Category: Insurance

Insuring Your Student Away at College

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Sending a child off to college is always an exciting and anxious time for parents. They worry about their child’s safety, whether she has everything she needs, how she’ll get along with her roommates, and whether she’s ready for independent living. Between making sure that textbooks and supplies have been purchased, tuition bills paid and course registrations completed, it’s natural that parents won’t think about insurance considerations. However, accidents can happen at college just as easily as they can at home, so it’s worth taking a few minutes to think about insurance coverage.

A homeowner’s insurance policy may not cover a part-time student or one over a certain age. For example, policies often state that a person has coverage if she is a full-time student and was a resident of the policyholder’s household before moving out to attend school. They also limit coverage to students who are either under the age of 24 and related to the policyholder or in the policyholder’s care and under the age of 21. This could become an issue when the child is attending college at a later age, or at graduate school, law or medical school, where students are often in their mid-twenties. The parents should discuss this with an insurance agent and consider asking for a change to the policy that would eliminate these restrictions.

A typical policy covers the student’s belongings while at college, but limits coverage to 10 percent of the amount of insurance covering the parents’ personal property. For example, if the policy shows a limit of $100,000 for coverage of personal property, it will cover the student’s property up to a maximum of $10,000. If this amount of insurance is too low, parents should consider higher limits.

Many colleges require students to own a laptop computer. A standard homeowner’s policy will cover a laptop, but only for a small number of causes of loss. These include perils like fire, theft, lightning, explosion, and vehicle damage. The policy does not cover damage from someone dropping the computer, spilling a beverage on it, or damage to its circuitry from a power surge. However, many insurance companies offer special computer coverage that will pay for damage from these types of accidents. An agent can explain to the parents what the coverage includes and how much it will cost.

The homeowner’s policy will also cover the student’s liability for any injuries or damages she may cause to others while at school. For example, the policy would pay for repair or replacement of dormitory furniture that she may accidentally damage.

If the student brings a car to college and the parents’ auto insurance policy lists it, the student will have coverage for its use. Of course, the student could also buy her own policy. If she does, she should buy liability coverage in an amount at least equal to what the parents have. Purchasing only the minimum limits required by state law could leave her owing a large amount out of pocket if she causes serious injuries to others in an accident. If she doesn’t bring a car with her, the parents’ policy will cover her while using someone else’s car unless it’s regularly available to her. The car owner’s policy should also provide her with coverage.

Parents’ insurance policies will automatically cover many student situations. However, parents should read their policies to verify the coverage they have. A discussion with an insurance agent is in order if anything is unclear or appears inadequate. A little bit of advance checking can save a lot of worry and expense later.

Utilizing a Wrap-Up Program for a Large Scale Construction Project

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Large construction projects are often difficult to finance because of high costs and increased risk. One way to decrease the cost of the project and lessen the risk is through “wrap-up” insurance programs.

Under this type of program, one group of insurance policies covers all parties involved in the project for the length of time it takes to complete the project. This insurance is underwritten for the specific exposures of the project and it protects the project owner, contractors, and all subcontractors. Most wrap-ups include workers’ compensation, general and excess liability, and builder’s risk coverage. Wrap-ups can also include professional liability, environment liability and other essential coverages.

These wrap-up programs can be initiated either by the project owner or the general contractor. When the owner controls them, they are referred to as “owner controlled” insurance programs (OCIP). When the general contractor intiates the program, it is called a “contractor controlled” insurance program (CCIP). The minimum size for a wrap-up to make sense is generally $100 to $150 million in hard construction costs.

The most common reason that wrap-ups are used is for potential cost savings. Subcontractors always include in their bids the cost of insurance for a project. Depending on the type of work the subcontractor performs and location of the work being performed, the subcontractor’s insurance cost could add several percentage points to their bid amount. By insuring all of the subcontractors under one insurance program, the owner/general contractor can realize a substantial savings.

Wrap-ups not only save money on premiums, but additional cost savings can be gained through the design of the insurance program itself.  Many wrap-ups are written using risk sharing techniques, such as larger deductibles or retrospective rating. Retrospective rating is a premium calculation formula in which the final premium is not determined until the end of the coverage period. The insurerreviews the owner/general contractor’s losses after the policy ends, and adjusts the premium based on those losses.However, the premium is subject to a maximum and minimum. If a project is well run, this can result in a significant premium reduction. Wrap-ups have also been written at fixed rates for the duration of the project.

Another reason for a wrap-up is that it enables an owner/general contractor to fulfill Minority Business Enterprise (MBE) and Women Business Enterprise (WBE) requirements on public projects. If the controlling government authority of a project requires that minority contractors must be hired, a wrap-up may be the only way to meet this standard. That’s because many minority contractors may not be able to afford the level of coverage required by the government authority and would be unable to bid on the project. If the owner/general contractor is providing all necessary coverage, this removes the obstacle of being unable to pay for insurance that would prevent an MBE or WBE from bidding.

Aside from potential cost savings, wrap-up programs can also provide a measure of asset protection for owners.  With most construction projects, contractors are individually required to secure and maintain the minimum insurance required under their contract.  While owners may have a certificate of insurance to verify coverage, there is no guarantee at the time of a loss that the insurance will be in force, the coverage will be sufficient, or the necessary limits will be available due to the contractor’s claims activity at other projects. This is a critical aspect that is often overlooked during the decision making process.

Separate Households: Whose Insurance Covers the Kids’ Accidents?

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Michael and Maureen divorced after 18 years of marriage and agreed to joint custody of their three children. Their 11 year-old son Mikey is riding his bike one afternoon with some friends and not paying full attention to the road in front of him. A five year-old child chasing a ball runs into the road and Mikey strikes her with his bike, causing her to fall and break her arm. The child’s furious parents sue both Michael and Maureen for compensation for her injuries and trauma.

Not long after, their 16 year-old son Mark gets his drivers license. One evening while driving home, he swerves to avoid a deer in the road, loses control, and plows into two parked cars. Both cars are relatively new; the repair bills come to thousands of dollars.

Because Michael and Maureen now have separate households, they each have their own auto and homeowner’s insurance policies. Are both parents responsible for the children’s actions? Is only the parent who had custody at the time of the accident responsible? And whose insurance pays for the damages? Will either policy pay? With the increasing prevalence of two-household families and blended families, the question of which parent (and, therefore, which insurance policy) is responsible for a child’s actions has become more common. The answer is not always clear.

A standard homeowner’s policy covers the people named on it (the named insureds); household residents who are either relatives of the named insureds or under age 21 and in the care of a named insured or relative; and full-time college students who are either relatives of the named insureds and under age 24 or others in the care of a household resident and under age 21. A standard auto policy covers the named insureds and “family members” (residents of the household related to the named insureds by blood, marriage, or adoption, including ward or foster children.) Michael and Maureen have joint custody of their children. In which parent’s household are the children residents?

State laws and courts have answered this question in a variety of ways. For example, states such as New York have established “dual residency”; that is, a person can be a legal resident of multiple households at the same time. However, other states such as Montana have laws prohibiting dual residency. Some courts start with the custody awarded in the divorce decree but also consider how the parents are actually handling custody. A New Jersey court found that a child had dual residency, despite the mother having legal custody, because both parents had actual custody at different times. The judge ruled that both parents’ homeowner’s policies applied to the child.

Other states have ruled that no one factor determines residency; a court must look at multiple factors. A Georgia court devised an approach that measures custody time and focuses on whether there is in fact more than one household. New Jersey courts look at both measurable factors and qualitative factors, such as whether people in the household function together as family members.

If Michael and Maureen live in a dual residency state, both their homeowner’s and auto policies may cover the accidents their children have. Policy terms explain how they share loss payments for these incidents. In other states, the solution may be more complicated. A court may weigh several factors and assign residency to only one of the households, requiring one parent’s insurance to pay for the loss. Since the outcome in these situations is uncertain, the best thing for divorced parents to do is to make sure they have plenty of insurance provided by financially strong companies.

Specialized Insurance Available for Green Construction

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Weather patterns have become increasingly erratic over the last several years. Heat waves, droughts, mudslides, and increased hurricane activity have become the norm. In 2004, four major hurricanes pummeled Florida; the Gulf Coasts of Louisiana, Mississippi and Alabama are still recovering from 2005’s Hurricane Katrina and its ensuing floods. Between these disasters and increasing attention from politicians and the media, the problem of global climate change has become a major issue. As a result, the insurance industry has begun to devise new products and strategies for dealing with this problem.

Some insurers are beginning to offer specialized “alternative energy insurance” policies. For example, one company is writing policies to cover alternative energy system performance. This policy insures against the risk that a deficiency in the design of alternative energy technology will result in the under-performance of a facility. The company designed it to help owner-operators of facilities meet the needs of lenders concerned about their investments. Another company has broadened its coverage for commercial buildings to include alternative energy systems. It also will insure against loss of income when alternative energy systems suffer damage and extra expenses when the building owner must buy power from the grid while the system undergoes repair.

At least one insurer offers special coverage to encourage commercial building owners to replace destroyed buildings with new ones using green technology. It gives the property owner several green technology options, including:

  • Non-toxic, low-odor paints and carpeting
  • Energy-efficient electrical systems
  • Interior lighting systems that meet independent energy efficiency standards
  • Water-efficient plumbing systems
  • Enhanced roofing and insulation materials to reduce heat loss.

Anticipating less severe and less frequent losses, the same company offers rate credits to green building owners. It has found that most losses in traditional buildings are from electrical fires, heating and air conditioning system fires, and plumbing leaks. The company expects green technology to make these events less likely.

Another insurer has introduced for commercial building owners a new policy that encourages green building. It features coverage for:

  • The increased cost of green building alternatives
  • The expense of re-engineering and re-certifying green buildings
  • Vegetative roofs, and
  • Additional time to restore operations so that building repairs can include green alternatives.

Insurers are also educating their clients about the implications of climate change. Recognizing that courts could hold businesses liable for future environmental damage, insurers have worked with corporate boards and officers to encourage planet-friendly business practices. Their hope is that actions taken now will reduce the number and size of future liability insurance claims.

While only a small number of insurers offer specialized policies for green construction now, the success of these products will encourage other companies to follow suit. Also, as green building technologies become widespread, the desire to attract and retain business will force insurers to compete with policies of their own. Insurance agents can identify companies that offer these coverages and make coverage recommendations to property owners.  As businesses and households everywhere take steps to reduce their carbon footprints, make certain that your insurance coverage is keeping up with those steps.

Dog Bite Prevention

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If you own a dog, you should be aware that it is not completely unlikely that your dog may bite. According to 2009 figures from the CDC, approximately 4.5 million Americans are bitten by dogs every year. Of these bites, about one in five result in wounds that require medical attention. Furthermore, the property/casualty industry pays out hundreds of millions of dollars to satisfy dog bite claims each year. But you can take steps to make it less likely that your dog will bite.

Prior to bringing a dog into your household:

* Speak with a professional such as a veterinarian, animal behaviorist, or a responsible breeder to find out which breeds of dogs are the best fit for your household.

* Dogs with aggressive natures are not appropriate for households with children.

* Pay attention to cues that a child is apprehensive about a dog. If a child seems fearful of dogs, wait before bringing a dog into your household.

* Before buying or adopting a dog, spend time with it. Exercise caution when bringing a dog into a household with an infant or toddler.

If you decide to adopt or purchase a dog:

* Spay or neuter your pet since this action reduces aggressive tendencies.

* Don’t ever leave young children or babies alone with a dog.

* Don’t play aggressively with your dog. Avoid wrestling or tug-of-war games.

* Teach your dog submissive behaviors such as rolling over to expose the abdomen, and giving up food without growling.

* Seek professional advice from a veterinarian or responsible breeder if the dog develops aggressive or other unwanted behaviors.

 Teach children special safety precautions to take around dogs:

* Children should not approach an unfamiliar dog

* Don’t run from a dog or scream

* If an unfamiliar dog approaches, remain motionless

* If knocked over by a dog, roll into a ball and lie still

* Report stray dogs or dogs displaying unusual behavior to an adult.

* Avoid making eye contact with a dog.

* Do not disturb a dog that is sleeping, eating, or caring for puppies.

* If bitten, immediately report the bite to an adult.

Be a responsible pet owner and protect yourself and others from dog bites, pain and suffering, as well as insurance claims!

Cover Your Home Office with Necessary Business Insurance

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If you run a business from your home, don’t make the error of believing your current homeowner’s insurance policy covers the loss of expensive business equipment. Although many homeowner’s policies offer a small amount of insurance coverage for inventory, there are strict exclusions for liability claims arising from any “for-profit” activities.

While some office-only types of businesses can be insured against liability claims under the homeowner’s policy, professional liability insurance needs would not be included. Insurance packages created specifically for in-home businesses are available at a moderate cost.

An average homeowner’s policy provides only $2,500 coverage for business equipment, which frequently is not enough to cover all business property. You may also need to consider coverage for liability and loss of income. Be aware that insurance companies differ quite a bit in the types of business operations they cover. Taking the time to shop around for coverage options, as well as pricing, will pay off in the long run.

No matter what type of policy you choose, if you’re a professional working out of your home, you probably need professional liability insurance. Depending on the type of in-home business you operate, special policies may be required. You have three basic insurance choices, depending on your specific business:

Homeowner’s Policy Endorsement

In order to double your standard coverage for business equipment, such as computers, you may be able to add a simple endorsement to your existing homeowner’s policy . For as little as $25, you can increase the policy limits from $2,500 to $5,000. Some insurance companies will permit you to increase your coverage up to $10,000 in increments of $2,500.

In-Home Business Policy/Program

An in-home business policy renders more comprehensive coverage for liability and business equipment than a homeowner’s policy. These policies, which are also referred to as “in-home business endorsements,” differ substantially depending on the insurer.

What if you have additional employees working in your home? Some in-home business policies allow a certain number of full-time employees, usually up to three. In-home business policies include extended liability insurance for higher amounts of coverage. For example, they may provide protection against lawsuits for injuries caused by your product and/or service offerings.

Business Owners Policy (BOP)

Developed specifically for small-to-mid-size businesses, a Business Owners Policy is an excellent tool if your home-based business operates in more than one location. A BOP covers business property and equipment, loss of income, extra expense, and liability. These coverage plans are offered on a much broader scale than the in-home business policy.

Check Your Insurance Before Climbing into the Cockpit

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Nearly 600,000 Americans are active certified aircraft pilots, according to Federal Aviation Administration estimates. These pilots fly everything from helicopters to commercial jets. Some own the aircraft they fly. Whether you own a plane or fly rented or borrowed aircraft, you should be aware of what your insurance can and cannot do and the insurance coverage you need.

A typical homeowner’s insurance policy does not cover the policyholder’s legal liability for bodily injury or property damage arising out of any of the following:

  • The ownership of aircraft
  • Its maintenance, occupancy, operation, use, and loading or unloading by anyone
  • Entrustment of it to anyone
  • Poor or no supervision of a person using it
  • Its use by a child or minor

Personal umbrella liability policies typically contain similar provisions. Consequently, it is essential for aircraft owners and renters to purchase aviation insurance. A relatively small number of insurance companies offer these policies, and the coverage details vary from one company to another. However, they all cover legal liability for injuries or damages. Coverage applies to the policyholder, anyone riding in or using the aircraft with the policyholder’s permission, and any other person or organization responsible for the aircraft.

Aviation policies normally contain several provisions that limit or eliminate coverage, such as:

  • No coverage for liability that the insured assumed by signing a contract.
  • No coverage for damage to property the insured leases, occupies or has control of, though some insurance companies cover damage to leased hangars.
  • No coverage for losses occurring when the aircraft’s Certificate of Airworthiness is not in effect.
  • No coverage for injury or damage that occurs while the aircraft is being used for an illegal purpose.
  • No coverage for a loss that occurs when the number of passengers exceeds the maximum stated in the policy.
  • No coverage when a pilot who does not meet certain conditions is operating the aircraft. These conditions may include having a valid pilot’s certificate, having logged a minimum number of flight hours, and having flown that make and model of aircraft a minimum number of hours.

Policies usually cover the use of substitute aircraft while the insured aircraft is out of service for maintenance or repair. Also, policies issued to an individual or couple often include coverage for the occasional use of aircraft they do not own.

Aviation insurance also covers damage to the aircraft itself. Policies typically cover damage from all causes other than:

  • Wear and tear, mechanical breakdown, and related causes
  • Damage to the tires
  • Depreciation or loss of use of the aircraft
  • Embezzlement
  • Government seizure of the aircraft
  • Change in ownership of the aircraft

Discuss how you use aircraft with an insurance agent to make certain that you have the proper coverage and amounts of insurance large enough to adequately protect you. Personal aircraft can be a great convenience for their owners. The right insurance can give you financial peace of mind when you jump in the pilot’s seat.

Will Your Insurance Protect you from a Facebook Lawsuit?

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Mostly everyone knows that the use of social media has grown by leaps and bounds over the past decade.  What many people don’t realize are the unique risks that come along with social networking. Anyone using Facebook, MySpace, LinkedIn, or other social networking sites should exercise extreme caution in what they decide to say on-line.

As an example, in 2009 a teenager in New York sued some of her classmates and their parents, accusing the classmates of bullying and humiliating her in a Facebook Forum.   Whether or not the allegations are true, the teenagers and their parents require legal resources to pay for the possible judgments against them.

Many people believe a standard homeowner’s insurance policy will cover them in such a situation.  In fact, it probably will not provide the necessary coverage.  A standard policy covers bodily injury or property damage done to someone else.  It defines bodily injury as sickness, harm or disease, and it defines property damage as destruction of or injury to physical property.  Neither definition includes publishing or saying something that injures another person’s reputation. Hence, the policy is not likely to cover a Facebook post.  In other words, the policy is unlikely to cover the act of making someone else feel miserable due to social networking.

A good source to consider for additional coverage is a personal umbrella policy.  This kind of policy provides additional insurance in circumstances where a loss has depleted the amounts of liability insurance offered under a homeowner’s policy.  Umbrella policies usually have a deductible of $250 to $500; but have the potential to protect the policyholder from financial devastation.  

As Americans become more exposed to risk through social networking, they should choose their words carefully on any social networking site.  Additionally, they should speak with an insurance professional to see if an umbrella policy is a good match for their insurance needs in an increasingly risky world. 

Protect Your Officers with Drive Other Car Coverage

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Mary is a junior partner in a law firm and drives a car that the firm owns and insures. She is unmarried and her children are not old enough to drive, so she does not carry a personal auto insurance policy. The firm’s auto insurance covers her as a partner and she doesn’t own another car, so she sees no need to have her own policy. Most of the time, this is not a problem. However, spring break comes and she takes her kids to DisneyWorld. She rents a car at the Orlando airport and never gives a thought to whether her firm’s insurance will cover her if she has an accident with the rental. In this case, a phone conversation with the firm’s insurance agent would have been a good idea.

While driving back from the Magic Kingdom one night, Mary accidentally rear-ends a new Lexus. The damage to the other car is extensive; Mary looks to her firm’s auto liability coverage for the cost of repairing it. The ISO Business Auto Policy covers the person or organization shown in the policy declarations (the information page at the beginning.) In this case, the name shown in the policy Declarations is the name of Mary’s firm. The policy goes on to say that, for liability insurance, the firm is an insured and so is anyone else using, with the firm’s permission, a covered auto the firm owns, hires or borrows, with some exceptions. Unfortunately for Mary, the firm didn’t rent the car; she did. She rented the car in her name. Consequently, the firm’s insurance will not cover her liability for this accident. She will be forced to pay for it out of her own funds.

However, there are a couple of policy changes that the firm can buy that would solve Mary’s problem. The first is an endorsement called Drive Other Car Coverage-Broadened Coverage for Named Individuals. The insurance company will require the insured to list the names of one or more individuals on the endorsement. The change extends several of the policy’s coverages so that they apply to the listed individuals and their resident spouses. This endorsement comes with some significant limitations:

* It extends to the listed individuals coverages that the policy already provides; it does not add coverages not provided. If the firm’s policy does not provide collision coverage on any its vehicles, Mary will not have collision coverage on a car she rents.

* It covers the named individual’s spouse only while a resident of the same household. If Mary is married to Jim, Jim automatically has coverage for a car he rents in his name. If they separate, however, Jim loses that automatic coverage because he no longer resides in the same household as Mary.

* The only family member it automatically covers is the resident spouse. It will not cover any other family members in the household unless the endorsement specifically lists their names.

An alternative to this endorsement is to list individuals’ names in the policy declarations along with the firm’s name and attach an endorsement called Individual Named Insured. It covers the individual listed in the declarations and automatically covers the person’s resident spouse and family members. It also covers these individuals should they injure another of the firm’s employees.

These policy changes affect several coverages, including liability, uninsured motorist, medical payments, and physical damage. An organization should consult with a professional insurance agent to discuss the endorsements’ details and identify the one that will best insure the concerned individuals. With the right coverage in place, Mary can enjoy her vacation without having to worry about who will pay for the fender-bender.

National Council on Compensation Insurance Says Younger Workers Are More Accident Prone

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According to a study conducted by the National Council on Compensation Insurance, younger workers have more injuries and illnesses than older workers; but older workers have higher costs per claim. The researchers discovered that age is an important factor in overall claim costs, but the significance of age on claims frequency has lessened. This has been interpreted to mean that age may not play an important role in future frequency trends. However, the relationship between age and claim severities is basically unchanged.

Factors associated with age, such as average wages, claim durations, lump-sum payments, injury diagnoses, and number of medical treatments, comprised a large part of the reason for the differences in the severity of claims between younger and older workers. The differences in wages and duration of claims were the principal reasons for the differences in the amount of payouts between younger and older workers. Differences in wages accounted for approximately one third of the differences in the amount of payout, while the differences in the duration of claims accounted for almost one half the difference.

Older workers experience more high cost injuries, such as injuries to joints like rotator cuffs and knees. These were more commonly experienced by workers aged 45-64.  Workers aged 20-34 more commonly experienced ankle sprains. Carpal tunnel syndrome and injuries to the lower back are among the top 10 diagnoses for workers of all ages. The researchers pointed out that the differences in the types of injuries only comprised about a quarter of the difference in medical severities between younger and older workers. The real factor influencing the difference in medical severities between older and younger workers was the significantly higher number and different mix of treatments within a diagnosis. This alone accounted for 70 percent of the difference.

Less than 10 percent of the difference in medical severities is due to a slightly more costly mix of treatments for older workers. This was reflected in small differences in the average prices of different types of medical services. The greater number and different mix of treatments also contribute to the longer duration of payments for older workers.

As for trends in loss costs, the researchers noted that the baby boomers’ impact was apparent when the data was viewed historically, but the major impact of this aging workforce has probably already occurred and employers should not anticipate that the aging workforce would present a major problem in terms of future claims costs.