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Frequently Asked Questions About Insurance

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Auto Insurance

FAQ: Auto Insurance

What should I consider when purchasing automobile insurance?

There are a number of factors you should consider when purchasing any product or service, and insurance is no different. Here is a checklist of things you should consider when purchasing automobile insurance.

Don't base your decision on price alone. Base your decision on a measure of value, which is what you get for your money. Consider the quality of the company's claims service and consumer education. Purchase the amount of liability coverage which makes sense for you.

You should decide which optional coverages you want. For example, do you want optional physical damage coverages or is the market value of your car too low to warrant purchasing them. Once you have decided what you want in your automobile insurance policy, you can now decide who you would like to purchase the insurance from. For example, you may decide you like the idea of purchasing insurance from a mutual company rather than a stock company.

What are some practical things I can do to lower my automobile insurance rates?

If you do shop around, be careful to make sure each insurer is offering the same coverage. Many insurers use the ISO policy forms, but this is not always the case. While other insurers will lessen certain protections in order to make the policy cheaper, so you'll buy it. It's in these times where we need to remind ourselves that cheaper does not mean better. The best advice is not to buy insurance based on anyone's quote, but wait until any new policy is issued before comparing your new policy to your old one... and make sure you received the coverage you wanted before canceling your old policy.

Look for any discounts you may qualify for. For example, many insurers will offer you a discount if you insure multiple cars under the same policy, or if you have had a driver education class in the last five years. Be sure to ask us about discount plans.

Another easy way to lower the cost of your automobile insurance is to increase the deductible. Simply raising your deductible from $250 to $500 can lower your premium sometimes by as much as five or ten percent. However, you should be careful to make sure that you have the financial resources necessary to handle the larger deductible.

I have an older car whose current market value is very low - do I really need to purchase automobile insurance?

Most states have enacted compulsory insurance laws that require drivers to have at least some automobile liability insurance. These laws were enacted to ensure that victims of automobile accidents receive compensation when their losses are caused by the actions of another individual who was negligent.

Except for the minimum liability coverages that you may be required to purchase, many people with older cars decide not to purchase any of the physical damage coverages. It is often the case that the cost of repairing the damages to an older car is greater than its value. In these cases, your insurer will usually just "total" the car and give you a check for the car's market value less the deductible.

Suppose I lend my car to a friend, is he/she covered under my automobile insurance policy?

Whenever you knowingly loan your car to a friend or an associate, he or she most-likely will be covered under your automobile insurance policy. In fact, even if you do not give explicit permission each time a person borrows your car, they most-likely are covered under your automobile insurance policy as long they had a reasonable belief that you would have given them permission to drive the car. If you're not sure what your policy's exact responsibilities are under these conditions, you will want to review the "definitions" section of your policy.

What is the difference between collision physical damage coverage and comprehensive physical damage coverage?

Collision is defined as losses you incur when your automobile collides with another car or object. For example, if you hit a car in a parking lot, the damages to your car will be paid under your collision coverage.

Comprehensive provides coverage for most other direct physical damage losses you could incur. For example, damage to your car from a hailstorm will be covered under your comprehensive coverage.

It is important to know the differences between the collision and comprehensive coverages for a couple of reasons.

In order to make an informed purchasing decision about these optional coverages, you need to know the difference between them.

The deductibles under the collision and comprehensive coverages are often different in amount.

What factors can affect the cost of my automobile insurance?

A number of factors can affect the cost of your automobile insurance - some of which you can control and some which are beyond your control.

The type of car you drive, the purpose the car serves, your driving record, and where you live all affect how much your automobile insurance will cost you.

Even your marital status can affect your cost of insurance. Statistics show that married people tend to have fewer and less costly accidents than do single people.

I lease my car. Do I need GAP insurance?

Whether you lease your car or have an outstanding auto loan, GAP insurance can provide valuable protection during the early years of your car's life. As we all know, a new car's value drops the minute you drive it off the lot. And unfortunately, if a bus plows into the side of your new car five minutes after you drive it off the lot, your insurance only covers the actual cash value of the car. At this point, there's a good chance the insurance payoff isn't enough to pay off your outstanding lease (or loan) balance.

GAP insurance was created for just such a situation. If a loss occurs (theft, total loss in a collision, etc.), GAP insurance will pay the difference between the actual cash value of the vehicle and the current outstanding balance on your loan or lease. Some lenders and lessors actually require you to carry GAP coverage until the outstanding loan/lease amount drops below the value of the vehicle.

GAP insurance is typically not very expensive, since the coverage amount is relatively small. However, the cost will vary depending on the type and value of the vehicle you purchase.

Home Insurance

FAQ: Homeowners Insurance

What is homeowners insurance and who should buy this type of coverage?

Homeowners insurance is one of the most popular forms of personal lines insurance on the market today. The typical homeowner's policy has two main sections: Section I covers the property of the insured and Section II provides personal liability coverage to the insured. Almost anyone who owns or leases property has a need for this type of insurance. And most often, homeowners insurance is required by the lender as part of the requirements in obtaining a mortgage.

What is the difference between "actual cash value" and "replacement cost"?

Covered losses under a homeowner's policy can be paid on either an actual cash value basis or on a replacement cost basis. When "actual cash value" is used, the policy owner is entitled to the depreciated value of the damaged property. Under the "replacement cost" coverage, the policy owner is reimbursed an amount necessary to replace the article with one of similar type and quality at current prices. The choice of which policy best suits your needs or desires is up to you when purchasing a homeowners policy, although if you currently have an actual cash value policy we can upgrade your protection to replacement cost for additional premium.

What factors should I consider when purchasing homeowners insurance?

There are a number of factors you should consider when purchasing any product or service, and insurance is no different.

Here is a short list of things you should consider when you purchase homeowners insurance.

-First and foremost, purchase the amount and type of insurance that you need. Remember that if your policy limit is less than 80% of the replacement cost of your home, any loss payment from your insurance company will be subject to a coinsurance penalty. Also, determine the amount of personal property insurance and personal liability coverage that you need.

-Second, determine which, if any, additional endorsements you want to add to your policy. For example, do you want the personal property replacement cost endorsement, the earthquake endorsement, etc..?

What are some practical things I can do to lower the cost of my homeowners insurance?

There are a number of things you can do to lower the cost of your homeowners insurance.

One way to lower the cost of your homeowners insurance is to look for any discounts that you may qualify for. For example, many insurers will offer a discount when you place both your automobile and homeowners insurance with them. Other times, insurers offer discounts if there are deadbolt exterior locks on all your doors, or if your home has a security system. Be sure to ask us about any discounts you may qualify for.

Another easy way to lower the cost of your homeowners insurance is to raise your deductible. Increasing your deductible from $250 to $500 will lower your premium, sometimes by as much as five or ten percent. However, be careful to make sure that you have the financial resources necessary to handle the larger deductible.

What are the policy limits (i.e., coverage limits) in the standard homeowners policy? [Note: this answer is based on the Insurance Services Office's HO-3 policy.]

Coverages A and B provide protection to the dwelling and other structures on the premises on an all risks basis up to the policy limits. The policy limit for Coverage A is set by the policy owner at the time the insurance is purchased. The policy limit for Coverage B is usually equal to 10% of the policy limit on Coverage A. Coverage C covers losses to the insured's personal property on a named perils basis. The policy limit on Coverage C is equal to 50% of the policy limit on Coverage A. Coverage D covers the additional expenses that the policy owner may incur when the residence cannot be used because of an insured loss. The policy limit for Coverage D is equal to 20% of the policy limit on Coverage A. The coverage limit on Coverage E, Personal Liability, is determined by the policy owner at the time the policy is issued. The coverage limit on Coverage F, Medical Payments to Others, is usually set at $1000 per injured person.

Where and when is my personal property covered?

Coverage C, which provides named perils coverage, applies to all your personal property (except property that is specifically excluded) anywhere in the world. For example, suppose that while traveling, you purchased a dresser and you want to ship it home. Your homeowner's policy would provide coverage for the named perils while the dresser is in transit, even though the dresser has never been in your home before.

Do I need earthquake coverage? How can I get it?

Direct damages due to earthquakes are not covered under the standard homeowner's insurance policy. However, unless you consider yourself living in an area that is prone to earthquakes, you may not want this coverage. If you do live in a part of the country with high earthquake activity you may want to consider adding an earthquake endorsement to your homeowner's insurance policy. This endorsement will cover damages due to earthquakes, landslides, volcanic eruptions and other earth movements.

Will my homeowner's policy cover me for losses that occur outside of my home?

There is only one way to find out the answer to this question, and that is to check your policy. Homeowner's policies regularly provide protection for off-premise destruction or theft, which covers your possessions while they are outside your home. For example, if your luggage were stolen while you're on vacation, a homeowner's policy containing off-premise protection would cover the loss. This type of protection can also protect your kids' stereo equipment and other possessions when they go off to college - if they live in a dormitory. Once a child moves to an off-campus apartment, he or she will typically need to purchase a separate renters insurance policy to cover their personal property.

If your homeowner's policy does not contain off-premise protection as part of your standard coverage, you may be able to purchase this coverage for an additional charge.

You should check the liability portion of your policy to determine your level of coverage for accidents that occur outside your home. Homeowner's policies typically cover accidents that occur on your property - if the mailman slips on your sidewalk, or if a neighbor is injured in your backyard. Many policies will even cover you for accidents that occur away from your property. For example, if you run a shopping cart over someone's foot at the grocery store, many policies will cover the medical bills. But once again, the only way to know whether you're covered is to carefully read your homeowners insurance policy.

How much of the exterior of my property is covered by homeowners insurance--fencing, driveway, etc.?

Many people don't realize it, but homeowners insurance covers a lot more than just your house. A standard homeowner's insurance policy provides broad protection for personal property and other structures located in and around your home.

Several different types of coverage are included in every standard homeowners insurance policy (HO-1, HO-2, and HO-3--the three standard policy types available for most homes). Coverage A is strictly for the physical structure of your home, including additions permanently attached to the structure (such as an attached garage). Coverage B insures other structures on the premises, including detached garages, fences, swimming pools, driveways, and sidewalks. The limit on this coverage is typically 10 percent of the Coverage A amount. Coverage C insures your personal property, including all of your household possessions and other items such as awnings, outdoor antennas, and carpeting. The limit on Coverage C protection is typically 50 percent of the Coverage A amount. Additionally, all standard homeowner's policies include various "additional coverages" for items such as debris removal, trees, and shrubs. Each of these coverages has its own dollar limit.

While homeowner's insurance coverage is very broad, there are certain items which are not covered. For example, motorized vehicles (e.g., cars, motorcycles, go carts, golf carts, and snowmobiles) are not covered by your homeowners insurance. Animals, birds, and fish are not protected under homeowners insurance, either.

Keep in mind, too, that your homeowner's insurance policy only covers the above-listed property if it is damaged or destroyed by an insured peril. Personal property is only protected against the perils listed in your policy, while your dwelling may be insured against named perils (HO-1 and HO-2) or open perils (HO-3).

My neighbor's tree fell across my fence. Will their insurance cover the damage?

In most cases, your insurance will be the one to cover the damage. Although the tree fell from your neighbor's property, the damage affected your property. Your homeowners insurance covers damage to your property, so you should make a claim under your policy. Your policy probably also provides coverage to remove the debris from your property (typically up to $500).

There are a few exceptions to this general rule, however. For example, say you notice that your neighbor's tree has a large, dead branch hanging precariously over your property. You notify your neighbor in writing of this hazard and ask him to address the problem, but he chooses to ignore it. Two weeks later, the branch comes crashing down and destroys your fence. In this case, you may have some recourse against your neighbor's insurer, because your neighbor had notice of a potential hazard and did nothing to improve the situation. Make sure you keep records of all correspondence and actions regarding the situation, so that you have something to back up your story if you have to contact your neighbor's insurer.

Complications may also arise depending on what actually caused the tree to fall. If the tree fell in a windstorm, or if it was struck by lightning, there is little question that the damage will be covered. However, certain perils such as floods and earthquakes are not covered under standard homeowner's policies. If the tree fell as a result of such an event, the damage may not be covered at all. To find out for sure, you'll have to contact your insurer.

Renters Insurance

FAQ: Renters Insurance

Why would I want to buy renters insurance?

If you live in an apartment or a rented house, renters insurance provides important coverage for both you and your possessions. A standard renters policy protects your personal property in many certain cases of theft or damage and may pay for temporary living expenses if your rental is damaged. (including loss of use). It can also shield you from personal liability. Anyone who leases a house or apartment needs should consider this type of coverage.

How does a renter's policy protect my personal property?

A renter's policy provides named perils coverage. This means your property is protected from all the perils that are specifically listed on your policy.

    These usually include:
  • -  Fire or lightning
  • -  Windstorm or hail
  • -  Explosions
  • -  Riots
  • -  Aircraft
  • -  Vehicles
  • -  Smoke
  • -  Vandalism or malicious mischief
  • -  Theft
  • -  Falling objects
  • -  Weight of ice, snow, or sleet
  • -  Accidental discharge or overflow of water or steam
  • -  Sudden and accidental tearing apart, cracking, burning, or bulging
  • -  Freezing
  • -  Sudden and accidental damage from artificially generated electrical current
  • -  Volcanic eruptions (but this doesn't include earthquake or tremors)

Renters coverage applies to your personal property no matter where you are in the world. This means you're covered when you are on vacation as well as at home.

Why do some apartment complexes require tenants to have renters insurance?

The owners of these apartment complexes require their tenants to have renters insurance to ensure that they have personal liability coverage. Owners of apartment complexes carry property insurance to protect themselves in the event that the apartment building is damaged. However, if a negligent tenant causes damage, the owner's insurer will sue the responsible tenant for the amount of damage they caused. The owner wants to make sure that the tenant has insurance coverage that will protect him or her in this event.

What if I share my apartment with a roommate? Do we both need to have renters insurance?

Standard renter's policies cover only you and relatives that live with you. If your roommate is not a relative, each of you will need your own renter's policy to cover your own property and to provide you liability coverage for your own actions.

Personal Liability

FAQ: Personal Liability

What is a personal umbrella liability policy?

    The personal umbrella liability policy is an insurance contract designed to accomplish two goals.
  • -  First, it increases the liability protection beyond what the policy owner already has in his or her homeowners and automobile insurance policies.
  • -  Second, the personal umbrella policy is designed to fill in the gaps in a policy owner's liability coverage since several types of liability exposures exist that are not covered by automobile and homeowners policies.

Together with homeowners and automobile insurance policies, broad personnel liability protection is attained through the purchase of a personal umbrella policy.

How do I know if I need a personal umbrella liability policy?

It used to be that the only people who needed personal umbrella liability policies were wealthy individuals who had sizable amounts of personal assets that would be at risk in a lawsuit.

However, in our very litigious society, many people are realizing that they have a need for more liability insurance than what is provided under their homeowners and automobile insurance policies. The personal umbrella policy is ideally suited to provide this protection at extremely affordable rates.

General Questions

FAQ: General Questions About Insurance

What kinds of questions should I be expected to answer when I am applying for an insurance policy? Why do insurers ask all of these questions?

When you apply for an insurance policy, you will be asked a number of questions. For example, your name, age, sex, address, etc. In addition, you will be asked a number of other questions which will be used to determine what type of risk you are.

For example, when an insurance company is deciding whether or not to supply automobile insurance to a potential policy owner, it will want to know about the person's previous driving record, whether there have any recent accidents or tickets and what type of car is to be insured.

    All of this information will be used for two purposes.
  • -  Based upon the responses to these questions, the insurance company will decide whether the profile of the applicant is consistent with the type of risks the insurer is trying to attract. Some insurers specialize in offering insurance to only very safe drivers and therefore will only accept applications from people who fit the profile of a safe driver while others may base their policies on those who are considered a higher risk, and charge accordingly.
  • -  Once the insurer has decided that your risk profile is consistent with the types of risks it accepts, the answers to the questions will be used to determine which rate category should be applied. For example, the insurance company will decide whether you should be offered insurance at the high risk driver rate or the low risk driver rate.

Collectively, this entire process is known as the underwriting process and every insurance company has one. The primary function of the underwriting department in an insurance company is to decide whether or not to offer insurance to a person who has completed an application.

If the answer is yes, then the underwriting department seeks to determine the "quality" of that risk so that the proper premium can be charged. That is, high risk people should pay more than low risk people because of the greater possibility of experiencing a loss.

My child is heading off to college this fall. What insurance issues does this raise?

As you send your children off to college, you probably have a lot of things on your mind - whether they'll eat right and get enough sleep, how to pay the tuition bills, what to do with that empty bedroom, etc. For most people, insurance concerns are pretty low on the priority list. But there are some important issues you should consider.

Issue #1: Health insurance - make sure your child is covered.

Your medical plan probably covers your children until they're somewhere between 20 and 24 years of age, regardless of whether or not they live at home. But if the plan is an HMO and your child's college is far from home, accessing an approved provider may prove difficult. As an alternative, consider purchasing health insurance coverage through your child's college. Many colleges and universities offer low-cost health insurance for students. Cost and level of coverage vary greatly from one school to the next, but school-subsidized health insurance is often less expensive than continuing coverage through your existing health plan. And since health care is typically provided on-campus, it may be easier for the student to access.

Issue #2: Homeowner's/Renters insurance - make sure your child's possessions are covered.

If your child lives in a dorm or other university housing, their personal property is typically covered under your homeowners insurance policy. Check your policy for coverage limitations on computers and stereos, if your child can't live without these. Once a student moves out of the dorms and into an apartment, they are usually no longer covered under your policy. Off-campus students should purchase a renters insurance policy to cover their possessions.

Issue #3: Auto insurance - make sure the car is covered.

If your child will be taking a car to school, make sure the car is properly insured. If the child owns the car, then the insurance policy must be in the child's name as well. If the child is "borrowing" a car from Mom and Dad, the child must be listed on the insurance policy. Some insurance companies may require the child to be listed as the primary operator, since the car is in the child's possession and not the parents'.

How often should I check my Social Security earnings record? Is there much of a chance that an error may occur?

You should check your Social Security earnings record at least once every three years. Errors in your earnings record are more likely to occur if you change jobs frequently or have more than one employer.

To check your earnings record, you should complete and return an SSA-7004, Request for Earnings and Benefit Estimate Statement. You may complete and transmit the SSA-7004 online. Or, if you prefer, you may download the SSA-7004 from the Social Security Web site server and mail it to them. Within four weeks after submitting the request, you'll receive a statement from them showing your earnings as reported to Social Security by your employer(s).

What do I give up by not using an agent to purchase insurance?

The disadvantage of not using an agent to purchase insurance is that the policyholder does not receive as much, or often any, personal service. A licensed agent with whom there is direct contact can be vital when purchasing a product and absolutely necessary when filing a claim. Without an agent to act as your personal advocate during the claims process, you are left to take care of the details on your own... not sure who to contact at the insurance company or who you can really trust to help you during the times in life when you need help the most. Without an agent you are on your own to absorb the frustration and expense of resolving your problems.

Am I at risk if I don't use a licensed agent?

Many "direct writing" insurance companies/providers fail to tell you that the "call center personnel" who will take your information and issue the policy ARE NOT licensed to sell insurance, therefore lacking the professional knowledge to guide you toward an acceptable level of protection. These companies are conducting business using a loophole within the law which allows the company to have 1 license while everyone else works without it. Going this route can place your financial future at risk because unlicensed personnel are trained to simply sell you a policy without being aware of what "real" protection means.

For instance, imagine you own a $150,000 home and your auto insurance policy's liability limits are $50,000. When you purchased the policy you were told this was plenty of protection considering your state's minimum requirement for liability is $20,000. Yet if you have an accident and are sued for $200,000 your policy is only going to pay out $50k, leaving you responsible for the remaining $150k. Since your home would cover the difference, a court judgment could force you into selling your home as a way to settle the suit. If your policy's liability limits had protected you at a minimum of $200,000, the policy would be paying for the total suit.

Because direct writers are typically located hundreds (if not thousands) of miles from where you live, many won't hesitate to sell you a policy with low liability limits as a way to simply make the policy cheaper while convincing you to buy it, leaving you extremely vulnerable to financial disaster.

Insurance & Credit Scoring

FAQ: Insurance & Credit Scoring

Why do insurers use credit?

Insurance companies use financial history along with other factors (such as, in the case of auto insurance, years of driving experience) to properly classify an insured according to his/her potential risk. Studies have shown a correlation between a consumer's financial history and his/her future insurance loss potential. Thus, some insurance companies believe the use of credit helps to underwrite an applicant at a cost that reflects their specific risk.

What information is in a credit report?

  • -  Identifying Information- Name, Current and Previous Addresses, Social Security Number, Telephone Number, Date of Birth
  • -  Credit History- History of satisfying obligations to retail stores, banks, finance companies and mortgage companies
  • -  Public Records- Judgments, Foreclosures, Bankruptcies, Collections, Tax Liens, Garnishments
  • -  Inquiries- Identifies credit grantors or other authorized parties that have received a copy of the consumer's credit report, typically during the past 2 years. Also, lists companies who received consumer information for the purpose of offering credit
Contact Us

Walters & Associates Insurance

130 So. Willow St. STE 8
Kenai, AK 99611

Office Hours: M-F 9am-5pm

Tel: 907-283-5116
Fax: 907-283-3923

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