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What is Insurable Interest?

What is Insurable Interest?

With so many different types of insurance policies existing, it is hard to think of something that you can’t insure. You can insure your home, car, motorcycle, boat, belongings, and even your life. But can you insure your neighbor’s car? Surprisingly the answer is no. You can only insure the items that you have an insurable interest in.

So what is insurable interest? Insurable interest means that the destruction of the property or the death of the person insured would cause you to take a direct financial loss. You can’t insure your neighbor’s car, because you would not suffer a financial loss over it being totaled. You also can’t insured your barely known distant relative with life insurance since their passing isn’t going to directly impact your personal finances. You can insure the home & car, and belongings in your name as if they are destroyed or damaged, you will be directly responsible for repairing or replacing them. There can also be life insurance on your spouse that you can benefit from as their untimely death would create financial hardship for your family.

Insurable interest is required so that you only benefit from insurance payouts for losses that would actually affect you financially. Insurance companies often require you to have insurable interest when you start the policy on the person or object and insurable interest at the time of the loss. For example:  you owned a car and added it to your auto insurance policy, but later you sold it to your cousin. Let’s say that cousin then had an accident. Your insurance would not cover this vehicle even if you still have it listed on your policy as now it belongs to your cousin. It is your cousin who would take the financial loss, not you.

Sometimes, with families, friends, and romantically involved parties, this can be complicated. Insurance policies have listed named insureds for the policy and these named insureds are the ones that receive the funds. Usually named insureds are an individual or an individual & spouse combo.

So can you insure your child’s vehicle? If a child owns a vehicle in their name, is paying the payments on the vehicle, would suffer the damage to their credit if they don’t pay, but insure it on their parent’s auto policy, the parents receive the funds for the totaling of the vehicle.  So it is better in this scenario for the child to insure their own vehicle on their own policy as they have the insurable interest and should receive the funds vehicle in a claim. Sometimes insurance companies will allow for a child/parent co-owned vehicle to be insured on a policy in either the parent’s or the child’s name. This makes it so that the loss funds can be put in both names.

 

In the case of romantic relationships and friendships, insurance companies sometimes do not want to insure something owned by two unrelated individuals. If they start a policy together, but part ways, how does an insurance company decide to whom the funds belong? Insuring married couples is safer as if they split, lawyers help decide to whom funds and property belong. This will vary from company to company following their rules about how they will insure co-owned items or items owned individually insured on a co-owned policy.

The best idea is to ask your insurance agent before you buy anything co-owned or buy something and expect to be able to insure it on someone else’s policy.  To make sure that you will receive the funds for the loss, make sure to insure everything correctly. Provide your agent with your proof of purchase for an item showing who has ownership and let them know if you transferred ownership to someone else. For life insurance policies, make sure all of the beneficiaries are kept up to date. This way you know in the case of a claim, the correct people (you including) receive the benefit of the insurance you are paying for!

The Biggest Threat To Your Wealth

The Biggest Threat To Your Wealth:

A Lawsuit

You take many precautions to get the best returns on your investments, minimize taxes, and protect your home & family from financial hardship.  However, most people don’t think about protecting their wealth from legal judgements.  Some people believe the risk is so small that it will never happen to them, but all it takes is one accident to completely overwhelm your current insurance limits leaving you with a pricy legal defense bill. Don’t think it can happen to you? Check out some local recent lawsuits here and here.

Often home insurance policies have about $100k-$300k in liability coverage & auto policies with good coverages may have between $300k-$500k in bodily injury liability along with $100k in property damage. However, a lawsuit can often quickly surpass these limits leaving you to pay for your legal defense and whatever settlement amount the court may decide on.  Your home, business or real-estate holdings, future income, and non-qualified retirement assets are left to foot the bill.  Although rare, the court can order up to a 25% wage garnishment until the settlement is paid off.

To cover claims in excess of either your auto or homeowners policy, you can purchase excess liability coverage through a Personal Umbrella Policy.  They are called umbrellas since they cover excess liability from any policy you have under it. These could be homeowners, auto, motorcycle, boat, renter’s, landlord, recreational vehicle, and others. Another area Personal Umbrella Policies help protect families is in personal injury lawsuits, such as in liable or slander cases; for example a family member posts a negative online review that results in an alleged defamation lawsuit.

You can usually purchase $1 million in liability coverage for around $150-$400 per year depending on your risk factors. Umbrella policies usually have $1 to $5 million in coverage, but also come in larger amounts for celebrities, business owners, executives, and politicians.

Everyone has the risk of being sued over an accident, but if you have any of these risk factors, you may need an umbrella more than the average person:

  1. You have a dog (or other large animals like horses).

  2. You have teenage or young drivers in your household (or you are accident-prone).

  3. You have a long commute to work or drive a lot.

  4. You volunteer for (or are on the board of) a non-profit, or coach youth sports.

  5. You have a pool or trampoline (or other fun structure at your home).

  6. You (or your children) play sports in public areas.

  7. You are a landlord or own multiple properties.

  8. You have a boat, motorcycle, ATV, or other recreational vehicle.

  9. You frequently entertain guests at your home.

  10. You own a business.

  11. You have a job that others associate with making good money.

  12. Your  income is higher than the average for your community or you live in a high income community.

Which of these risk factors do you have?

 

What Is “Full” Coverage?

What Is “Full” Coverage?

You are told by your dealership when you buy a car with a loan that you need “full” coverage, but what exactly what is being asked for when you want to include “full” coverage on a vehicle? There is no one specific coverage called “full” coverage.  Since what is in your mind probably isn’t the same as what is in your insurance agent’s mind, let’s clarify what falls under the umbrella of “full” coverage and the options you have. Let’s agree that “full” coverage includes all the coverages that are specific to a particular vehicle rather than the coverages that apply to the policy as a whole.  These can include:

  1. Collision coverage is a required coverage when you have a loan on the vehicle. However, the deductible can vary widely. You can choose many options between $100 to $2000. It is important to keep your deductible low enough that you can afford to pay the amount of pocket at any time if you have an accident and need your vehicle repaired.  However, the lower the deductible, the higher the cost. Many people choose a middle ground of around $500 for a collision deductible. Let your agent know what deductible amount do you want for your collision coverage.

  1. Comprehensive coverage is also a required coverage when you have a vehicle loan. There are also the wide varieties of deductibles between $0 to $2000.  For comprehensive coverage, usually the lower the deductible, the better. Comprehensive coverage is generally less expensive than collision coverage. So if it does not cost a lot more to have a $0 deductible than other amounts, it is convenient to have nothing out of pocket if you hit a deer or take a rock to the windshield. Let your agent know what deductible amount do you prefer for your comprehensive coverage

  2. Towing and labor coverages are vehicle specific as well. While this coverage is not required if you have a loan, this is a coverage available to help you out with a short tow or offer some simple roadside assistance.  Usually there are only a few per incident coverage amounts to choose.  Tell your agent whether you would like towing and labor coverage, and if so, for what amount per incident.

  3. If you have a collision or comprehensive claim, your vehicle has to go to a shop to be repaired leaving you without a vehicle. While not required by a vehicle loan either, rental reimbursement coverage can cover the cost of a rental car for a short period of time while your vehicle is being repaired due to a claim. You choose this coverage amount at a per day maximum. Keep in mind the type of rental vehicle you would like in exchange for your vehicle being in the shop as larger rented vehicles cost more per day. Let your agent know if you would need a rental car if you have a claim, and if so, how much coverage per day do you want.

  1. Lastly, some policies offer coverages specific to brand new vehicles. These are not required by vehicle loan lenders, but can help you of sticky situations if a brand new vehicle ends up totaled.  You would have to speak to your agent specifically about the coverages available to you. Some offer replacement cost on new vehicles instead of actual cash value. Some offer to replace your new vehicle with whatever the current year is of that same make and model for a set number of years. Some policies may offer a form of gap coverage. So if you buy a brand new vehicle, be sure to ask your agent if they have any special coverages available.

So next time if you ask for “full” coverage on a vehicle, try to clarify for your insurance agent what you really want and need on your vehicle.  The extent of coverages and costs can vary widely depending what amounts and deductibles you choose.  Feel free to ask for cost comparisons between taking a certain coverage amount versus another to find the right coverage and cost balance for you.

Pennsylvania Full vs. Limited Tort

Pennsylvania Full vs. Limited Tort

When you are setting up and reviewing your auto insurance in Pennsylvania, one of your important decisions to make will be choosing full versus limited tort.  This article is not fully exhaustive on the subject and is not meant to give legal advice. You can read the state law regarding tort here.

When you choose a tort option, you are choosing it for the members of your household, including your spouse and children. Your option is regarding your legal rights to sue the at-fault party in a car accident.  When you choose a tort option, you must sign the state document indicating which you would like.  If you do not sign the document within the given time period, your insurance policy will default to full tort regardless of your initial decision.

What is Full Tort?

Full tort is generally more expensive to have on your insurance policy. However, for the cost, it gives you the unlimited right to sue if you are involved in an accident.  You can sue for economic losses, such as medical expenses, lost wages, property damages, out-of-pocket costs along with non-economic losses, including pain and suffering regardless of the type or severity of injuries. Pain and suffering is generally a large part of accident lawsuits. Having the ability to sue for these does not guarantee that you will actually win a settlement, and even if you are awarded damages by the court, there is no guarantee the at-fault party will have the coverage or assets to pay. That is where we enter into the discussion of uninsured and underinsured motorists bodily injury coverage, which we will address in another article.

What is Limited Tort?

The first thing that people notice with limited tort is that their insurance cost is 15%-20% less than with full tort.  However, for those savings, you sign away the ability to sue for pain and suffering for “non-serious injuries” along with other non-economic losses. So what can you sue for? You can still be reimbursed for economic losses.  These include medical bills, lost wages, property damages, and other out-of-pocket costs. You can sue for “serious injuries” which are defined in your policy as personal injuries resulting in death, serious impairment of body function or permanent serious disfigurement.

Limited tort does have a number of exceptions that will revert your rights to full tort after an accident where:

  • You were hit by a driver convicted of a DUI (Driving Under Influence) or accepts ARD (Accelerated Rehabilitative Disposition) as a result of this accident. Keep in mind, the driver must live to be convicted.

  • The vehicle that hit you is registered in a state other than Pennsylvania.

  • You were injured by a driver purposefully trying to harm themselves or others. This could include a road rage scenario and possibly the act of avoiding such a risk.

  • You were hit by a driver without insurance. Keep in mind that drivers without insurance often don’t have great amounts of assets or income to recover either, which makes your uninsured motorist coverage important.

  • Your injuries were caused by an auto manufacturer’s defect or a mechanic’s defect in workmanship.

  • You were in a vehicle other than a private passenger vehicle. This could be a business vehicle, company vehicle, commercial vehicle, bus, other public transportation, motorcycle or bicycle.

Consider your rights, your family, the exceptions, and the price of your insurance coverage to make a decision of full or limited tort. If you have legal questions, consult a lawyer for further information. If you have insurance coverage or rate questions, ask your agent!

Tips to Quickly Stop the Damage of Identity Theft

Tips to Quickly Stop the Damage of Identity Theft

Have you been a victim of identity theft? Do you know someone who was? Chances are you answered yes to at least one of these questions. According to CNN, every two seconds another American becomes a victim of identity theft – and it’s growing rapidly!

There are clear steps you can take to protect yourself from identity theft before it occurs, but what about after it has already taken place? Consumers should be made aware that most homeowner or renters insurance policies don’t cover much, if any money stolen from property, and none of the money stolen from a bank. Once the damage is done, you can still manage its impact by following these key tips to stop the damage from going any further.

Check your bank accounts daily

The few minutes of your day it will take to diligently check your bank accounts, is well worth the price of fraudulent spending cleaning out your savings. Beyond just spotting ID theft, this practice will also help you spot erroneous fees or mistakes made when depositing checks. Online platforms, such as mint.com, can help you aggregate all of your different bank accounts into one location where you can view them seamlessly. This daily practice will ensure ID theft will have no more than 24 hours impact on your bank account, increasing your chances of getting all of your stolen funds restored.

Check your credit score three times per year

While you’ve likely seen commercials out there for all sorts of credit score companies, keep in mind that there are just three main credit bureaus: Experian, TransUnion and Equifax. You should run your credit score with them each once per year. Spread these out over the year, so you are checking your credit every four months. Checking all main credit bureaus will give you the full picture of your credit, so you can spot anything that appears fraudulent. The sooner you catch these errors, the sooner you can report them to the bureau and restore your credit.

Set alerts on spending

One of the best ways to catch ID theft in real-time is to set alerts on any spending from your bank accounts or charges to your credit card. Most banks or credit card companies will monitor your account for what appears to be fraudulent spending, but this may not be enough to catch a sophisticated ID theft. Take matters into your own hands and get an email alert for any time a card is used. These may result in a few extra emails a day, but it’s easier to delete these emails than to recover money lost due to ID theft.

Change all passwords on important accounts

Once you see fraudulent charges occur, it’s safest to assume the ID theft has all of your sensitive information. Immediately change your passwords for all bank accounts, email accounts, government accounts, social media and PayPal. This is one of the fastest and smartest ways to reduce the impact of ID theft. Additionally, don’t reset your password to something obvious or something you’ve recently used for another account.

Send creditors and credit reporting agencies a copy of your ID theft report

Once ID theft takes place, you should share copies of your ID theft report with your creditors and credit report agencies so they can note the fraudulent charges as such and remove the impact these would otherwise have on your credit score.

Escalate things to the police or FTC

If after you have taken all of the actions listed above and the fraudulent activity continues to occur, it may be time to take your case to the police or Federal Trade Commission (FTC). Usually the entities only get involved if the case is extremely sophisticated, but yours just might be. With their resources, you have a better shot at restoring your identity and the money or credit you may have lost in the process.

The good news is there are services and insurance out there that can offer you some additional peace of mind. Companies like LifeLock and IDShield offer subscriptions to closely monitor your private information and alert you of any potential threats. However, these services are by no means a guarantee you will never experience identity theft. Additionally, you can usually add on ID theft expense coverage as part of your homeowners’ insurance policy for about $30 a year. While this doesn’t cover the actual money stolen as the result of ID theft, it does provide up to $25,000 to cover the cost of hiring an attorney, credit recovery and monitoring service, and pay for time off work related to getting your ID back.

Remember, the best safeguard against ID theft is using precaution, closely monitoring your bank accounts and credit score, and taking action immediately if anything looks out of place.

What other questions or tips do you have related to identity theft? Share your thoughts by leaving a comment below!

6 Ways to Get More Out of Your Insurance in 2018

6 Ways to Get More Out of Your Insurance in 2018!

It’s a new year and the perfect time to take a fresh look at the many areas of your life which you can improve. Aside from improving your health and breaking some bad habits, it’s also smart to take a critical look at your insurance policies to be sure you are properly covered and getting the best rates possible.

Take a look at these six tips for getting more out of your insurance in 2018 and plan to put them to use in the coming months!

Learn What Coverages You Really Need

When it comes to insurance, you don’t want to overpay for coverage you don’t need and you certainly don’t want to be underinsured. It’s smart to educate yourself on what coverages you really need for home, auto, life and any other type of insurance you purchase. Your agent should offer you sound advice, but you should also have enough base knowledge to ask questions and understand exactly what you’re getting in a policy.

Bundle Insurance Packages

Working with a single agent and bundling multiple insurance packages can save you time, money and stress. Many insurance companies offer a full suite of insurance policies and when you purchase multiple policies, there is a cost-savings involved. You will get the most out of your insurance by bundling packages because you will (most likely) only need to work through one company and one agent which increases efficiency and lowers costs.

Invest in Safety and Anti-Theft Devices

Get more out of your insurance this year by investing in safety and anti-theft devices for your home, car, boat and other insured assets. Most insurance policies will then offer a discount for installing such devices that reduce the risk of your items being stolen or damaged. Not to mention, this is a huge benefit to you, too. Win, win!

Stay in Direct Communication with Your Insurance Agent

It’s important that you have a direct line of communication to your agent, especially in case of emergency. Get the most out of your insurance, and reduce your stress, by working with an agent who is professional, responsive and proactive. You should also schedule a regular (i.e. annual) meeting with him or her to review your policies and insurance needs, as these frequently change over time. You want to be sure you always have accurate coverage and are taking advantage of the best possible rates.

Maintain Good Credit

For so many reasons, it’s smart to regularly check your credit score and to take steps to improve it. When it comes to insurance, your credit may play a role in setting your policy rates. Your credit-based insurance score helps the insurer determine your likelihood of experiencing an insurance loss. It’s important to note that not all insurance companies consider credit ratings when determining your policy rate, but a good credit score will help you in so many other areas of your finances that it’s one more way you can get more out of your insurance in 2018.

Consider service, not just price

It’s easy to focus on the bottom line of what your insurance costs, but don’t forget to consider the service aspect. Working with a company and an agent who delivers exemplary customer service is invaluable. This will save you headaches – and likely money – in the long-run. When shopping around, consider how responsive and knowledgeable the agent is and whether you would feel comfortable turning to this person in an emergency situation.

What other insurance-related questions do you have? Leave a comment and let us help you find an answer!

LOCAL AGENT

David Downey
Insurance Agency Owner
11 N US Hwy 15, Ste 7
Dillsburg, PA, 17019
717-432-1361
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