Tuesday, June 29, 2010

Indiana Asks Recent Storm Victims to Report Damage

Indiana Asks Recent Storm Victims to Report Damage: "The Indiana Department of Homeland Security is asking state residents who sustained damage from recent storms and flooding to report it online.
The agency wants everyone with damage since June 13 ..."

Monday, June 28, 2010

Homeowners Offered Few Insurance Choices in Hurricane States

Homeowners Offered Few Insurance Choices in Hurricane States: "In most hurricane-prone states, homeowners have few choices of insurance coverage, with just eight property and casualty insurers in each state controlling up to 77.2 percent of the market share, ..."

TS Alex -Season's 1st Named Storm- Strengthens over Gulf of Mexico

TS Alex -Season's 1st Named Storm- Strengthens over Gulf of Mexico: "Alex, the hurricane season's first named tropical storm, reached that level on Friday, but weakened as it moved across the coast of Belize and El Salvador and over Mexico's Yucatan Peninsula. Two ..."

Friday, June 25, 2010

3 or more reasons you should get replacement cost not actual cash value, a comparison

Should I get replacement cost or actual cash value insurance on my property?  That is the question as an insurance agent I hear all of the time. 

I know, I know...  How can an insurance agent tell you that the property that you could only sell today for $80,000 is worth $120,000.  That is because in insurance 95% of the time we are talking about replacement cost not market value.  In fact never in an insurance policy will you see the term market value ever being used.  The closest valuation method that we have to market value is what we call Actual Cash Value (ACV).

Replacement cost is not usually defined in a policy, but it is understood to be the lesser of the cost to repair or replace your property.  ACV is defined as replacement cost MINUS the cost of depreciation.

Here is the big issue, who defines depreciation with ACV?  It will be the insurance company not you, and if you had to guess would you guess they would want to pay you more or less money?  Yeah you guessed it.

"Derek, can't I hire my own attorney to make them pay more," yeah you are right, you can hire an attorney at your expense to try to convince them to pay more, so once again they are paying less than you want AND you have to pay for an attorney sounds like a double loss.

Now I do get the following comments from clients when they are pushing back on replacement cost:
  1. I could buy a new house like mine for less than that.
  2. I could rebuild my house for less than that.
  3. I just want my money back if my house is destroyed, I do not want a new house there.
Well here are the issues with those trains of thought:

  1. That may be true, you might be able to buy a different house that you would be happy with for less than the value of your house.  The good news is a replacement cost policy still gives you that option you are allowed to just buy a new house, the bad news is they will only pay you the market value of your current house to buy a new house. The other bad news is the city or town that you left your old destroyed house in will want that house removed from the lot, or they will do it for you at a very extreme cost.  This is the reason you must purchase replacement cost.  There are many other cost factors in a claim that are not figured into the simplistic mindset of "I could just buy a new house with the cash"
  2. This one is great if you can build the house.  The problem is most of the time when a catastrophic loss happens to a house there will be many different specialized skill sets, such as pollution removal, that you actually will not have the knowledge of local, state and federal laws to do it on your own.  Also this is assuming that you were not injured mentally or physically when almost everything you own goes up into flames or blown away.  Most people do not have the time or skills to build a house on their own, let alone after that type of trauma.  Plus most people would still not want to do all of that labor for free, and if you were to rebuild your whole house, replacement cost would pay you for your efforts.
  3. This is the one that will trap most people.  Yes if the house burns to the ground you might be happy just to get a check, remove the old house and walk away.  Especially if you are a property investor and not the homeowner.  That is if you are lucky enough to have the full house go away.  Most property claims are partial claims, meaning that the whole house is not gone.This is where you can own a lot of money for something.
Just as an example, you have a hail storm hit your house.  You put your last roof on 10 years ago, at that time the roofer told you the roof was guaranteed for 20 years.  The hail storm completely destroys your roof.  You have contractors come out and the absolute best price you can find is $10,000 to replace the roof.  Let us look at the difference on what you have out of your pocket if you have replacement vs ACV (we will assume you have a $1,000 deductible).

Replacement Cost (No Depreciation):
Insurance pays $9,000
You pay $1,000

Actual Cash Value (50% Depreciation):
Insurance pays $4,000
You pay $6,000

As you can see the savings of about $50 a year to switch from replacement cost to ACV just cost you $5,000, that was the most expensive $50 you ever saved.

Nation's Flood Insurance Program Remains in Limbo

Nation's Flood Insurance Program Remains in Limbo: "The Senate today voted against legislation that included a provision to reauthorize the National Flood Insurance Program (NFIP).
Along with short term extensions for numerous other federal ..."

Restaurants Lax on Food Safety, Says Researcher

Restaurants Lax on Food Safety, Says Researcher: "Here's an unappetizing thought: A review of restaurant food safety practices found that a typical kitchen worker cross-contaminates food with potentially dangerous pathogens about once per ..."

Commercial Insurance Prices Stay Level for 5th Straight Quarter

Commercial Insurance Prices Stay Level for 5th Straight Quarter: "A fragile global economy, excess capacity in virtually every line of commercial insurance and last year's below-average catastrophic losses combined to keep commercial insurance prices flat during ..."

Monday, June 21, 2010

How does insurance pay if a tree damages my house or car?


Again here in Indiana we have the threat of storms "some possibly severe". Inevitably we always receive those winds. Not always the winds that do damage to your home, but the ones that blow the limbs off trees or even just a little stronger and blow the trees down. After the trees or the parts come down they land on homes, garages, cars, fences, RV's and the list goes on. That's when our phones begin to ring with questions such as: The neighbors tree fell on our garage, our tree fell on the neighbors car, I had my trailer parked at my friends house and it was hit by a limb, my tree is on the neighbors fence, who is responsible for the damage? In insurance the "peril" wind is responsible for the damage, not the neighbor, not the tree, not you. You can't put blame to a person on this because they have not been negligent, just unlucky. So the blame falls to the wind which we as people cannot control. What this means is if your property was damaged it is covered under your policies, if your neighbor's property is damaged it is covered under their policies and if your friends property is damaged it is covered under the friends policies. Unless it is covered property on the homeowners policy it will not be covered there. Meaning a car is covered under an auto policy, a trailer under a RV policy, a motorcycle under a motorcycle policy. The homeowners policy does not cover vehicles that are subject to licensing, specialty, or motorized conveyances even if they are parked in a damaged garage. Also, the tree is not covered.


 

When that tree comes down there is also debris removal. This can be very complicated. Most standard homeowners policies only cover the debris removal if the tree hits a covered structure and it is very limited coverage. Meaning a house, a garage, a fence, swimming pool or shed are covered structures on the homeowners policy. Policies provide some provisions for removal coverage if the tree is blocking a roadway or driveway. A car, a trailer, a motor home, or motorcycle are examples of items that are "not covered" for debris removal, because they are not a structure on the homeowners policy. It is important to check your homeowners policy for the limits and what is covered on tree debris removal because companies vary the amount of coverage or give "bonus " coverages to entice insurance buyers.


 

And on a sideline for the water after those rains FLOOD is NEVER covered under a homeowners policy. You must purchase a flood policy.

Friday, June 11, 2010

Ohio Court Has Jurisdiction Over Non-Resident Internet Defamation Case

Ohio Court Has Jurisdiction Over Non-Resident Internet Defamation Case: "The Supreme Court of Ohio has ruled that an Ohio trial court may assert jurisdiction over a nonresident defendant in a defamation case involving Internet postings, according to a slip opinion ..."

Wednesday, June 9, 2010

Best Upgrades Travelers Group Issuer Credit Ratings; Revises Outlook

Best Upgrades Travelers Group Issuer Credit Ratings; Revises Outlook: "A.M. Best Co. has upgraded the issuer credit ratings (ICR) to "aa" from "aa-" of Travelers Group, its P/C members and affiliate, Travelers Casualty and Surety Company of America (TCSA) and TCSA's ..."

FEMA: Insurance Applies if Oil from Spill Mixes with Flood Waters

FEMA: Insurance Applies if Oil from Spill Mixes with Flood Waters: "The Federal Emergency Management Agency has clarified that in the event of a declared flooding disaster, National Flood Insurance Program coverage will apply even if oil from the British Petroleum ..."

Tuesday, June 8, 2010

State Farm Won't Add New Flood Policies but Its Agents Will Still Sell Them

State Farm Won't Add New Flood Policies but Its Agents Will Still Sell Them: "State Farm Insurance Co. has decided to discontinue writing new flood insurance policies with the National Flood Insurance Program but the company says it will still service existing policies and ..."

Judge: Policy Didn't Cover Chinese Drywall Damage

Judge: Policy Didn't Cover Chinese Drywall Damage: "An insurance company doesn't have to pay for damages at a Virginia man's home ruined by Chinese-made, sulfur-emitting drywall, a decision by a federal judge Thursday that could affect how lawsuits ..."

Risk Management a Low Priority for Small Biz World

Risk Management a Low Priority for Small Biz World: "Risk management ranks relatively low on the priorities list for small business owners, according to a recent survey by Travelers. And that outlook could mean trouble down the road when problems ..."

Thursday, June 3, 2010

Restoring Gaylord's Flooded Nashville Properties to Cost $215 Million

Restoring Gaylord's Flooded Nashville Properties to Cost $215 Million: "Gaylord Entertainment Co. says it expects the total remediation and rebuild cost for its properties in Nashville, Tennessee damaged by early May's record flooding to be between $215 million and ..."

Hail Loss Claims Up 61%; Suspicious Claims Up 136%

Hail Loss Claims Up 61%; Suspicious Claims Up 136%: "The number of hail loss claims filed with insurers increased by 61 percent, from 256,000 in 2006 to over 413,000 in 2009.
At the same time, the number of claims referred for suspected fraud ..."

BP Oil Spill Losses Hit Reinsurers; Premiums Jump

BP Oil Spill Losses Hit Reinsurers; Premiums Jump: "Reinsures have bumped up prices for offshore energy-related insurance premiums by 50 percent following insurance industry losses of up to $3.5 billion from the BP plc oil spill in the Gulf of ..."

Wednesday, June 2, 2010

NFIP Lapses Again Due To Senate Inaction

NFIP Lapses Again Due To Senate Inaction: "The National Flood Insurance Program will lapse June 1 because of congressional inaction, meaning insurance agents will not be able to provide new or renewed insurance policies under the Federal Emergency Management Agency’s Write Your Own Program."

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