provided a
certificate showing workers compensation coverage, no charge will be made. A. To avoid the additional premium for this exposure
and to place the risk of loss with the independent contractor’s
insurance company. A. They serve as documentation of accurate payroll records
and are used as a supplement for audit information. A. Yes. Simply request this from your agent and review the reasons for revision. Then your agent will contact the company and request a revised audit. This should be done as soon as possible after the original audit is performed. |
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