When you sit down with your insurance agent to customize your Homeowners insurance policy, it may be helpful to know what’s most likely to go wrong that could result in a Homeowners claim. So I thought I’d pass along this actual claim data, which average nationwide losses over five recent years.
Wind and Hail 34.8%
Storm damage accounts for over a third of all Homeowners claims in an average year. Of course, this can vary considerably depending on weather patterns. During the five years of this data, it ranged from 20% of all claims filed in 2015 to 49% of losses in 2012.
Water Damage and Freezing 28.9%
What is most likely to happen to your home when there’s no storm activity? Probably a pipe breaking or water line leaking or appliance malfunctioning that results in water damage in your house. It’s easy to forget how many water lines we have running throughout our homes, and one small leak can lead to thousands of dollars in cost to clean up and repair the resulting damage. This category also includes damage and cleanup costs from a backup of sewers or drains (an optional coverage on most policies). In years when it’s not storming, this category accounts for the lion’s share of claims; for example, in 2015 (a year in which only one out of every five claims were storm related), 45% of all claims were for water damage and freezing.
Fire and Lightening 23.5%
While fire coverage is probably the main thing people think of when insuring their home, less than one quarter of all claims fall in this category, which also includes lightening claims. In my experience, lightening related electric surge claims are far more frequent than fire claims. If I had to guess, I’d say probably only one out of every ten “fire and lightening” claims result in the fire department having to put out a fire. Of course, when that does occur, there is going to be a lot of damage, from smoke and water if nothing else.
All Other Property Damage 6.7%
There’s a lot of other things that could go wrong that could lead to damage to your home, personal property or outbuildings. This category includes vandalism, frozen food spoilage, damage caused by vehicles and a number of other less likely (but possible) perils.
Liability and Medical Payments 3.6%
This category covers any time your policy pays money out to a third party on your behalf. For example, a guest is hurt on your premises, your dog bites someone or you are trying to cut down a tree and it falls the wrong way onto your neighbor’s shed.
Good news! The odds of someone breaking into your home and stealing your possessions are actually rather low, compared to other things that could go wrong at your home. This category also includes a thief breaking into your car and stealing stuff inside or maybe taking items from an unlocked garage.
Chances are you won’t have to file a Homeowners claim due to any of these things happening any time soon, but having a well-rounded Homeowners policy provides great peace of mind just in case something does go wrong.
Claim data is per Insurance Services Office (ISO), as reported in the June 2017 issue of National Underwriter.
If your Auto policy just renewed and your price has gone up, you are not alone. We are noticing a trend in Minnesota of rising Auto insurance rates, similar to what drivers have been experiencing across the country in the last two years, according to many news sources. (Here’s one example story by CBS.)
The good news for drivers is that we do have a competitive Auto insurance marketplace. There are many, many different insurance carriers who would like your business and are looking for ways to win you as a customer. If one carrier decides to raise prices simply to rake in more profits, someone else will undercut their rates and steal much of their client base.
Having said that, an insurance carrier can’t sell you insurance coverage at a loss, or at least they can’t do so for long. When rates are adjusted across the board there is typically an underlying cause.
So why have Auto insurance rates been going up around the country? According to everything I have read, it comes down to two primary factors. Drivers are getting into more accidents, and each accident is costing insurance companies more.
Let’s break this down. It’s been said that more accidents are happening because people have been driving more miles due to lower gas prices. In addition, increased distractions such as texting while driving continues to cause more accidents. And accidents are growing more expensive to cover for several reasons, including the cost to replace all the new safety devices going into new vehicles, ever-increasing medical costs and increased litigation costs and average claim settlements. (Read more about the reasons for higher rates here.)
“But why are MY auto insurance rates going up?” you may ask. “I haven’t filed any claims.” Let me see if I can explain this with a simple example.
Example of how Auto insurance rates work
Let’s pretend Lake Mutual is an insurance company who insures ten drivers and ten vehicles. For the past several years, Lake Mutual has paid $7000 per year in claims and their overhead costs have averaged $2600 per year. They have collected a total of $10,000 in premium per year from their ten drivers and have made $400 per year in profit.
Now, one might assume that if Lake Mutual is collecting $10,000 in premium per year from their ten drivers, then each driver is paying $1000 per year. But that’s not how Auto insurance works. Instead, what Lake Mutual does is to look at statistical likelihood of each driver to file a future claim.
Lake Mutual charges Jared the most. He is 22 and has had a DUI and two speeding tickets in recent years. Lake Mutual charges Jared a whopping $3000 a year. They also charge Sandra $1400 a year. She is 45 but had two recent accidents with her prior carrier before switching to Lake Mutual.
Lake Mutual considers both Jared and Sandra to be a lot riskier than their other drivers and so charges them way more. This takes care of nearly half of the $10,000 Lake Mutual needs to collect, and so it splits the remaining $5600 among their remaining eight drivers, at an average of $700 per driver per year.
Glen pays the least. He is 55 and has a perfect driving record other low-risk factors and pays only $450 per year.
To recap, Lake Mutual has been charging its ten drivers a total of $10,000 a year, from Jared at $3000 down to Glen at $450. Unfortunately, costs are going up. Lake Mutual’s claim payments last year went up to $7900 and their overhead to $2800. So they have decided that they will have to raise rates to collect $11,000 this next year instead of $10,000. This means each driver gets a ten percent increase. Jared’s rates go up from $3000 to $3300. Glen’s rates go up from $450 to $495.
Of course, Glen isn’t happy about his increase. He has been paying Lake Mutual $450 a year for several years and hasn’t filed any claims. He doesn’t feel his rates should go up because of other people’s claims. What he doesn’t know is that he is still paying way less than some of Lake Mutual’s other insured drivers, because he is a lower risk. All Glen sees is his $45 increase.
What this very simplified example points out is that a low risk driver will always pay less than a higher risk driver, but when costs go up, everyone will pay more. Unfortunately, this is the nature of Auto insurance.
What to do about rising Auto insurance rates
If you are seeing your rates go up, there are several things you can do about it:
If your home is situated on several acres and you own a tractor, Bobcat, skid steer or other motorized machine that you use to maintain your premises, I’m sure that you want to make sure that this equipment is properly covered, both for its value and also with liability protection if an accident occurs. Unfortunately, while your Homeowners insurance may provide some coverage for your machine, most policies will leave uninsured gaps which might escape your notice without a close examination of your policy.
As I see it, the problem is not that your Homeowners carrier doesn’t want to properly cover your bobcat or tractor; it’s more that the writers of your Homeowners policy didn’t really anticipate policyholders owning this kind of machine to begin with.
First let me explain that there are typically only two types of motor vehicles covered under most Homeowners policies: a) vehicles intended to assist the handicapped (think motorized wheelchairs) and b) unregistered, off-road vehicles used to service your premises (aka “service vehicles”). While the primary intent of service vehicle coverage is for incidental machines such as riding lawnmowers, it may also work to cover your tractor or similar machine, but let’s dig a little deeper before we assume that you’re good to go.
First, most Homeowners insurance policies only cover service vehicles while they are on your premises. Even if that is the main place you use your machine, do you ever take it over to a relative’s home to help them out or maybe to hunting land you own to do a little work? Or how about when you bring it into town for servicing? If you got in a car accident while trailering it or if it was damaged or stolen while at at another location, most carriers would likely deny your claim.
Secondly, there are other exclusions and limitations that could come into play. Some Homeowners policies place a limit on coverage for service vehicles, which might be as low as $5000 or less. While $5000 should be enough to cover most riding lawnmowers, it’s probably nowhere near the value of your bobcat, skid steer or other tractor or machine. Occasionally I see policies that don’t provide any service vehicle coverage at all.
Unfortunately, most Homeowners carriers simply don’t offer a way to overcome these restrictions or fully cover your motorized equipment. It’s not so much that they don’t care about your coverage needs, but a suburbanite working in a 4x6 cubicle in a high rise may not be able to imagine why a private homeowner would need such a machine to begin with.
There are a few insurance companies out there who will allow you to specifically add your motorized equipment to your Homeowners policy (or on a separate companion policy) to ensure that it is covered up to its value both on and off premises. Depending on the carrier and the value of your machine, this often costs one or two hundred dollars a year and is probably money well spent. However, it is important to note that this addition provides property coverage only and does not broaden your Liability coverage, which might remain a major gap in coverage. We do see a few carriers that provide off-premises Liability coverage service vehicles, and you probably need to go with one of these carriers. Or your other option would be to buy a farm policy if you are able, as farm policies tend to be more friendly to insuring motorized equipment.
Let me bring up a very important word of caution. If you are relying on your Homeowners or other personal policy for coverage, I’d strongly discourage you against ever using your machine for pay. The temptation is definitely there: Once you have this machine, why not make a little money with it on the side doing a few cash jobs for friends or acquaintances? The problem is that as soon as you use your machine for any business or money-making purpose, you are probably voiding coverage, even if your machine is specifically listed. If you want to use your equipment to make money even occasionally, your only option for coverage is likely a commercial equipment policy.
As I’m sure you can tell from this post, coverage for large motorized machines as a home owner is quite tricky. We recommend seeking the help of a knowledgeable, experienced local agent – one who takes the time to read and understand policy contracts (many don’t). We also recommend carefully reading your insurance policy yourself. If I can be of any assistance, I’d be happy to help.
This post only addresses the coverage needs of a private homeowner who lives on residential property not used for farming or business and who insures their home via Homeowners coverage (not farm coverage) and who owns a motorized machine for the primary purpose of maintaining their primary residential premises. While the coverage described in this post is typical in our experience, there can be significant coverage differences from one policy to the next. Therefore, your own policy coverage may vary from what we describe here. Please read your insurance policy carefully.
At Pine Country Insurance, we believe in helping each client customize their insurance coverage to fit their own needs, desires and budget. So we take the time to sit down with each new client (preferably face to face but sometimes via phone) to review and explain the basics of their coverage options and selections.
Before this discussion happens, we normally base our initial quote primarily on a set of basic coverages normal in the industry, to the extent possible and practical. However, if you have already provided us with a copy of your current policy declarations page, then we attempt to match that coverage to the extent that we are able, unless we discuss otherwise with you. Either way, that initial quote is preliminary, because we have not yet had a chance to sit down with you to help you customize as desired.
This means that the final price of your coverage with us could be higher or lower than the initial quote that we provide you – based on the decisions that you make when we sit down to review your options. Here are some of the variables that you may have a chance to customize during our discussion:
Your Dwelling limit
The most basic part of your coverage is the limit for coverage on your dwelling. Most often we base this on a reconstruction cost estimate that we complete. It is important for you to review this to make sure it looks accurate to you and that you feel comfortable with it. Most people want a policy that will rebuild their home if it burns down, but there are cases where people might want to just “cash out” of the value of their home and walk away. In that case, some (but not all) of our carries will offer the option to insure for less than the estimated replacement cost of the home.
The most common Homeowners deductible that we see is $1000, and that’s most often what we initially quote. Depending on the carrier, you may be able to buy down to a $500 deductible, but sometimes this becomes quite expensive, and many carriers don’t offer a lower wind & hail deductible. We also have several carriers who offer a healthy discount if you choose to buy a higher deductible.
Increased basic limits
Most carriers automatically include allowances for Personal Property and Other Structures that are based on a certain percentage of your Dwelling limit but that can be increased if desired. In addition, higher limits for Liability, Medical Payments and Loss of Use may be available. During our discussion, we review these limits and whether you feel they are sufficient to meet your needs.
Water Backup coverage
Most of our carriers offer this as an option that can be added to your quote. In general terms, it covers cleanup and damage that results from the backup of sewers or drains or failure of a sump pump. Click here for more information on this valuable add-on.
Coverage for valuable items
While Homeowners policies generally provide blanket coverage for most of your personal property, there are some items that may need special protection. For example, the average Homeowners policy provides around $1500 for theft of jewelry and around $2500 for theft of firearms. If you have valuable jewelry or guns exceeding these limits, then we may wish to talk about options to add more coverage. (Read this post to learn more about insuring valuable jewelry.)
If there is flooding in your neighborhood which damages your home or belongings, it is important to understand that your Homeowners policy won’t cover this. Flood coverage is usually available through the National Flood Program, sponsored by the federal government and administered by various insurance companies.
Many more ways to customize
There are many, many more options that you can add to your Homeowners policy for additional peace of mind. Depending on what is offered by the carrier, these additional options may include Identity Theft, Personal Injury Liability, Volunteer Wrongful Acts Liability, enhanced Dwelling replacement cost coverage, “Special Peril” Personal Property coverage, Ordinance or Law, Equipment Breakdown, Service Line coverage, “green” repair, Earthquake and numerous others. (In some cases, some of these options might already be included in your initial quote, for example, if we are quoting the IMT GEM Homeowners.)
As you can see, you have many choices in how you wish to customize your Homeowners coverage. We don’t tell you what to buy, but we do take the time to sit down and explain how your coverage works and what your options are, to the extent that you desire. Because we believe that the insurance business is about trust, we want to start our relationship out in the right way.
Coverage descriptions in this post are based on what is typical at the time of writing but may vary from what is included on your quote or policy. There are cases in which we may not be able to offer the kind of coverage discussed herein, due to the condition of your home, unique hazards or other reasons. Please read your policy carefully.
If your vehicle were damaged in an accident, how would you get to work or drive your kids to school? Most Auto policies give you the option to add the Rental Reimbursement option to vehicle(s) that you fully insure. This covers all or part of the cost of a rental car if your vehicle is disabled due to a loss covered by your policy, giving you something else to drive while your vehicle is being repaired.
If your vehicle is involved in an accident and isn’t drivable, Rental Reimbursement coverage typically kicks in right away. If your car is drivable after an accident, then a rental car will normally be offered for the period of time that it is in the shop. If the cost to repair your vehicle is too high and the insurance company declares it a total loss, the rental car will typically extend until shortly after your claim is settled.
When you add Rental Reimbursement coverage to your vehicle, you will usually get to choose from optional limits such as:
Locally, most insurance companies will offer to set you up with a rental car through Enterprise. In this arrangement, Enterprise will directly bill your carrier for the cost of the rental car, up to your coverage limit(s). However, if your total cost (including taxes) for the rental car exceeds the daily or total limits shown above, then you will be responsible for the difference. Because Enterprise typically provides discounted insurance rates, $30 a day is usually about enough to cover the cost for their most basic vehicle in Bemidji.
You also have the option to choose your own rental car provider. In this case, the rental car provider might bill your insurance company (if they are willing to do so); otherwise you can pay for the rental care and then submit your receipt to your claim adjuster and ask for reimbursement up to your covered limit.
Because rental car agencies in town run a fairly tight inventory, it’s usually best to reserve your rental car as soon as you schedule the repairs with your body shop. If your vehicle isn’t drivable after an accident or if your vehicle is stolen, it can be hit and miss as to whether a rental car will be available immediately or not.
Rental Reimbursement is priced quite reasonably – often costing $1 to $4 per month per vehicle. Some insurance companies will actually include a nominal limit for free on all vehicles that they fully insure. Most often, if a limit is included for free it is $20 per day. We represent one insurance company that includes $30 per day at no additional charge.
It’s important to note the Rental Reimbursement doesn’t kick in unless there is damage to (or theft of) your vehicle which is covered under your policy. Since Auto insurance doesn’t cover mechanical issues, you can’t use your Rental Reimbursement coverage if your vehicle goes in the shop needing transmission work or a new carburetor. You also can’t buy Rental Reimbursement coverage on a vehicle you insure for “Liability only”.
Some people may choose not to buy Rental Reimbursement coverage under the assumption that their body shop will provide a loaner car or that a rental car will be covered by their vehicle warranty. However, our experience is that only in rare cases do body shops provide loaners, and any rental car coverage in your warranty probably only applies if you have a warranty claim for a mechanical issue to your vehicle.
While making the wrong decision on whether to add Rental Reimbursement won’t make or break you financially, I can tell you that having this coverage definitely makes things easier after an accident. If you don’t have access to backup vehicle, I think this is probably worthwhile to add.
If you rent your home and apartment and don’t currently have Renters insurance, you’re not alone. Statistics I’ve seen indicate that only one out of every two or three people who rent buy this coverage. In 2010 when the Regency Park apartment building caught on fire in Bemidji, a client informed me that less than five of the tenants in the building had Renters insurance at the time of the fire.
So, why bother with Renters insurance? Do I really need this extra expense, especially if most other people aren’t buying it either? Here are some things to consider:
First, understand that your landlord’s insurance isn’t going to cover your stuff. If your building burns down, its insurance will cover the damage to the structure, but it won’t cover your personal property in most situations. So, if you don’t buy your own insurance, you are totally unprotected.
Second, if a fire or other major calamity occurred, the cost to replace all your stuff adds up quicker than you might guess. And think beyond your computer, TV, phone, tablet and furniture. How much would it cost just to replace every item of clothing that you own? Now how about all your other miscellaneous household items, from linens and blankets to pots and pans to your DVD collection or hobby gear? If you talk to someone who has lost everything in fire, they will be quick to tell you that replacing everything was a much larger expense than they would have imagined.
Thirdly, what if you accidentally caused damage to the building where you live? Renters insurance covers more than just your things; it also covers your personal liability. Let’s say you accidentally left a candle burning or a space heater running too close to flammables and a fire started. Or you accidentally flipped off the furnace switch before leaving on a short trip and came back to frozen pipes and water damage. In either of these scenarios, your landlord’s insurance will likely cover the damage to the building – but then the insurance company may might well turn back around and sue you for the entire cost of repairs, since it was your fault. The liability coverage provided by a Renters policy definitely adds peace of mind.
Finally, the cost to buy Renters insurance is less than you think. Most people can buy a starter policy for no more than $10 - $15 a month. And if you bundle Auto and Renters insurance together, your cost will often be even less. In some cases, the discount for bundling that gets added to your Auto insurance can actually be more than the cost of the Renters policy, in affect making your Renters insurance free!
Given its inexpensive cost and all the protection that it provides you, Renters insurance is definitely a great value worth adding. And coverage is easy to get; just call the agent who handles your Auto insurance and I’m sure they will be happy to help. Or call us if we can be of assistance.
If you have recently become engaged, I’m sure this is a happy time that you will remember all your life. Perhaps the thought has crossed your mind while you are showing off your new ring to everyone, “What if this precious possession fell off my finger and I lost it?”
Given the value of most engagement rings, it’s important to make your ring is properly insured. Yes, your ring could slip off your finger, or your diamond could fall out of the ring or your ring could even be stolen. Your new ring is a financial asset worth protecting.
Unfortunately, Homeowners or Renters policies usually don’t automatically include sufficient coverage for most engagement rings. An average policy will cover theft of jewelry up to $1500 or so and usually won’t cover accidental losing at all. This is why it is a good idea to add specific coverage for your ring as “scheduled property”. This is often a feature that you can on to your existing Homeowners or Renters policy.
When you schedule your ring, you are describing it on your policy, declaring its value and paying an additional premium based on how much it is worth. While rates do vary from carrier to carrier, we often see scheduled jewelry run around 80 cents to a dollar per year, per hundred in value. This means that a $5000 ring would cost $40-$50 per year to schedule and a $10,000 ring would command $80 to $100 in annual premium.
Usually your agent will ask you for an appraisal before your ring can be scheduled. Beyond establishing a value, the appraisal also provides a detailed description of the jewelry for identification and/or replacement purposes. If you have a receipt that includes a detailed description (including the 4 Cs of your diamond - cut, color, clarity, and carat), this may work in lieu of a separate appraisal document. Depending on the carrier, an appraisal may not be required for lower valued rings but it is still usually a good idea because it documents what is being insured and what it is worth.
Scheduling your ring gives you far better coverage than you would have otherwise. Your ring is fully covered up to its stated value and you have coverage for misplacing it or losing all or part of your ring. Typically there is no deductible that applies.
Not all scheduled jewelry coverage is the same, however; so we recommend specifically asking for Agreed Value coverage. If your jewelry is scheduled on an Agreed Value basis, you will be paid the full amount shown on your policy if your ring is lost or stolen. Without Agreed Value and depending on your policy, you may be paid the lesser of the actual cash value, the estimated repair cost, the estimated replacement cost and the value shown on your policy. Agreed Value might cost a little bit more but is well worth the extra premium.
While we usually recommend our client buy Agreed Value coverage whenever it is offered by the carrier, we rarely see it on other jewelry schedules people bring in for us to review. So if you don’t specifically ask for Agreed Value, you are not likely to get it and you probably won’t be aware of the difference unless you actually have a loss.
One issue that sometimes comes up is who should schedule the ring – the bride or the groom? Since property normally needs to be insured by whoever owns it, this comes down to a philosophical debate within the insurance industry as to whether an engagement ring is owned by the giver who purchased it or the receiver who possesses it. I’ve seen different insurance companies come down on both sides of this debate, so the rules vary depending on your carrier.
If the two of you are both insured under the same Homeowners or Renters policy, this is a moot point, as you can add it to your joint coverage. However, we often see cases where one party owns the home or has their name on the lease and has the insurance just in their name. (This raises other coverage issues; see this post.) Depending on your carrier’s rules, you may or may not be able to add the ring on to this existing policy. If the other party does not have their own insurance and doesn't live with parents or other family, it’s possible a separate policy may have to be taken out to get the ring insured. (However, we often have more flexibility for our clients since we represent multiple insurance carriers.)
If you have just become engaged, congratulations. Enjoy this special time, and don’t forget to make sure your insurance keeps up with your recent life change.
Full Glass is an option you can add to your vehicle’s Comprehensive coverage which reduces your deductible for glass damage to $0. If you add this option to your policy, it will pay the full cost to replace your windshield or other safety glass.
Full Glass is offered by Minnesota Auto policies but is not often found in other states. Most Minnesota drivers who purchase Comprehensive coverage on their vehicle buy Full Glass as well. However, it is optional, and it is possible to fully insure your vehicle with Comprehensive and Collision coverage but not buy Full Glass.
Sometimes people ask us to insure their vehicle for “Liability with Glass.” Unfortunately, this is not possible, as glass breakage is not a coverage you can buy on its own. Glass is covered under Comprehensive coverage, and Full Glass simply waives the Comprehensive deductible that would normally apply. However, you can buy Comprehensive with Full Glass without buying Collision coverage; if you did this, your vehicle wouldn’t be covered for damage caused by collision or upset, but it would be protected against deer hits, theft, fire, vandalism, hail, etc. as well as glass breakage.
Most glass claims are filed to replace cracked windshields, but Full Glass also extends to the other safety glass surrounding the passenger compartment of your vehicle. Full Glass does not apply to headlights, taillights, cameras, sensors, etc.
If you choose not to buy Full Glass coverage, any glass claim would be subject to your Comprehensive deductible. If you choose a deductible of $500 or more but decline Full Glass, you’ll probably end up paying for the entire cost of a new windshield out of your own pocket, in the event it needs to be replaced. (However, carriers often fully cover chip repair even without Full Glass, as an incentive to repair your windshield before the chip grows into a crack requiring replacement.)
The cost to add Full Glass can vary considerably from carrier to carrier and also depends on how high your Comprehensive deductible is and other factors. On a preferred policy, we often see a price tag ranging from $2 to $5 per month per vehicle. However, there are other cases where it can cost a couple hundred dollars every six months to add Full Glass to a vehicle, especially on a higher risk policy issued to someone with a less favorable driving history and/or a lapse in prior coverage.
Assuming that you are able to add Full Glass inexpensively, I do consider it a good value, as I tend to see more claims filed for cracked windshields than for anything else.
A few years ago, GEICO ran ads bragging that they cut out the middleman, implying that buy selling insurance directly to you they save you the invariable markup this guy in the middle charges. Indeed, the biggest reason people buy their insurance direct instead of through an agent is undoubtedly because they think they will save money. But is this actually true?
In my office, I compete against direct insurance writers every day, especially when it comes to Auto insurance. What I have found is that there are times that a direct policy will cost less than what I can offer, but there are many other times that I can offer as good or better a price as what someone found online.
But how can that be? What about the commission my agency receives for its services? How can this commission be added to the price yet the price still be lower? I believe there are four main reasons why the rates I offer are often lower than what you might find online, and I’ll explain these reasons in this post.
Reason 1: All insurance companies have acquisition costs
You might think you are saving money by cutting out the middleman like GEICO said, but did you ever stop to think how much GEICO spent in advertising costs to get you that message? I just googled it myself and the figure seems to hover around $1 Billion per year. (That’s Billion with a B.) Think of that: One insurance company is paying a billion dollars to try to get you to buy their product! Where are they getting this money? I assure you their billion dollar advertising bill is not being paid via their money tree; it’s coming out of your pocket, as a part of the premium you pay! In fact, a 2013 study showed that nearly seven percent of premium paid to GEICO went directly to cover their advertising costs.
Let me be clear, I’m not saying this to criticize insurance companies with large advertising budgets. What I am explaining is that all insurance companies have acquisition costs. Before you can buy insurance from a given company, you first have to hear that the company exists, and you have to be convinced that it would be a good idea to consider them. It costs an insurance company money to make this happen.
In my agency, we represent a mix of insurance companies whose names may sound familiar (Progressive, Travelers and Nationwide) and other carriers you probably never have heard of (such as IMT, Ram Mutual, State Auto and Itasca Mutual). The primary difference between these carriers is how much they spend on advertising. You see, the carriers you have never heard of have to rely on insurance agents to bring them customers, and they compensate their agents to do so.
“But,” you say, “I found my insurance company online! It wasn’t a result of advertising!” Think again. Chances are that if you bought your insurance directly from a carrier after a Google search, that carrier paid quite a bit for Google to show you their name. In fact, insurance is the most expensive Google search category, according to this website, which indicates that when you google the word “insurance” and click on a sponsored result, that insurance company may be paying Google up to $50 just for your one click, regardless of whether you buy anything from the company or even whether you stay on their website for more than an instant. Again: Who pays Google $50 per click? You do, as part of your insurance premium when you buy from a carrier who markets via Google.
So the question is not whether you are willing to pay acquisition costs as part of your insurance premium; it’s simply a question of who you will pay acquisition costs to support. Will you pay your acquisition costs to support Google, CBS or ESPN, or will you pay them to support a trusted local agent who will work with you to provide you a good insurance value both now and down the road?
Reason 2: Good agents help keep your rates low
For you as a consumer, the purchase of insurance is a bit more complex than buying bread or milk. There’s a lot to understand about insurance, and making a mistake in the coverage you buy could be financially catastrophic down the road. This is a reason so that so many people turn to trusted agents to assist and guide them.
What you may not be aware of is that the reverse is also true – insurance companies rely on trustworthy, ethical agents to assist them through the complexity of selecting the right customers to insure at the right price! In order to keep their rates low, insurance companies need to insure risks that fit into what they are priced to be able to cover. They also need accurate information about the nature of the risk so that proper rates can be charged. If a given carrier is constantly writing insurance policies with bad or only partial rating information or that don’t fall within their plan guidelines, they will soon find that they are paying more in claims than what they are taking in for premiums. Rate increases are sure to follow next.
Good insurance agents help the insurance companies they partner with write the insurance business that falls within their guidelines and with rates based on accurate information. This helps insurance carriers keep their rates low. And it explains why some of our carriers with names you’ve never heard of may be able to beat the rates of the carriers trying to sell you insurance without the assistance of a professional insurance agent.
Reason 3: It also costs money to money to provide you service
Insurance companies who sell direct have ongoing costs to serve you. Every time you call or inquire online regarding a bill or to add or remove a vehicle, someone has to be paid to take care of this for you. It’s either going to be a faceless employee in a call center receiving these service dollars, or it can be your local professional insurance agent and their staff. Now I know that many insurance companies have online service portals, but there’s a fair amount of money spent keeping that technology working properly as well, and there are certain issues that come up that artificial intelligence just isn’t equipped to resolve. Servicing your account costs money no matter how you cut it.
Reason 4: Bundling saves you money
Most of the big direct online insurance sellers focus primarily on Auto insurance, and for good reason. Auto insurance is much easier for them to write without the assistance of a local agent, compared to other lines such as Homeowners or Renters coverage. If these guys offer Homeowners insurance at all, it’s frequently almost an afterthought, and often they are partnering with a different carrier to even insure your home since they don’t actually write home coverage themselves. But when you buy your Auto insurance from one provider and purchase Homeowners or Renters insurance somewhere else, you typically pay more to buy these policies separately. Your local agent can help you save money by bundling your auto and home protection together.
Beyond the initial premium you pay
It’s important to conclude this post by pointing out that a good insurance value is about more than just the price of the premium. It’s about professional, trusted assistance in making a good decision in how you set up insurance to protect your risks. Many people buy their insurance online without really understanding what they are buying. Perhaps they think all insurance is the same. It’s not. Perhaps they think their insurance needs aren’t any different than the next person’s, so all they need is an online button or call center employee to take their order for a one-size-fits-all policy. That’s not true either. At some point down the road, you may need your insurance to cover a loss, and there’s no substitute for a trusted local agent in helping you increase the odds that you’ll have the right protection in place to cover it.
If you carry Rental Reimbursement coverage on your Personal Auto policy, it will pay for a rental car while your vehicle is disabled after a covered loss. Also known as Transportation Expense, this coverage will typically kick in immediately if your vehicle is not drivable after the accident. If your vehicle is drivable, then Rental Reimbursement applies for the time that it is in the shop being repaired.
Rental Reimbursement coverage is usually sold with a daily limit and an overall limit. Frequently offered limits include:
If you have this coverage on your vehicle, most insurance companies in this area will offer to set up a reservation and direct bill with Enterprise. This means all you have to worry about is a refundable security deposit and any rental car fees or taxes that exceed the limits that you purchased. Of course, you also have the option to obtain a rental car from another provider you receive and submit the receipt for reimbursement if the provider isn’t willing to bill your insurance carrier directly.
How big of a limit should you buy? In our local area, we find that $30 per day is probably a good minimum. $30 tends to be about enough to cover the fees and taxes for the least expensive rental car option with Enterprise’s insurance rates. (Enterprise offers discounted rates for insurance claims.) If you currently drive a bigger vehicle and want that same option for a rental, then you should probably go up to $40 or $50 a day.
How long will the insurance company pay for your rental car? If your vehicle is being repaired, typically until your vehicle’s repairs are complete. If your vehicle is a total loss, then usually the rental car ends shortly after the insurance company pays your claim. (Coverage will also end if you exceed your total available limit, which doesn’t happen too often.)
Rental Reimbursement coverage is relatively inexpensive. On average, it costs $1 to $4 per month to add it to a fully insured vehicle. Some carriers include a nominal amount of coverage for free, most frequently $20 per day. Currently one of our carriers that we represent, IMT, includes a $30 daily limit automatically for all fully insured vehicles, as a value-added benefit of being insured with them.
It’s important to note that Rental Reimbursement only kicks in if there is a loss covered under your policy. So if you hit a deer, get in an accident, have your vehicle stolen, etc. But if your transmission goes out, your Auto policy won’t cover the repair; which means it also won’t pay for a rental car while they put a new transmission in your vehicle.
Sometimes clients will say that they don’t need Rental Reimbursement because it is already covered under their auto warranty. But, more than likely, any rental car coverage in your warranty only kicks in if there is a warranty claim. This means that if a mechanical issue disables your vehicle, you have a warranty claim for the repair and the rental car. If an accident disables your vehicle, then you have an insurance claim for the repair and the rental car. In general, I’d say that vehicle warranties and insurance coverage compliment each other but don’t duplicate benefits.
Whether you choose this coverage is not a decision that will make or break you financially. However, I tend to recommend it for anyone who doesn’t have a backup vehicle available, for the simple reason that I know you will be quite a bit happier with your insurance at claim time if we can put you into a free rental car. It’s just an added expense that most people aren’t keen to absorb in addition to their deductible after an accident.
Should you add Rental Reimbursement coverage to your fully insured vehicle(s)? Consider what you would drive to get to work, to take the kids to school or to get to your appointments if your vehicle was disabled and/or being repaired after a car accident. If you’re not sure you’d have another vehicle available, it’s probably worthwhile to add this coverage to your policy.
"Share one another’s burdens.” The numbers are growing of people who find this philosophy appealing - much more appealing than continuing to pay more for health insurance than they pay for their mortgage. And so many people who have carried traditional insurance all their lives are now choosing faith-based health sharing plans, such as Medi-Share, Samaritan Ministries, Christian Healthcare Ministries and others. But how do these compare with traditional health insurance, and are they a financially safe alternative?
How do these plans work?
Instead of paying a monthly premium to an insurance company, you pay your monthly membership to other members of your healthcare sharing plan who’ve incurred medical expenses deemed eligible for “sharing” by the plan. The plan may also ask for a small amount of your membership share to cover its administrative costs. Because recognized healthcare sharing ministries in existence prior to 1/1/2000 have a special exception in the Affordable Care Act, if you are a member of such a plan, you are not subject to the Obamacare penalty for being uninsured.
Reasons people like these plans better
The single major reason the many people are joining faith-based health sharing plans is that they are usually much more affordable. Your monthly membership cost in such a plan might range from $300 to $800 a month for an average family, versus $1000 to $1500 a month to enroll your family in the cheapest health insurance option (which comes with a much, much higher deductible).
So, how are faith-based health sharing plans able to charge that much less? I'd suggest that the obvious answer is that it is mainly healthy people who enroll in them. Why? For one, these plans tend to restrict coverage for pre-existing conditions, so they aren't nearly as attractive to individuals with expensive chronic conditions. And people with ongoing medical needs are more likely to value the security of real insurance. This isn't rocket science; having a healthier membership means lower medical costs per average member, which means members don't have to pay as much. These sharing plans may also point to lower administrative costs, the assumed healthier lifestyles of their church-going members and available discounts when paying for medical bills in cash.
Secondly, not only is your monthly payment lower with a healthcare sharing plan, your out of pocket medical cost may be lower as well. While many people are now buying health insurance with $6000 or $7000 deductible, the average healthcare sharing plan might start paying after as little as a few hundred dollars out of your own pocket.
Beyond basic affordability, the whole concept of direct sharing can be appealing. Many families find it much more acceptable to write a large monthly check directly to another member in financial need than it is to fork over those same hard-earned dollars to a big insurance company. It can be argued that it is far more in keeping with American values for citizens to freely associate to help each other in time of need, rather than being told they must buy a product or face a tax penalty.
Reasons for caution
As these healthcare sharing plans disclose in the fine print and usually even the big print, they are not insurance. What does that mean? In simple terms, it means that there is no contract in place guaranteeing that your bills will be covered. Your medical expenses being paid for is wholly dependent on the continued voluntary participation of other members. These plans are quick to point out that “so far, so good” – they’ve always remained solvent to date. But, without question, the plan would fail if some natural or man-made disaster occurred or a terrible virus spread that caused a high percentage of members injury or major sickness. This is a risk you take with such plans. Since these plans are not insurance, there is no state guarantee fund backing them in the event the plan becomes insolvent.
In addition, because these plans are not insurance, they are also not regulated by government. Not only does this mean that you can’t appeal to the Department of Commerce to resolve a dispute, but it also means they are not required to “cover” everything that a regular major medical insurance policy covers. Most of these plans have caps on how much they will pay for – per medical incident or per year. I noticed one plan with a cap as low as $125,000 in some cases, which is definitely a cause for caution. (You may be able to add an additional level of protection for an extra monthly or annual cost.)
Since they aren’t regulated as insurance, these plans may also have unexpected exclusions. In addition to excluding medical costs arising out of activities deemed immoral (such as sex outside of marriage), the plan could also exclude other seemingly random procedures or activities. For example, a given plan might exclude injuries resulting from riding an ATV or rock climbing. And as mentioned earlier, unlike today’s health insurance policies, these plans generally exclude or restrict pre-existing conditions. (This even means the plan might not cover a pregnancy which began before you signed up.)
To switch or not to switch?
So, is a Christian healthcare sharing plan worth the risk and uncertainty of not being insured? Ultimately this is a decision you will have to make. One thing I can say for sure: more and more families and individuals feel that they don’t even have a choice, as the cost of health insurance rises further out of reach with each annual rate hike. At the end of the day, you have to be able to afford to pay the monthly cost of whatever you enroll in.
If you are considering taking the leap to healthcare sharing, I hope this post helps you make an education decision. If you move forward, it's important to do so with your eyes open, understanding both the risk as well as the benefits.
Pine Country Insurance is an insurance agency offering insurance products. As such, we are not an expert in the subject matter discussed herein, and we are providing this high-level commentary for general thought-provoking purposes only. Pine Country Insurance does not offer or endorse any non-insurance plans or products.
We are happy to bring back our holiday storefront display which we debuted last year. It features two scenes from "Bemidji in the 1930s". On the right, newly constructed Paul & Babe statues dominate the waterfront scene, next to a busy Carnegie Library all decked out for the holidays. The left shows a neighborhood scene, including one of the main small grocery store /residence combos which dotted the Bemidji landscape in this era.
We hope you will stop by to take a look at our display and to say hello this holiday season!
If you have purchased a GEM Homeowners policy with the IMT Group through our agency, you’ve made a good choice. Yes, the GEM policy is priced competitively, but the added coverage features are what really set it apart.
Broader Personal Property coverage
When you buy Homeowners insurance, you don’t know what might happen down the road, and that’s why the GEM’s “open peril” coverage is better for your personal property. While standard Homeowners policies name around sixteen causes of loss that your stuff is protected against, the GEM covers your personal property against all “risk of direct physical loss” unless specifically excluded in the policy. This shifts the burden of proof from you, to show that a loss was covered by a peril listed in the policy, to the insurance company, to point out which specific policy exclusion applies. Read more about this “HO5” level coverage from a recent post.
Better jewelry coverage
While standard Homeowners policies typically only provide around $1500 in coverage for theft of jewelry and don’t cover losing, your GEM policy increases your jewelry theft limit to $5000 and also extends that limit to losing and mysterious disappearance. So if you unsuccessfully search your house high and low for that small diamond that fell out of your ring, or, worse yet, your ring slips off your finger as you flush the toilet, you’ll be quite happy to have this additional protection. (We do recommend adding extra coverage of your jewelry is valued above $5000.)
More firearms coverage
The IMT GEM policy doubles the standard Homeowners limit for theft of firearms from $2500 to $5000.
Personal Injury Liability Coverage
Your GEM Homeowners policy goes beyond the standard policy by adding protection against a claim or lawsuit against you for accidental libel, slander, wrongful entry or invasion of privacy.
More coverage to rebuild your home
If your home burned down and you decided to rebuild, there’s no guarantee that the replacement cost estimate completed several years ago is going to be enough to pay the costs of reconstruction. So, in addition to a built-in inflation guard feature, your GEM will pay up to 25 percent more than your policy limit if necessary to rebuild your home. This could be especially valuable protection if there were a natural disaster, as construction costs tend to inflate significantly in the aftermath of such events. (While the GEM is certainly not the only policy with such a provision, many policies might only cover ten to twenty percent, and some might not include this provision at all.)
Broader coverage for downed trees
While a standard Homeowners policy only removal costs for trees that damage a covered structure or block your driveway, your GEM coverage will extend its policy limits to cover debris removal for any tree brought down by wind on your premises. (The normal policy deductible and tree debris removal limits still apply.)
The list goes on
Other GEM coverage features not included on a standard policy include limited Pet Injury coverage, an arson reward, no deductible for certain larger losses, as well as lock and garage door transmitter replacement (to protect your home’s security). Compared to a standard policy, your GEM also includes higher limits for personal property used for business, counterfeit money protection, fire department service charges, loss assessment, money, gold, coins, increased repair costs due to an ordinance or law, food spoilage, securities, notes, tickets, theft of silverware, trailers, watercraft and shrubs, trees and plants. If you’d like to read more about the GEM, view IMT’s GEM flyer here.
Even better when bundled
While the GEM is certainly great coverage, your protection gets even better when you bundle your GEM with IMT Auto insurance! IMT adds a common loss deductible so you won’t have to pay two deductibles when the same loss damages your house and car (such as backing into your garage door or a hail storm that damages both your vehicle and your roof). But an IMT Auto policy doesn’t stop there and packs in added value with a complimentary rental car after a covered accident (up to the applicable limits), identity theft recovery service, new car replacement coverage for the first year, pet injury coverage, theft of gear from your vehicle and guaranteed repairs if you file a claim. Read more about IMT’s Auto insurance great benefits here.
IMT’s strength and responsibility
While better Homeowners insurance coverage is great, it only matters if you feel that you can trust your insurance company. IMT’s history goes back to the 1880s, giving it a 130-year proven track record of reliability. The IMT Group’s member companies, IMT Insurance Company and Wadena Insurance Company are both rated “A Excellent” by AM Best for their financial strength. IMT is also a good citizen and award-winning employer at its Iowa-based headquarters, having been named “Best mid-size company workplace” by the Des Moines Register in 2016 and financially supporting dozens of worthy causes in its region and beyond.
The IMT GEM is one of a number of Homeowners policies that we offer through the multiple insurance carriers that we represent within our agency. If you are insured with us but don’t have the GEM, contact us to discuss the option of switching to this well-rounded Homeowners coverage. Or if you are not insured by our agency yet, let’s talk about writing you a GEM policy of your own!
In this post we generally compare IMT’s GEM Homeowners policy with an unendorsed ISO HO3 Homeowners policy, referring to it as a "standard Homeowners policy". This post contains summary information only and does not detail all the terms, conditions, limits and exclusions found in any insurance policy; so it is important to read your policy carefully. Most losses are subject to an applicable deductible. Coverage features mentioned in this post are based on current policy versions and are subject to change by the controlling entity without notice or update of this post. If you notice anything that has changed since this post was written, we appreciate you letting us know so that we can update our description here.
If you are shopping for insurance or comparing different options, it could be helpful to know the difference between different level of coverage you might see on policies or quotes. While most preferred Homeowners policies are quoted and written on a more standardized basis, there can be big differences of coverage especially on rental homes, vacant homes, mobile homes, secondary and seasonal residences.
The insurance industry uses the terms “Basic, Broad and Special Peril” to refer to what property is insured against, sometimes adding a fourth option “Limited Perils”. These options define what “perils”, or causes of loss, are covered under the policy. In other words, what could happen to your property that the policy would cover.
A “Limited Peril” coverage form is usually the most restrictive coverage package option you will see. It is offered by a few insurance carriers, often to apply to specific buildings or property. It typically covers the following causes of loss:
A “Basic Peril Policy” is also often known as a HO-1 or a DP-1. It typically covers Perils 1-7 listed above, plus the following causes of loss:
8. Volcanic eruption
9. Vandalism or malicious mischief
Sometimes peril 9 is not included, or it may be an optional coverage that must be purchased for additional premium, depending on the policy. Some Basic Peril policies might also cover peril 10 below, along with glass breakage and sinkhole collapse.
A “Broad Peril Policy” (aka HO-2 or DP-2) covers Perils 1-9 shown above, plus the following additional perils:
10. Burglary and/or theft (see below)
11. Falling objects
12. Weight of ice, snow or sleet (for example, too much snow builds up on your roof and it caves in)
13. Accidental discharge or overflow of water or steam (think a water line springs a leak and causes water damage)
14. Sudden and accidental tearing apart, cracking, burning or bulging (think your water heater explodes and causes water damage)
15. Freezing (for example, your furnace suddenly stops running while you are on vacation and your pipes freeze, causing water to run free and damage your home)
16. Sudden and accidental damage from artificially generated electrical currentPeril 10 (burglary and/or theft) varies depending on the policy; it might cover just the damage to the home caused by burglars or it might just cover stolen property. It might be optional or not included. It might require an additional premium charge.
Some policies might include restricted collapse coverage under Broad Perils.
“Special Peril” coverage provides coverage in a different way. Instead of naming a list of perils that are covered, it covers all risks of direct physical loss unless such loss is specifically excluded. So while Special Peril coverage generally covers all 16 of the perils listed above, it can go far beyond that. It shifts the burden of proof from you (to show that your loss was caused by one of the perils listed above) to the insurance company (to point out where in the insurance policy the loss is specifically excluded).
If you buy Limited, Basic or Broad peril coverage, your coverage will be known as “Named Peril”, because your policy is only covering perils actually specifically named in the policy. However, if you buy Special Peril coverage, this is often called “Open Peril”, because the policy is open to cover any peril unless specifically excluded.
Coverage most frequently sold
Most preferred Homeowners policies provide Special Peril coverage for the dwelling and other structures and feature Broad Peril coverage for personal property. This kind of policy is often referred to as an “HO-3 policy”. If you are shopping for coverage for your primary residence and it is considered a preferred risk, most of the quotes you receive will probably be for this type of coverage.
Some Homeowners policies go beyond the standard “HO3” level to also provide Special Peril coverage for your personal property, as well as your dwelling and other structures. This type of policy is usually referred to as a “HO-5 policy” and is the best coverage you can purchase, as it relates to protection against causes of loss.
As mentioned above, some types of policies are more likely to provide only Limited, Basic or Broad coverage. We’ll often see these levels of coverage on older mobile homes, homes in poor condition, vacant homes, seasonal homes, some rental homes, as well as homes which for some reason don’t qualify for more preferred coverage.
While there is a certain amount of standardization in covered perils between policies, there can also be some differences. This means that your policy might vary from what I've detailed here. Most insurance policies number covered perils as I have done in this post. However, numbering can vary between policies and levels of coverage, so the numbering might not match up to your policy.
For people living in the Bemidji area who are looking to buy health insurance on their own for 2018, the choices available are rather limited. While most Minnesotans get their insurance from their work, through Medicare or via medical assistance or MinnesotaCare, four percent of state residents buy coverage in the Individual and Family market, and options in this market aren’t great in Bemidji.
Like in the majority of greater Minnesota, there are only two options available for purchase in the Bemidji area – Blue Plus and Medica.
Unfortunately for us in Bemidji, Medica announced that Sanford hospitals and clinics would not be part of their 2018 network for Individual and Family plans.* This means that Bemidji residents with a privately purchased Medica major medical policy will face much, much higher out of pocket costs to get their care from Sanford in 2018. While this restriction doesn’t apply to emergency care and the newly opened urgent care clinic MedExpress is in Medica’s network, Medica members* needing most other services will find their closest options for in network care to be in Bagley, Walker or Park Rapids.
This really leaves only Blue Plus as a viable alternative for many people living in Bemidji. The Blue Plus plan being offered locally, Blue Plus Western Minnesota, features the Sanford Health system and certain other local facilities in the western Minnesota region. So Bemidji’s Sanford facilities are definitely in network. However, the network does not extend to providers in the metro area or Rochester or in other states.
Blue Plus offers three plan options for 2018:
Note that all three Blue Plus plans have annual out of pocket maximums of $6650 per person and $13,300 per family. After you have paid this much out of pocket during the calendar year, you no longer have to pay a percentage of your covered costs – the plan will now pay one hundred percent.
Just like with Medica, with Blue Plus your out of pocket cost for medical care will be dramatically higher than what I described above if you receive care from a provider who is not within the Blue Plus Western Minnesota network. You can check whether a provider is in network here (make sure to select “Blue Plus Western Minnesota” from the “View other networks” dropdown menu on the left on the search results page).
Many people may be disappointed to learn that these Blue Plus plans do not provide hardly any benefits before you meet your annual deductible. While many of us our used to being able to visit urgent care for a small copay, Blue Plus doesn’t pay anything towards this until you reach your deductible. The good news is that all three Blue Plus plans do provide full coverage for preventive care. In addition, the Gold plan does cover generic prescription drugs prior to meeting your deductible, with a $20 copay.
How much are rates for Blue Plus in the Bemidji area? Here are some examples for someone living in Beltrami County. (I rounded these to the nearest dollar):
If you are looking for coverage for your family, you would add up the individual premiums. For example, a couple both age 62 would pay $1942 for Silver ($971+$971) or a family with both spouses age 45 and two children under 18 would pay $1360 for Bronze ($421+$421+$259+$259). The good news for larger families is that you only pay for up to three kids on your family plan.
Note that these are just examples for these ages; click here to request rates for your age. You can read more about the Blue Plus Western Minnesota plans by clicking here.
Not only are plan options limited in our area, but they might get even worse before open enrollment closes on 12/15/17 (or 1/14/18 if buying through MNsure). This is because Blue Plus announced an enrollment cap; once they reach a certain number of statewide enrollments, they will close for the year. While I'm not certain how long they will stay open, if they fill up, our options will go from bad to worse.
It goes without saying that health insurance has grown inconceivably expensive in the past few years, to the point where many people simply aren’t going to be able to afford it. What other alternatives are available?
For many, there may be financial assistance available through MNsure, either in the form of subsidies to reduce the rates shown above or via medical assistance or MinnesotaCare. Many people who assume their income is too high might actually be surprised to find that they qualify.
Let’s take a family of four as an example. If their annual income is under $32,718, all the members can can enrolled in free medical assistance. If they make more than $32,718 but less than $49,200, their kids 18 can get medical assistance and the parents may qualify for low-premium MinnesotaCare. Between $49,200 and $67,650, the kids still qualify for Medical Assistance and the parents will have to buy private coverage but may qualify for a subsidy to reduce their cost. If their household income is more than $67,650 and less than $98,400, their only option will be private coverage but they will likely be able to get a subsidy to reduce the premiums I illustrated above.
These income levels vary depending on the size of your household. For example, in a family of six, the kids qualify for free medical assistance all the way up to $90,640 in annual income. I should also point out that these details are a summary, and there are eligibility restrictions and other terms and conditions that apply. To find out for sure what financial assistance your family might qualify for, you will need to visit mnsure.org, create a login account and complete an application.
Beyond government financial assistance, one other alternative many are now considering are faith-based cost sharing plans. These plans are not insurance and are not guaranteed to cover your health care costs. In addition, they may have unexpected exclusions and troubling annual or lifetime maximums. However, they are considerably less expensive than insurance and are certainly worth considering if you simply can’t afford to buy a major medical policy.
Unfortunately, I have also seen some people tricked by unscrupulous sales people into buying Short Term or Defined Benefit plans thinking that they are buying major medical coverage. While these plans might be a good fit for certain situations, see my previous blog post about why these plans often fall into the “too good to be true” category and probably won’t provide you the benefits you are expecting.
What I continue to see is that now more than ever, people are looking for a trusted advisor to guide them through this frustrating and confusing process of choosing a health insurance plan. While I don’t carry around any miracles in my bag of tricks, if you are looking for help, contact me and I’ll be happy to do what I can to assist you.
Read health insurance frequently asked questions >
Meet our blogger Agent Ken Cobb >
*Medica announced that Sanford Health would no longer be part of its Applause network for 2018. The Medica Applause network is used specifically for Individual and Family plans and does not impact Medicare or employer-based plans, to the best of our knowledge.
I often take phone calls from clients who are trying to decide whether to file a small claim or just take care of it out of their own pocket. One of their questions is usually whether filing a claim might hurt their insurance going forward.
The answer to this question can depend on several factors. First of all, some types of claims are surcharged by most insurance companies. A surcharge basically means that at your next renewal your rates will go up specifically because of that claim. Or, to put in another way, a surcharge is the opposite of a discount.
On an Auto policy, most carriers will surcharge any accident claim that is not someone else’s fault. Examples of this would include rear ending another driver, falling asleep at the wheel, failing to yield in an intersection, plus other less obvious situations such as slipping into the ditch due to icy conditions, backing into a tree in your driveway or tapping the bumper of a parked car at the store.
Auto insurance claims that are not typically surcharged include hitting a deer, hail damage, glass damage, theft, finding that your vehicle was hit while parked and accident claims where someone else is clearly at fault.
It’s worth noting that some carriers offer accident forgiveness, which typically “forgives” the first accident which might otherwise be surcharged. Several insurance companies offer this as an add-on to your policy which can be purchased before the accident occurs. In some cases, accident forgiveness might come as a free loyalty reward after you have been with the carrier for several years.
On a Homeowners policy, insurance companies tend to surcharge most non-weather-related claims. Examples of claims likely to be surcharged include burglary, water damage caused by a broken pipe and an injury on your premises.
Insurance carriers surcharge claims because their statistics indicate that people with certain types of prior claims are more likely to suffer another loss in the future. Because insurance pricing is based on calculating your statistical likelihood of filing a future claim, prior losses are often surcharged. Typically the same surcharge will apply regardless of whether the claim was filed under your current policy or with a prior carrier. Most often, surcharges apply until the loss is over three years old.
It’s also worth noting that in some cases, you could see an increase in your premium after a loss even when a surcharge doesn’t apply. For example, I mentioned that weather claims on a Homeowners policy are not usually surcharged. However, a carrier might be giving you a discount for being claim free for the last three and then might remove that discount after paying you to repair storm damage to your home. While this is not technically considered a surcharge, this would still result in an increased premium due to the lost discount, although likely not as much of an increase as if a surcharge was also applied. Discounts can vary from carrier to carrier; so you may wish to ask your agent about this when starting a new policy. (However, keep in mind that over time, your carrier may change what discounts they apply and how.)
Now that I’ve explained the possibility of an increase in future rates, let’s talk about a bigger concern. Could filing a claim result in your carrier not continuing to insure you going forward? If the insurance company feels that your claim history makes you statistically risky, they might not want to renew your policy at the end of your current term.
However, there is good news in Minnesota. State law does not allow insurance companies to non-renew Homeowners or Auto insurance unless certain criteria are met. On a Homeowners policy, your carrier is not allowed to non-renew you because of claims unless you have had two non-weather-related paid claims in a three-year period. (See examples of such claims above.)
On an Auto policy, the state devised a point system that looks at accidents and tickets in the last three years. For example, on a single car policy, two chargeable accidents or one chargeable accident plus a couple tickets would be enough to non-renew. Further, your Auto Physical Damage coverage can be non-renewed if you’ve been paid on three to four physical damage claims in the past three years, regardless of fault. Because of these state-imposed restrictions, we don’t see policies non-renewed very often, but it does happen occasionally.
So what would happen if you actually were non-renewed? Often in this situation, people are forced to go with a policy that is either more expensive and/or provides less coverage. As an independent agent representing multiple carriers, we usually are able to find our client an alternative in this situation, granted they may not be as thrilled with the rate or coverage provided on the new policy.
So, let’s say you were trying to decide whether to turn in a deer hit claim to your insurance company. It might make a difference whether this is your first claim in the last three years or whether you have had one or more previous claims. While it’s impossible to say what might happen in the future, it’s less risky to turn this one in if it’s your first claim in a while versus if it’s your second or third recent claim.
This discussion begs an obvious question: Why even bother buying insurance if using it will just increase your rates or cause you to be non-renewed? My answer would be to consider what the main purpose of insurance actually is - to protect yourself against the unlikely chance of catastrophic financial loss. You didn’t buy your Homeowners policy because you were concerned about replacing your furnace filters; you bought it because you wanted to be protected in case your home burned down. Taking care of smaller losses yourself and reserving your insurance to cover the possibility of a larger, more severe loss is a strategy that may lead to more stable rates and coverage over time. With this in mind, some people will consider the premium savings available with a higher deductible.
So when a client asks whether they should turn in a claim for payment under their policy, my role is to provide worthwhile information that might assist them in their decision. Having said that, if there is a loss involving an injury or a third party, we usually have no choice but to report it, and in certain cases our agency might be contractually obligated to report a loss we’ve been informed of whether our client wants to turn it in or not.
Information and guidance after a loss is one of the great benefits of having a relationship with a local, professional insurance agent. If you don’t have such an agent now, maybe it’s time we talk.
Josh had purchased a brand-new Chevrolet Silverado fourteen years ago. He carefully maintained and kept it in great shape all these years. A couple months ago, he was broadsided in an intersection, resulting in body damage to the entire right side of his truck. Because several of the Silverado’s body parts would need to be replaced, the repair estimate came to over $5000. Unfortunately, this was enough to declare his vehicle a total loss. The insurance company valued his vehicle at $6600 and found that they could sell it for a salvage value of $650. John chose to “buy back” his vehicle and so they paid him the difference of $5950, minus his $500 deductible. This left John with just enough to complete the full repairs on his truck and make it good as new. But now, will John have trouble insuring it?
Jacky has a slightly different story. She was looking for a newer, more reliable vehicle but was having trouble finding a vehicle she liked that priced low enough to afford the payments. She had been looking at vehicles eight to ten years old when she saw a four-year-old Toyota Camry online that was within her price range. The ad said that it had a salvage title but had been fully repaired, and it looked fabulous, both online and also when she went to see it. She bought the vehicle for a steal because of the salvage title, but now will she be able to get it insured?
Insuring a vehicle with a salvage title can, indeed, be more difficult. A couple things that can make a difference is whether the damage has been fully repaired and what kind of coverage you wish to carry going forward.
In our second example above, the Camry’s damage had been fully repaired and Jacky’s loan required that she fully insure the Camry. Even so, there’s an even chance that Jacky’s current insurance company might not be willing to provide this coverage. If she finds this to be the case, Jacky may want to talk to an independent agent like me, who will likely be able to provide quotes from one or more carriers willing to fully insure it. She may be asked for proof that that the vehicle is fully repaired, such as clear photos showing the condition. So it can really vary; many carriers are not willing to offer physical damage coverage in this situation, but other carriers are.
Now let’s go back to John. He paid off his new-truck loan years ago, and it is up to him what coverage he carries going forward. If he opts to continue to fully insure his pickup, he’ll be in a similar situation as Jacky. But if he chooses to self-insure the remaining value and go with “Liability only”, his current carrier will likely be willing to provide this reduced coverage. They may still ask him for photos and/or repair receipts. It’s worth noting, however, that there are a few carriers who simply refuse to provide any coverage at all for salvage titled vehicles.
There is one thing both John and Jacky need to know if they do fully insure their vehicles. Although they won't pay any less in premium due to the salvage title, they’re not going to get book value if their vehicle is totaled again later. Without question, a vehicle with a salvage title is worth less. (It was this very blessing that made it possible for Jacky to afford her Camry in the first place.) But this lower value will be taken into account when your carrier is appraising your totaled vehicle.
In some cases, insurance proceeds from a total loss might be enough to repair the major damage but might leave some cosmetic damage unrepaired. This will likely make it harder, but not necessarily impossible, to fully insure the vehicle. If physical damage coverage is secured and then new damage occurs later, the insurance company will take into account the existing unrepaired damage in settling the claim, if either the damage is to the same parts or if they are totaling vehicle for a second time.
One other note. In Minnesota, state law does not require a salvage title for lower value vehicles more than a few years old. So a vehicle could be a prior total loss and have a normal title. If you “buy back” your vehicle after a total loss and a salvage title is not required, your current insurance company will likely treat your vehicle the same as if it had a salvage title, meaning they might or might not be willing to fully insure it again after it is repaired. However, if you buy a repaired vehicle that was totaled previously but has a normal title, you may not have any insurance issues at all.
The Josh and Jacky examples are a work of fiction and do not depict any actual specific client or situation.
There are a number of factors that insurance carriers take into consideration when setting the rate they will charge to insure your home. In this post, I’d like to explain how Homeowners insurance premiums are determined, in an effort to take some of the mystery out of how much you pay for your coverage.
The first and most obvious factor is how much your home will be insured for. The Dwelling limit on your policy determines the base rate that you pay, which is then adjusted based on other factors we will explore below. In most cases, the Dwelling limit is based on an estimate of what it would cost to rebuild the home if it suffered at total loss. Therefore, the size and features of the home drive how much it is insured for and how much you pay to insure it.
Another big factor is the deductible you choose. The average deductible these days is $1000, but there could be significant savings to raise your deductible with many carriers. For example, you might see an insurance company offer a fifteen percent discount to go to a $2500 deductible or a maybe thirty-five percent discount to move up to $5000.
Of course, it also matters what coverage options you choose. Coverages typically offered as optional for an additional premium include water backup, identity theft, open peril personal property, enhanced coverage for jewelry or firearms, increased coverage for outbuildings, mechanical breakdown, earthquake and many others.
Beyond the base rates for the coverage selections you choose, another important factor is whether or not you bundle your Homeowners and Auto insurance with the same company. Many insurance companies offer discounts ranging from ten to thirty percent or even more off your Homeowners insurance premium when you also buy your Auto insurance from them.
Almost all insurance carriers also use your credit history as a factor in determining your rates. This is because studies show that, statistically, home owners with favorable credit histories suffer fewer or less severe losses than average, and vice versa. Depending on the carrier, this might be a relatively minor factor or it could be huge. I’ve seen insurance companies price the difference between the best and worst credit history at around twenty-five percent. I’ve also seen cases where a carrier might charge the lowest credit score two to three times as much as the highest score.
Your distance from fire protection also can have a big impact on your rate. The lowest rates are reserved for homes within five miles of a fire department and one thousand feet of a fire hydrant. But many of us in northern Minnesota live further out from the fire station, which does increase insurance costs, because it is less likely our home could be saved if a fire started.
Beyond how far you live from town, another factor is the region where you live. Minnesotans pay a lot more to insure their homes then, for example, someone living in Idaho or Nevada, because we tend to experience more storm damage here than folks out west do. There are also differences in pricing within the state, also based on historical storm damage trends. The good news is that here in Bemidji, we are just within the wooded northeast region of Minnesota that tends to see the lowest insurance costs based on storm trends. I would say that in general, home owners living further north and east in the state pay less for insurance than those living further south or west.
Features of your home also come into play. Many insurance companies will provide discounts if your roof, heating systems, electrical and/or plumbing are new. If your home is older and these haven’t been updated recently, you will definitely pay more for your insurance than if your home was just built. You may pay less if you have a steel roof instead of shingles, as it is less likely to be damaged in a storm. Insurance carriers also usually provide small discounts for deadbolt locks, fire extinguishers and monitored alarm systems. Plan to pay more for coverage if you have a woodstove, due to the increased risk of fire. Less conventional construction types, such as manufactured homes and log homes, also often cost more to insure.
Last but certainly not least, insurance carriers look at your prior claim history. If you have filed a claim before, statistically you might be more likely to suffer another loss in the future. For this reason, most insurance companies add a surcharge if you have been paid for a non-weather claim in the past three years.
All of these factors and more are often specified with the rates that a given carrier files with the state of Minnesota. While the factors are complex, carriers must charge you premium that exactly reflects the rates that they filed with state.
To summarize, insurance pricing is based on the statistical likelihood of a future covered loss, combined with how much the carrier is likely to have to pay if such a loss does occur. While some insurance pricing factors can certainly be frustrating at times, the good news is that we have a competitive Homeowners insurance marketplace in which carriers are competing to offer you the best deal they can while still collecting enough premium to at least break even. If you are concerned that you might be paying too much, I’d suggest talking to an independent agent like me who can shop among their carriers within this competitive marketplace to find the best value.
Curious to see actual examples of home insurance costs in the Bemidji area? Click here to read what some of our other clients pay to insure their homes with us.
It is safe to say that the companionship of a dog is as much a part of our culture as baseball and apple pie. The good news is that by and large, insurance companies are comfortable insuring households with a canine member. The bad news is that there are exceptions in which man’s best friend can create some insurance issues.
When an insurance company is deciding whether your home is a good risk for them to insure, they’re looking to avoid factors that increase the likelihood of a future loss. A dog that they consider more risky than average is one of those factors.
Reports indicate that there are nearly one million dog bites per year requiring medical attention in America, and the average dog bite claim costs an insurance company more than $30,000. This explains why insurance companies want to evaluate the level of risk your dog poses.
It’s hard to know what dog might bite. Any dog can do it given the right circumstance. But insurance carriers do look at statistics that indicate that certain breeds tend to bite more often than others. For example, a recent study showed that over the last twelve years, pit bulls accounted for two thirds of all dog bite fatalities in the US.
So most carriers have a list of breeds they believe pose an above average statistical risk. All carriers are likely to list pit bulls, rottweilers and wolf hybrids as risky breeds. Beyond that, carriers lists vary, but a given list might include breeds such as Akita, Alaskan Malamute, Chow, Doberman, German Shepherd, Husky, Mastiff and Presa Canario. And insurance companies tend to be equally concerned whether the dog is full-bred or a mix that contains one of these breeds.
When you apply for Homeowners insurance, your insurance carrier will ask whether you have any pets or other animals. If you have a dog, they will ask what breed Rover is and whether he has ever bitten in the past. If your dog’s breed is on their concern list or if it has a bite history, many carriers are likely to decline to insure your home at all.
So the unfortunate reality is that owning certain dogs could make it more difficult for you to get Homeowners insurance. While some dog breeds might be unacceptable with one carrier but acceptable with others, there are some dogs that may be uninsurable by practically any carrier.
In some cases, your best option might be to find a carrier willing to exclude your dog. But be aware, this often comes as part of a broader exclusion for any other dogs you own or even any other animals that you own. Also, only a few companies are even willing to do this. Once you do find such a carrier, you are still in the uncomfortable position of being on the hook financially if your dog bites, or even if he or she runs out in the road and causes a car accident.
Of course, your other option would be to buy property-only insurance without any liability coverage at all. This leaves you even less protected and is definitely not something that I would recommend. Also, this is not likely to save you any money, as preferred-priced Homeowners policies build in liability coverage automatically; so non-standard policies where liability coverage is optional tend to be more expensive to begin with.
If you have a pet considered uninsurable, that doesn’t make them any less apart of your family. This could leave you quite frustrated as to what to do. My recommendation would be to talk to an independent agent. Unlike exclusive agents who represent just one carrier, independent agents like me have a number of companies available and can often find a solution for hard-to-insure situations.
Getting into an accident is no fun. It can certainly be a traumatic experience, and it’s almost always an inconvenience and disruption to your life. What’s even worse is when your insurance rates go up on top of all that. Unfortunately, it is the reality that Auto insurance rates are based on your statistical level of risk.
After an accident, when your next renewal arrives, your insurance company re-assesses your comparative level of risk as a driver and adjusts your rates accordingly. Auto policies are written for either a six or twelve-month term; so your next renewal could be anywhere from a month to a year down the road. When your next renewal does come, your rates are likely to go up because you are now statistically more likely to have a future loss than you were before.
So how much will your rates go up at renewal? Unfortunately, this can be difficult to predict. The rates you pay have been filed by your carrier with the state, but they are quite complex. I often see increases that range anywhere from fifteen to fifty percent after an accident. Obviously, that’s a big range, and I’ve definitely seen cases outside that range as well.
One thing worth mentioning is that the amount your premium increases is not based on the amount that was paid out on your claim. This is because your rates reflect your statistical likelihood of filing a claim in the future; it's not about recouping what was paid out in the past. (However, some carriers may not raise your rates if your claim was under a certain amount, such as $500 or $1000.)
Most insurance companies surcharge accidents for a three-year period. This means that at your next renewal after the accident’s third anniversary, typically you’ll see your rates go down. However, many carriers also have a safe driver discount that can look back as far as five years; so there could be some effect on your rates for up to five years.
But what about not-at-fault accidents? By and large, you shouldn’t see a big rate increase if the accident was someone else’s fault. Keep in mind, however, that if the insurance company pays a claim for collision damage to your vehicle and there weren’t any other drivers involved, the accident is automatically considered your fault. So, unfortunately, if you back into a tree, hit a parked car or slide into the ditch due to icy conditions, your rates will go up just as much as if you fall asleep at the wheel and cause a five-car pileup.
So is it a good plan to switch carriers after an accident to avoid the rate increase? If only it were that simple. Because insurance companies base their rates on your likelihood of having a loss in the future not as a means to recoup what they paid out in the past, any other carrier you ask for a quote is likely to surcharge your accident just the same as if your accident had been with them. This doesn’t mean that you can never find a better deal with another carrier, but it’s unlikely you’ll be able to avoid any increase in insurance cost.
You may have heard about a friend being non-renewed by their carrier after they have had an accident. The good news is that this doesn’t happen as much in Minnesota as in other states, because of Minnesota’s consumer protection laws. However, if you’ve already had other accidents or tickets in the past three years, it is possible that your most recent accident could be the straw that breaks the camel’s back and allows your carrier to legally non-renew you. In that case, you would have to move to a new carrier willing to accept your driving record, and unfortunately the rates you find might not be pleasant.
It’s worth noting that there are now a number of insurance carriers offering optional accident forgiveness, which means they won't surcharge your first accident. You have to pay extra to add this feature up front before your accident happens; it doesn’t apply to an accident you’ve already had. Typically, only your first accident in a three-year period is forgiven. In my office, two of my eight carriers offer this option.
When working with my clients, I realize that an accident is an unpleasant experience for my clients, and I try hard to help and guide them through the claim process and also dealing with the affect in their rates afterward. Sometimes I can find clients a better option with another carrier; or we can talk about other ways to cut costs if need be. If you’ve been in an accident and need assistance, let me know how I can help.
Here in northern Minnesota, many of us look for more ways to spend time outdoors during our long cold winters. One such opportunity many enjoy is to relax in an outdoor hot tube after a long hard day. As I write this post, fall is in the air and homeowners are contemplating a new hot tub purchase or are preparing their existing tub for the upcoming season.
Clients often call me to “add their new hot tub” or to make sure their hot tub is covered under their Homeowners policy. Good news! If you have a standard Homeowners policy, your hot tub is already covered; if it catches on fire, gets hit by a falling tree, is stolen or is damaged by hail or even vandalism, you should be good to go.
However, we should stop and ask: What is most likely to happen to your hot tub? Odds are that you’re not going to have a thief back up a flatbed and load it up using their forklift. It’s not even very likely that it will burn up in a fire. What is likely is that the water in your tub could freeze, destroying the shell, mechanics and/or plumbing beyond repair. I’ve had this happen to several clients, and the cause could be either a loss of power or a failure or breakdown of the heating system in the tub.
Now if knew about this right away, of course you would either quickly fix the issue or else drain the tub before the water cools enough to freeze. But what if you don’t realize there is an issue until it is already too late? If you use your tub every few days, that is plenty of time for something to have gone wrong since its last use and for the water in the tub to freeze.
So, if the worst happens and your hot tub is totaled by freezing, will your Homeowners policy cover its replacement? I wish this were a simple question; however, unfortunately it is not. What I have found in my research is that the answer to this question may depend on a) what exactly went wrong that resulted in the freeze; b) whether your carrier classifies the tub as part of your dwelling, a detached structure or personal property; c) what optional coverages your policy includes and d) how your carrier interprets several vague provisions contained in your policy.
I’m sorry if this doesn’t sound very re-assuring. The honest truth is that you probably aren’t going to be able to know in advance whether a potential freezing claim would be covered. However, there are a couple things you can do now to make an uncovered loss less likely.
First, an ounce of prevention is definitely worth of pound of cure. Talk to your hot tub dealer or an electrician about installing some kind of warning light or alarm that will let you know if you lose power to the tub. If you were able to install an alarm system that directly monitors the temperature of your water, that would be even better. If you have a way to be notified of a heating failure before your water freezes, you’ve reduced your need to worry about whether a resulting loss would be covered.
Secondly, contact your agent and ask them to check with your carrier as to a) whether your hot tub falls under your Dwelling, Other Structures or Personal Property coverage and b) once this is known, whether there are any optional coverages that can be added that make coverage more likely or more complete. For example, if your hot tub is considered personal property, make sure your personal property is covered at replacement cost coverage (you want this anyway) and consider beefing up your personal property coverage from Named Peril to Open Peril (aka, upgrade your HO3 to an HO5). Also, make sure that your applicable policy limit is high enough to factor in the added value of the hot tub.
Any hot tub coverage discussion would not be complete without mentioning the unthinkable risk of a small child drowning in your hot tub. While you might be careful to supervise children whenever they use the tub, what if a neighbor kid wandered over while you were gone and climbed in the tub? For this reason, I recommend installing a locking mechanism on your outdoor hot tub and making sure it is engaged when not in use. If the worst did happen, most Homeowners policies would cover your liability for this accident, but occasionally we see a policy that excludes or limits such coverage; so you should confirm your hot tub liability coverage by reviewing your policy and/or calling your agent or carrier.
We are privileged here in the North Country to have numerous beautiful log homes adorning our lake shores and wooded areas. You may have heard that these homes are harder to insure, and this can certainly be true. Many insurance companies aren’t willing to insure log homes, and when you find insurance, it may be more expensive than if you lived in a wood frame home of similar size.
First, a point of clarification. Not all homes that look like log homes are actually log homes. Log siding often creates a log home look but is not true log construction. An easy way to tell the difference with a casual glance is to look at the corners of the home. If it is a true log home, the logs will extend through the corners. If it is a frame home with log siding, you will see trim boards in the corners. In my experience, you shouldn’t have any issues insuring a frame home with log siding.
But, assuming you do have a true log home, why are many insurance companies unwilling to insure it? Some of it may have to do with the uncertainty of how much premium to charge. With a frame home, if a portion of an exterior wall is damaged, repair is often as simple as replacing a few studs and some pieces of siding. But with a log home, will all the logs on that side of the home have to replaced? Is that even possible without tearing down the home and rebuilding it? And will contractors skilled to work on log homes be a lot more expensive? And if the home does have to be rebuilt, how do they even estimate what that would cost? These are some of the questions that may make many insurance companies walk away.
A common misconception is that log homes are harder to insure because of their increased fire danger. From what I have read and heard, log homes really don’t pose an increased fire risk, especially those with larger sized logs. Common sense would say that it is more likely that a home with 2x4 or 2x6 wood studs will burn to the ground than at a home with logs of an eight to twelve inch diameter. Having said that, there are things in a log home that will burn, and most log homes tend to be located further from their fire department, which does makes them harder to insure.
Once you find an insurance company willing to insure a log home, you might have to pay more to cover it, for several reasons. One reason is that many times a lot of the most competitive carriers don’t insure log homes. Secondly, the distance from fire departments of the average log home also makes it more expensive to insure. A log home may be more likely to feature wood heat, which may also affect insurance cost. An insurance carrier may also not offer its biggest discounts for log homes, due to the perceived increased risk.
Another issue with the cost of coverage is the increased replacement cost. A log home will often cost more to rebuild than frame construction of a similar size. Because standard Homeowners policies largely base their premium on estimated replacement cost, this is going to affect how much it costs to insure the home.
If you own or are buying a log home and are struggling to find good insurance at a fair price, you should talk to an independent agent. Independent agents represent a number of different insurance companies and will normally have options to insure your log home. As an example, here at Pine Country Insurance I represent a handful of carriers who insure log homes and am can usually offer log home owners a reasonably priced policy.
Perhaps you find the insurance transaction to be a bit of a mystery. You may wonder what happens to the money you pay in premium and how the agent who services you gets compensated for his or her time.
Insurance agencies are normally compensated in the form of commissions received from the insurance company (or sometimes subtracted from the premium the agency forwards to the carrier). In Home & Auto insurance, this is usually a percentage of the premium, most often in the range of eight to fifteen percent. In Health insurance, commission is usually a set dollar amount per policy per month. Either way, this commission compensates the agency for its marketing costs, for assisting its clients in purchasing coverage and for providing continued service to the customer.
Beyond commission, the other common form of compensation is profit sharing. Profit sharing is basically an agreement between the insurance company and the agency that if the agency does a good job of screening and discretion in what policies it places with the carrier and if this performance leads to the insurance company turning a profit on the agency’s business in a given year, the insurance carrier will share some of this profit with its agency partner, recognizing and rewarding the agency’s role in creating this profit. Quite often there is a minimum amount of business that the agency must have with the carrier and there may also be growth requirements attached. Not all insurance companies pay profit sharing.
Some agencies are also paid via fees billed directly to the customer. These fees could be instead of commission or in addition to it, and they could be a set dollar amount for certain services or could be a percentage of premium paid. Fee assessment is probably more common in larger insurance agencies and brokerages than it is in local agencies. We don’t charge customers any fees at Pine Country Insurance.
Here’s an example of how an agency is paid and where premium dollars go. Let’s say that in January Kala purchases Auto insurance from First Street Agency and signs up for auto-pay. First Street Agency places her insurance with Gopher Mutual. Gopher Mutual takes $83 a month out of Susie’s checking account and pays First Street Agency $12 per month (14 percent) in commission.
At the end of the year, Kala had paid $1000 in premium to Gopher Mutual. Good news! It was a good year; there weren’t any major storms in the state and Gopher Mutual’s customers didn’t have too many major accidents. So, out of the $1000 Kala paid for the year, Gopher only had to use $430 to pay customer’s claims. It did also use $260 to pay its operating costs and it paid $140 to First Street Agency in commission. This left $170 in profit. Gopher shared $20 of this profit with First Street Agency and much of the rest it placed in reserve in case there are more storms or accidents next year.
While your actual insurance transactions will be different from the example above, I hope this post adds some transparency to the process of agency compensation and where your insurance premium dollar actually goes. I welcome any questions you might have!
Here in Minnesota lake country, many of us who live on water make a sizable investment in our boat lifts and docks, and of course we want to make sure that they are insured.
First, the good news: Your dock or boat lift which is on your residence premises would be covered by a standard Homeowners policy, either as a structure or as personal property, subject to the policy deductible. However, there are several important caveats; so keep reading.
First, your dock or lift is not going to be covered if damaged by waves. While Homeowners policies cover wind damage, they don’t cover damage caused by water, even if the water is being driven by the wind. So if wind-driven waves knock loose your dock or lift from its moorings, expect to be on your own for the cost of the damage. However, if the force of wind directly causes damage to the dock or lift, that loss should be covered.
Secondly, your dock or lift is also not covered against damage caused by ice. If you leave your dock in the water over the winter and moving ice shelves destroy it during spring thaw, your Homeowners carrier is likely to deny that claim. Or if you leave in your boat lift and the pressure from freezing or thawing of the ice around it causes damage, again, this is most likely not covered.
Beyond these two troublesome exclusions, there are many situations where coverage could hinge on whether your dock or lift is considered a structure or personal property. This can matter because policy coverage provisions for structures and personal property are often quite different. If your dock or lift is permanently set in place and attached to its location, it is almost certainly a structure. However, most Minnesota lake dwellers pull their docks and lifts out of the water in the fall to protect them from ice damage. Is a movable structure still a structure? The answer to this question may depend on which insurance company you ask. (This means you probably do need to ask.)
If your movable dock or boat lift is not considered a structure, then it would be considered personal property and typically covered against loss caused by one of the perils named in the policy. This gives you coverage if it is directly damaged by wind during a storm. It also covers fire, vandalism and falling objects, among other perils. The other good news is that, as personal property, your dock or lift is covered anywhere in the world, even if it’s not located where you live. Finally, as long as your Homeowners policy covers personal property on a Replacement Cost basis, then your dock or lift will be covered for its cost to replace or repair, without a deduction for depreciation (when actually replaced or repaired).
Things can get a bit more complicated if your dock or lift is considered a structure. First of all, most Homeowners policies only cover structures located on your “residence premises”. So if you own a dock or lift located at a resort or on a vacant lake lot and it’s considered a structure, then you are going to need to add special coverage for it. (Many insurance companies offer an option to add coverage for structures located elsewhere; however, if your carrier doesn’t make this option available, it could be more difficult to get it insured.)
Another problem could be that it may not be clear whether your dock or lift is on the “residence premises” or not. Perhaps you have a camper setup at a resort which you insure as a seasonal residence. If your policy includes coverage for Other Structures, will it cover your boat lift located elsewhere in the resort? Or what if you have a dock where you live but your legal boundary stops just short of where it sits?
Standard (ISO) Homeowners policies define your “residence premises” as including the structures and grounds at the location of your insured home. In the case of a dock at the edge of your land but just beyond your property’s legal boundaries, my opinion would be that it’s at the same location of your home and therefore should be covered. However, not everyone agrees with my opinion, leaving some doubt. In the case of the boat lift located across the resort from the lot you occupy, there may still be an argument to be made in favor of coverage, but coverage seems even less certain. Also, be careful here, as some non-standard policies might define “residence premises” even more narrowly.
Just like personal property, a boat lift or dock considered a structure will be covered against direct damage from wind, fire, vandalism, falling objects and more. Unfortunately, if considered a structure, it is probably not going to be covered on a Replacement Cost basis. Standard policies cover “structures which are not buildings” on an Actual Cash Value basis, meaning a deduction will apply for depreciation, based on the age and condition.
It would certainly be nice if coverage for boat lifts and docks wasn’t so complicated. But given the issues that I’ve raised, I recommend contacting your agent to explain your situation (including exactly where your dock or lift is located, whether it is movable, etc.) and to discuss how and whether coverage applies under your policy. If you don’t have a knowledgeable personal agent to call, maybe it’s time to call me!
If you’re not married but live with your significant other, there may be insurance limitations of which you are not aware. In this post, I’ll explain the insurance problems that often apply to domestic partners and what you can do about them.
If either of you carry a Homeowners or Renters policy, you might assume that the policy’s personal property and liability coverage will automatically extend to the other partner. Unfortunately, this is usually not the case. A standard Homeowners or Renters policy provides personal property and liability coverage to “insured persons”. Typically, an “insured person” is the policyholder and his or her resident relatives.
This means that if a policyholder has children, parents, siblings or a spouse who live with them, these individuals are covered – but not the policyholder’s unmarried domestic partner. And while your policy may give you the option of choosing to cover your domestic partner's personal property after a loss, no such option exists in the event of a liability claim against them.
No one really expects a future liability claim, but think about this. Imagine your partner accidentally leaves the stove on which starts a fire, causing thousands of dollars of damage. Your insurance company pays for the damage but then sues your partner as the negligent party causing the damage. Since your partner is not an "insured person" in your policy, your carrier is fully within its rights to seek reimbursement from the responsible party.
So what can be done to extend coverage on your home policy to the partner you live with? There are a couple potential solutions.
In some cases, you may be able to make your home insurance a joint policy. This would mean that you share ownership and control of the policy with your partner, and you also share all the coverage. Normally a joint policy won’t cost any more than a policy written in just one name. The problem is getting a joint policy often requires that you both own the home. Or if you are a renter, some carriers may require that you are both on the lease. Another thing to keep in mind with a joint policy is that you will probably both be named on any claim checks or refund checks, which perhaps may not appeal to you.
Another solution which might be better is to add your partner as an additional “insured person”. This coverage option is often called the “Other Members of your Household endorsement". As the sole policyholder, you still maintain exclusive control and ownership of your policy and your partner probably won’t be named on claim checks. You will, however, usually pay an extra charge for this (often $50 to $75 per year), and this option is not available with all insurance companies.
Depending on who you are insured with, it is certainly possible that neither of these options may be available to you. In that event, there may be no way to cover your partner on your existing home policy, and your best course of action (short of changing carriers) may be for your partner to buy their own Renters policy. He or she will be able to buy a Renters policy even if they don’t actually rent, and if they bundle it with their Auto insurance, it may not add much cost at all.
Speaking of Auto insurance, there might be coverage issues there as well. Now, if you each own and insure your vehicle under separate policies, there shouldn’t be any major concerns. Both of you are covered under your own insurance, and if you drive your partner’s vehicle with their permission, their policy will cover you. (If you do drive your partner’s vehicle, we recommend making sure their coverage limits are at least as high as yours.)
But what if only one of you carries an Auto policy? Sometimes one person will be sole owner of both vehicles in the household – perhaps because they have better credit or are otherwise better positioned to take out a loan. In this situation, what often happens is that the partner owning the vehicles insures carries the insurance for both and lists their significant other on the policy as a driver.
If your partner carries Auto insurance listing you as a driver, you probably think you are worry free. The insurance company knows about you; so you are covered, right? Yes and no. While you are covered to drive your partner’s listed vehicles with his or her permission, you are lacking important policy coverage for non-owned vehicles.
If your significant other who carries the Auto policy borrows a vehicle, his or her policy provides backup coverage in case the borrowed vehicle isn’t insured or its insurance limits are lower than their own.* And when they rent a car, their Minnesota Auto policy covers that as well. This coverage usually extends to any “insured person” on their policy, but, just like home insurance, you’re likely not an “insured person” being their unmarried domestic partner. So, in this situation, you are covered to drive vehicles listed on their policy with their permission, but you are not covered by their policy to rent or borrow a car.
If this is your situation, what can you do to resolve this coverage gap? Depending on your carrier, in some cases it may be possible to make the auto insurance a joint policy. As with a joint home policy, you then share ownership and control of the policy and will both be listed on claim or refund checks. Both of you enjoy all the policy coverage. But a certain percentage of insurance companies won’t write a joint policy unless there is a jointly titled vehicle.
At Pine Country Insurance, we represent multiple insurance companies, and our carriers’ rules pertaining to domestic partners vary. This choice of insurance carriers usually gives us the flexibility to get both individuals fully insured, if so requested. But we don’t always know when our clients living situation changes. So we advise calling your agent when things change to see if any insurance updates are needed.
*Coverage under standard Auto policies for a vehicle borrowed by an “insured person” typically applies as long as the vehicle is not furnished or available for the regular use of an “insured person”.
Ken Cobb is owner of Pine Country Insurance and has been active in the insurance industry for over 15 years. Meet Ken.
Coverage descriptions found in this blog are summaries provided for general educational purposes and cannot fully detail the terms, conditions, limitations or exclusions of a specific insurance policy. Please read your policy carefully.