10 Insurance Terms You Must Understand

In a virtual world, your commercial insurance policy can seem like just so much more boring paperwork. However, if you’re a business owner, get over it; it’s essential you read and completely understand your policy, however boring. To get you to that place, here are some common – and important – business insurance terms you need to know:

Actual Cash Value (ACV): This refers to the cost of replacing destroyed or damaged property with like or similar property. However, depreciation is taken into account, so whatever the insurer pays to replace the property will have deductions for depreciation. For example, a surround-sound system installed in your restaurant 10 years ago is destroyed in an electrical fire. Your insurance would pay an amount to replace it with a similar or like item, less any depreciation value to account for value lost over a decade. If you have high-value items such as electronics, artwork, or antiques, consider replacement cost coverage, which allows a higher claim payout, because it doesn’t deduct for depreciation.

Act of God: These are naturally occurring perils over which policyholders have no control, such as earthquakes, devastating windstorms, typhoons, or similar events.

Aggregate limit: An aggregate limit is the maximum amount you can receive for a specified period of time. For example, you may have an aggregate limit of $200,000 for one year, which would mean that regardless of how many separate claims you make, once your policy pays out that amount for the year, it won’t pay more. Some policies have general aggregate limits, meaning the total amount your insurer will ever pay, regardless of how many claims.

Exclusion: These are “named provisions” that specifically identify items that aren’t covered, including losses occurring from specified actions or issues.

All-Risk policy: This policy will pay for losses regardless of the reason the loss occurred.

Named Perils policy: The exact opposite of an “all-risk” policy, “named perils” specifically defines what causes of loss will be covered. Usually, these include vandalism, fire, or acts of nature. This policy provides coverage ONLY for events listed in the policy, and although it’s usually very affordable, it offers very limited coverage.

Valued policy: Also referred to as an “agreed amount” policy, this states that an event resulting in a complete and total loss will be covered up to a specific, pre-determined amount as stated in the policy.

Endorsements: These are provisions added to a policy that provide extra coverage, alter a policy in some way to account for special coverage needs, or define exclusions or inclusions. Often referred to as “riders”, they can be thought of as amendments to policies.

Real Property: This refers to things such as the land or items permanently affixed or attached to it: sheds, detached garages, permanent fixtures like fences, and sometimes heavy machinery and equipment.

Personal Property: Personal property is different from real property in that personal property is easy to relocate. If you turned your building upside down, anything that falls out is considered personal property, such as furniture, computers, and office equipment.


Directors and Officers Insurance: Debunking the Myths

Companies often don’t believe they need the much-misunderstood commercial liability insurance product known as directors and officers liability insurance (D&O).

Acts leading to claims: This liability insurance provides protection from financial damages and covers legal defense expenses from claims relating to things like

  • mistakes
  • omissions
  • breaches of duty
  • misleading statements or misstatements
  • neglect

D&O insurance protects individual directors and officers of a company from financial damages due to actual or alleged wrongful acts committed while in these jobs. It covers past and present directors and officers, and sometimes employees. One common misconception is that D&O provides corporate leaders with blanket coverage, but in fact D&O doesn’t protect against negligence or illegal acts.

Who needs it? Publically traded companies should buy D&O insurance when a board of directors or an advisory committee is struck and/or when the company is looking for investors. In the latter case, investors will usually require D&O insurance as a condition for putting up funds. Non-profits and private companies should also consider D&O, depending on their business type. And small businesses also shouldn’t automatically dismiss it; there are many reasons managers, directors, and officers of even small companies may be sued.

Confused? Discuss it with your advisor.

Dos and Don’ts in Reexamining Your Auto Policy

Ready for 2015? We are, and want to ensure you’re saving money and understanding your auto insurance coverage. So here are a few ways you can do just that.

You probably haven’t even looked at your policy since last year. Here are some dos and don’ts.

  • DO pick up your policy and read it, making notes of any questions, so you can ask your insurance agent later.
  • DON’T head for the Internet. Only an agent who knows and understands your situation can give you the right answers.
  • DO understand your coverage options: You may not have the necessary coverage or have too much. Many people think full coverage includes things like roadside assistance and rental car coverage, when, in fact, you may only have liability, comprehensive, and collision coverage. Ask about additional coverages.
  • DO ask about discounts: What discounts do you have now? What else is available? People’s lives change: If you married and had a child, you may be eligible for a new family discount; or a good student discount, if you have a 3.0 GPA; or an average 3-7 percent affinity discount for belonging to or working for certain organizations or companies.
  • DON’T rely on state minimums: They usually don’t provide sufficient coverage, given current vehicle and healthcare costs. Purchase as much liability coverage as you can afford; it doesn’t cost much to increase liability limits (often just a few cents for an additional $50,000 or more in coverage).
  • DON’T pay for unnecessary coverage. If your older vehicle is only worth $1,000, carrying comprehensive and collision coverage with a $500 deductible isn’t economical. The insurer would only pay $500 after you paid the deductible. You could have banked your premiums and used it towards replacing the car.
  • DO work with your agent to pinpoint your needs and come up with the appropriate auto policy for 2015.


How to Ring in a Happy New Year With Peace of Mind

We know that risks from burglaries and house fires increase during the holidays; however, there are risks to your home all year round. Here’s how to ensure you’re protected in 2015.

Purchase insurance. Many renters believe they have coverage from their landlord’s insurance in the event of a fire. In fact, the landlord’s insurance will only cover the building’s structure; renters need their own insurance for their possessions.

Renters also need liability coverage. If you are the cause of a fire that affects your neighbors’ property, you’ll need liability insurance to protect you from losing everything if they sue you for their losses. Even homeowners without mortgages, many of whom don’t think it’s necessary to purchase homeowners insurance, still need the ability to rebuild if their homes are destroyed.

Understand your policy. Read your policy carefully and ask your agent about what is and isn’t covered. For example, homeowners insurance doesn’t cover floods; flood insurance must be purchased through the National Flood Insurance Program.

Take inventory. Rather than carrying the same limits as before, consider what you stand to lose and what it would cost to replace everything you own. The average renter has about $30,000 worth of personal property, and for families or antique collectors that could be much higher. Even if you believe your possessions aren’t particularly valuable, you’ll still need to replace them.

Conduct your inventory, determine estimated values, add them up and purchase this amount of personal property coverage. Now you can launch the new year with peace of mind.

Do You Need to Buy Repatriation Insurance?

Stop to think what could happen if you became sick or were injured while abroad and could not obtain needed health care locally.

Although most travel policies do include repatriation coverage – returning you (or your remains) to the U.S. for treatment or burial – the repatriation limit varies by insurer. Transportation home can be very expensive, so for many travelers, repatriation insurance is an excellent option. This covers emergency medical evacuation to a home medical facility and the cost of returning a traveler’s remains.

Here are a few of the coverages found in a typical repatriation policy:

Emergency medical evacuation

If you undergo a medical emergency that requires immediate transportation, your repatriation policy usually provides expert advice about providers and transportation to the most appropriate facility for the kind of medical treatment you need. In addition, if you must stay in another country, most policies cover the cost of a loved one’s travel to remain with you while you are treated there. The policy also may cover the cost of sending home your dependents.

Repatriation of remains

If the worst happens, it’s likely that you’ll want your remains (or those of a loved one) to be returned home, not to be buried abroad. While repatriation policies do not cover the cost of burial, they do cover transportation costs. This can save you a great deal of money and help reduce the difficulty of making the necessary arrangements.

Travel assistance services

Some repatriation policies also provide vital assistance with problems that can arise abroad, such as loss of prescription drugs, misplaced documents, and translation services, if needed.

Experts recommend you carry at least $1 million in repatriation insurance. If you become ill, special air transport may be medically necessary and costs can quickly escalate. Talk to your agent to ensure you have all the travel coverage you need before you venture abroad.

Yes, You Need Travel Insurance, but Be Sure to Shop Wisely

When you travel abroad, does your health plan cover you outside the U.S.?

In most cases the answer is no. Medicare, for example, doesn’t provide medical coverage for illnesses or accidents occurring outside the U.S. and its territories. And even when you travel outside your home state, Medicare Advantage plans include little or no coverage.

Today’s travel insurance policies offer a selection of benefits, from lost luggage assistance and travel delay to medical evacuation and help in a political uprising. There’s even a policy for those who don’t want the hassle of seeking reimbursement from their own health insurer after an overseas medical event; this policy pays medical bills regardless of whether the individual’s own insurer will pay.

Whether you travel independently or with a group, you’ll have peace of mind knowing you have access to experts whose only job is to help you return home safely.

However, you should shop wisely; it’s still important to ask questions, as coverage varies. For example, most insurers have restrictions covering individuals with pre-existing conditions, and also may not cover injuries resulting from sports that carry an element of risk, even popular sports such as skiing. But you may be able to purchase separate insurance to cover these and other situations.

Financial experts recommend you purchase directly from an insurance agent who specializes in travel insurance rather than from your travel agent. Why? Well, travel agents specialize in fun; insurance agents specialize in helping to ensure your coverage is right if things go wrong. Enough said.