Sunday, December 30, 2007

Consumer Alert: Stranger-Originated Life Insurance (STOLI)

Recent consumer alert from Ohio Department of Insurance:

The Ohio Department of Insurance advises consumers to proceed with caution when considering participation in a "Stranger/Investor Originated Life Insurance" (STOLI) life settlement arrangement. Consumers need to be fully aware that, unlike a traditional policy where the insured's loved ones are beneficiaries of the death benefits, in a STOLI arrangement, an investor group-strangers-will likely acquire an interest in the life of a participant.
Other possible consequences to consumers participating in STOLI arrangements are limits on future insurability, higher premiums for additional coverage and/or tax liabilities.
STOLI life settlement arrangements are typically promoted to consumers between the ages of 65 and 85 and include:
  • Allowing someone to purchase life insurance on your life in exchange for an immediate lump sum payment of some amount;
  • Entering into a contract for "free" or "no-cost" insurance on your life;
    purchasing a life insurance policy for the sole purpose of selling the policy to a third-party, whether immediately or in the future; or
  • Materially participating in transactions leading up to the purchase of a life policy for any of the above-stated purposes.

The following websites contain valuable information about investing, including information about STOLI life settlements: (non-profit broker-dealer regulation, consumer advisories) (non-profit website to educate consumers about scams) (state securities' regulators association; provides consumer investment advice)

You can verify licenses of agents, insurance companies, and life/viatical settlement providers and brokers at the Department's website or through the Department's toll-free Consumer Help Line 1-800-686-1526.

Monday, November 12, 2007

Renter Insurance

Renters insurance - Not just about price

Q: Is anything else important, other than price that I need to consider when shopping for renter’s insurance?

Top things: Price isn’t everything.

Property Coverage: make sure the coverage you have is enough for all your stuff. Make sure you have a replacement cost endorsement . Make sure your policy covers other high priced items you have: jewelry, collectibles, guns, computers; ask your agent about policy restrictions and get coverage for what you have. If your place has a basement, ask for a water back-up endorsement.

Liability coverage: Get $300,000 to cover for damages or injuries you may cause. The liability coverage will cover you if you cause a fire, someone gets hurt, or any other unintentional mishap.

For example, if you start a kitchen fire, which is very common in rental properties, the liability coverage will pay the landlord for the damages to their building. You don’t want to get stuck defending yourself in court or paying for this out of your own pocket.

Discounts: companies rate by territory, age, credit and a dozen other factors. Get some quotes. Also the company that handles your car may give a good discount both ways. Auto company doesn’t offer renters? Shop them both.

The future: Some home insurers will only offer their best packages to people with ‘history’; if the insurer does not offer homeowners coverage (like GEICO) they won’t be much help to you when you buy a house.

Service: is extremely important. How does the insurance agency treat you on the phone? Bad service while getting a quote may be a reflection of the agencies view of you. Ask about the insurers claims handling reputation. You don’t want to buy a policy with a combative company. Last thing you want is having to fight an adjuster for a loss.

Get Started
Don’t put this off till next week or next month. Deal with this right away. Get a referral to a local independent agent. She should be able to shop you with 6-10 good companies and serve as a first line adviser with you future questions, although feel free to stop back here with your questions.

Wednesday, October 10, 2007

Home Buying Checklist

Shopping for your dream house? It’s important to keep insurance in mind throughout the home buying process. Most lenders won’t provide a mortgage without insurance coverage. Your insurance company or agent, together with your realtor, can help you get what you want – a good home that is properly protected.
Put yourself in the best possible position to be able to afford a home, receive the lowest possible mortgage rate and get insurance for your new house. This takes advance preparation on your part.

  • Check your credit rating: Good credit helps you in many ways, including getting a mortgage at a good rate. Depending on the state and the insurer, it may also help you save money on your homeowners insurance. Get a copy of one or all of your credit reports. Make sure they are accurate and report any mistakes immediately. The credit report helps you see how your credit standing compares to others. If your credit is not as good as it should be, begin to improve it immediately.
  • Check your home insurance claims-filing history: Get a copy of your loss history report, such as a CLUE report from ChoicePoint or an A-PLUS report from ISO. This is a record of home insurance claims you have filed. If you have not filed any insurance claims in the past five years, you will not have a loss history report. The better your claim record, the less you may pay for insurance. A good claims record can also be important if you are selling the home you are currently living in. However, a past claim does not have to be a problem; the reulting repairs or improvements, if done properly, can make a property more attractive to buyers and insurers.
  • Renters insurance: If you are currently renting, it’s important to have insurance for your personal property. Your landlord’s coverage will not cover the things you own. If you haven’t owned a home before, it might be helpful to have a history of insurance when you go to buy your first home.
    As you look at homes, remember that characteristics of the house (where it is, how it's constructed and the kind of shape it’s in) can send your insurance rates up or down.
  • Construction of the house: If you plan to live near the Atlantic or Gulf coasts, consider a brick home because it is more resistant to hurricanes. If you are buying in a seismically active region, look for newer homes built to current codes, or older homes that have been bolted to their foundations. They are better able to withstand earthquakes.
  • Age of the house: Older homes sometimes have features such as plaster walls, ceiling molding and wooden floors that could be costly to replace. Such special features may raise the cost of insurance. Also, an older home that has been updated to comply with current building codes is typically less expensive to insure than an older home that is not up-to-date.
  • Condition of Roof and House: If you are considering a “fixer upper,” you may pay more for insurance until clear improvements are made. In particular, check out the condition of the roof. A new roof in good repair will be attractive to insurers and will save you money as well as aggravation.
  • Plumbing, heating and electrical systems: These systems can wear out, become unsafe with age or become dated as safer technologies are introduced. Recent upgrades make your home safer and less likely to suffer fire or water damage.
  • Safety devices: Homes equipped with smoke, fire and burglar alarm systems that alert an outside service may get sizeable discounts. Strong doors, dead bolt locks and window locks may also reduce insurance costs.
  • Pool, wood burning stove, etc.You will need higher property and liability coverage if you are buying a home with features such as a pool or a wood burning stove. In the case of a pool, consider getting additional coverage, such as an umbrella or excess liability policy.
  • Quality and proximity of the fire department: Homes near a fire station, those with a hydrant close by and those located in communities with a professional rather than volunteer fire department will cost less to insure.
  • Location, location, location:Homes near the coast will be more expensive to insure because the risk of hurricane, wind or water damage is greater. In many states, you will pay the first few thousand dollars in damage before your insurance kicks in. You also need to think about the threat of floods or earthquakes. You will need separate insurance for these risks and it can be costly. Also, around the country, there are high-risk areas vulnerable to hurricanes, brush fires or crime that might not qualify for private insurance. To make insurance available, there are state-sponsored Fair Access to Insurance Requirement (FAIR) Plans. FAIR Plans, however, can be expensive and provide less coverage.
    You have looked at a number of properties and are narrowing your search to a few homes. Now you need to get more specific information on the house and its insurability.
    Check the house’s loss history reportAsk the current homeowner for a copy of the house’s insurance loss history report. This will provide information regarding claims filed during the last five years and answer two questions that any savvy homebuyer should ask: Are there any past problems in the home? If damage has occurred, was it properly repaired? Prior claims are not barriers to getting insurance, but you should know the history of the home before you go to closing.
  • Get the house inspected: A thorough inspection of the home is very important. The inspector should: check the general condition of the home; show you where potential problems might develop; double-check that past problems have been repaired; and suggest upgrades or replacements that may be needed. If a house has been well-maintained, you should have no trouble getting insurance. However, if the inspector raises questions, your insurance company will as well. In particular, have the inspector check for water damage, termites and other types of infestation. Special attention should be paid to the electrical system, septic tank and water heater. Find out if there is an underground oil storage tank, as many insurers will not provide policies for homes that have one.
  • Contact your insurance professional: Don’t wait until the last minute to think about insurance. Ask your current insurance professional if the house will qualify for insurance and get an estimate of the premium. The sooner you act, the smoother the process will be. If you do not have an insurance agent or company representative, get recommendations from family, friends or co-workers. Select someone you know and trust, as he or she will be an advisor for many years.
    Shop around for the best coverage: Most people spend months looking for a house, but only spend a few minutes insuring it. Insurance companies sell insurance in different ways – some through their own agents, others through independent agents or brokers and still others directly by phone or over the internet. Select the arrangement that you are most comfortable with. Get the names of several highly regarded insurers. The higher the financial rating, the better prepared they will be if a real disaster strikes. Then compare prices – it could cut hundreds of dollars off the cost of your bill.
    Congratulations, you are set to purchase your new home. Now you want to be sure you are getting the right insurance coverage at the lowest possible price.
  • Take the highest deductible you can afford: The higher the deductible, the lower the premium. Since most people only file a claim every eight to ten years, you will save money over time and preserve your insurance for when it’s really needed.
  • Ask about available discounts for:
    Multipolicy (home, car or other policies with the same company)
    Smoke detectors
    Fire extinguishers
    Sprinkler systems
    Burglar and fire alarms that alert an outside service
    Deadbolt locks and fire-safe window grates
    55 years old and retired
    Long-time policyholder
    Upgrades to plumbing, heating and electrical systems
    Earthquake retrofitting to make the home safer
    Wind-resistant shutters
  • Get enough insurance to:
    Completely rebuild the house in the event it is destroyed by fire or other insured disaster . Replace everything in the house.
    Protect your liability in case someone is injured on your property and sues you.
  • Ask about additional coverage such as:
    Replacement cost for possessions
    Extended or guaranteed replacement cost for the structure
    Building code upgrades
    Sewer and drain back-ups
    Umbrella coverage for a pool or other high-risk items
    Special riders for jewelry, collectibles and expensive items
  • Flood, earthquake and windstorm risk: Damage caused by flooding and earthquakes is not covered by standard homeowners insurance policies. Instead, homeowners will need to pay an additional premium for coverage that is provided through the government’s National Flood Insurance Program (NFIP). To get flood insurance, your community must participate in the NFIP program. Policies for coastal properties will have a sizeable windstorm deductible, which means the homeowner may be responsible for thousands of dollars of damage before insurance kicks in. It pays to know what is in your policy. Earthquake insurance is offered by private insurance companies. In California, coverage is available through the California Earthquake Authority, a state program, as well as the private market. It can be expensive and comes with a high deductible.
    Properly maintain the houseMaintain your home as you would your car. Every year, there are important things you should do to reduce the chance that you will experience water damage, fire or other insured loss. Insurance does not pay for routine maintenance or damage resulting from neglect. The cost for proper care should be calculated into your overall budget. It’s your responsibility to be the “risk manager” for your home. If you do your part to reduce insurance losses, not only will your home be safer, it will also save you money on your insurance bill.
  • Keep insurance up-to-date: Let your insurer know about alterations, additions and improvements to your home. Major purchases and lifestyle changes such as a marriage or divorce should trigger a call to your insurance professional. This way, you can maximize your insurance dollars by not being either under- or over-insured.


To order a CLUE report, see


To order a credit report, see

For help with your credit score, call 800-777-2066

Institute for Business & Home Safety

Insurance Information Institute

Insurance Information Network of California


To order a copy of your A-PLUS report, call 800-709-8842

National Flood Insurance Program

Monday, September 24, 2007

Ten Most Asked Questions

Here you go: The most commonly asked insurance questions in the history of asking insurance questions:
Q: Can someone get a life insurance policy on me without my knowledge?
A: Anything under the sun is possible. In order to get a life insurance policy issued, a person should have:
1. An insurable interest in the insured (you’re financially impacted if someone dies)
2. A need for the insurance $$ amount requested (no $5 million polices on your kids, unless she’s Miley Cyrus)
3. Access to personal information IE DOB, SSN, address, medical history
4. Signature of the insured (if insured is an adult)
5. Cooperation from insured if insurer requires paramedic exam (blood, urine, saliva, med history) or a physical exam. The people performing the exams are required to check IDs.
In order to collect on the policy, the person would need:
1. Cooperation from family or the executor of the estate to get death certificates.
2. Be outside the contestability period of the policy (usually two years from policy issue date) to avoid the scrutiny of the insurance company.
In the US, there are around 1,500 - 2,000 life insurance companies and they all do business in a similar manner with small differences in underwriting. None of them would make a profit by paying death claims on fraudulently obtained policies; so safeguards are put in place to guard against deception.
Without a paramedic exam or physical, there is a limit on how much insurance you can purchase. The industry limit seems to be around $250,000. So purchasing a $1M life insurance policy without the insured’s knowledge would be a challenge requiring a good amount of deception and fraud at policy issue.
This limits the size and type of policy someone could purchase. Small policies (say less than $100,000 for a young person, $25,000 for an older person) get less scrutiny. Group policies require only a few questions, but again limit the death benefit that can be purchased (usually only spouses can be named to purchase 50% of employee’s death benefit).
So, my conclusion; unless you’re the target of a well thought out deception, you’re probably just paranoid or watch too much TV.
Q: My ______ (fill in the blank) died and we can’t find their life insurance policies. Where can I find this information?
A: There is not a central database of life insurance policies. I’ve written an article on searching for missing life policies: Sorry for your loss and good luck with your search.
Q: I need to file a claim against someone else’s policy. How do I find out who their insurer is?
A: A person or business’s insurance coverage is private information, so you can’t and you don’t.
Their insurer will not accept claims from you and in most cases will not even speak with you. If the other party refuses to file a claim or admit fault, you’ll need to involve your insurance company or take legal action. In the case of any legal action, I would recommend involving a lawyer.
Keep in mind your insurance covers you, their insurance covers them. If you have bodily injury or property damage and someone else is the proximate cause, you could file a claim with your insurance company and allow your insurer to subrogate the claim against their insurance company.
Q: What’s it like to work for _____(fill in the blank)? Is their training good? Will I really make $100K in my first year selling insurance?
A: There are a number of insurance companies who are always hiring sales agents, “account managers” or (my favorite) “manager trainees” :
Farmers, Met Life, State Farm, Allstate, Primerica, New York Life, United American. The list goes on. There's a reason why they’re always hiring: They wash out 85-95% of all their new agents within two years, 98-99% after 5 years. These are SALES jobs; you sell you eat, don’t sell don’t eat. Some will pay you a stipend or advance your commission if you’re not selling, but the bottom line is you have to sell, week in, week out or your butt is out in the street. Now there always seems to be 1 out of 100 people who thrives is sales; kid natural who makes $100K her first year. If you’re one of these people, God has blessed you; may he continue to do so. Most other successful sales people just work hard and persevere long enough until they succeed. Average income for a first year sales agent? 30K if you work really hard and get a little lucky.
My advice: if you’re really interested in the industry, get a job working for a successful agent with a good reputation in the business and learn the ropes. When you’re ready, look for a good situation working for yourself selling what you like to sell.
See for a rundown on commissions earned and learn how big you’ll have to be in order to survive the business.
Q: A big expensive repair need to be done to my house, will my homeowners insurance cover it?
A: Homeowners insurance covers
unexpected occurrences. Policies and coverage vary by state and policy, but repairs to a house are usually not covered unless the damage was caused by a covered risk.
Typically excluded items: earth movement, settling, faulty material, faulty workmanship, tree roots, old age & wear and tear, insect, vermin and pet damage.
So unless the proximate cause was something covered: fire, wind, falling objects, vehicle damage, building collapse, broken pipes you have no coverage. Water backup is an endorsement that usually has to be added to a policy; don’t have it, no coverage. If you call the insurance company claims center, they will log your call and start the count on number of claims you’ve filed in the past 5 years. Chances are 2 claims in three years will trigger a cancelation even if 0 dollars are paid on one claim. So you may want to hypothetically discuss this claim with YOUR AGENT.
See more about Homeowners coverage at:

Tune in next week for questions 6 - 10

Wednesday, September 5, 2007

SR22 - What is it?

Here's a question insurance agents hear week in and week out..can you sell me SR22 insurance? I'm here to clear up some of the confusion concerning the SR22 and what states require to keep people driving legally.

An SR22 is a document required as proof of financial responsibility by the court or under state law for persons convicted of certain traffic violations. The SR22 is not insurance, it is a certification that an auto insurance policy is in effect for a certain individual. This is the legal proof that courts need to show someone is complying with state financial responsibility laws. Insurers are allowed to charge a reasonable processing fee for filing SR22s. Insurers are not required to provide SR22s or may elect to offer them in one state and not another.

Definition of an SR-22 from the Car Insurance Learning Center:" SR-22 is a form which must be filed by the insurance company stating that auto liability insurance (or bonding in Ohio) is in effect for a particular individual. Required when insurance is provided to an individual who was in an accident or was convicted of a traffic offense and was unable to show financial responsibility. Each state has different variations of this form and requirements."

Long story short, someone got caught driving without insurance or the courts suspect they are or will be based on poor behavior (DUIs, reckless driving) .

SR22s are state specific and the requirements in one state may not apply in another state. You can expect an SR22 or financial responsibility in every state except for these exceptions.

Delaware, Kentucky, Minnesota, New Mexico, Oklahoma and Pennsylvania don't require SR22s, but if you have an SR22 and then move to one of these states, you must continue to meet the requirements of the SR22 state where the offense was committed.

New York and North Carolina don't require SR22 filings, and most companies don't offer out-of-state SR22 filings for policies in these states.

If you currently carry an SR22 in one state but move to another state, you must fulfill the SR22 filing period for your former state, even though you no longer reside there. Also, your insurance policy for your new state must have liability limits which meet the minimums required by law in your former (SR22) state. You can only get an SR-2 form from an insurance company that is filed with the state to issue SR22s.

SR22a forms: Similar to an SR22; there are used in Georgia, Texas and Missouri. In Georgia & Texas these are certifications used for repeat violators of financial responsibility laws. SR22a in GA & TX must be paid in guaranteed funds and policies must be paid in full for a 6 month term. In Missouri, SR22a are used for policies where drivers on a policy are restricted to only driving certain cars.

SR22 bonding: Very common in Ohio and other states that allow bonding in lieu of insurance. Drivers are told by the courts to secure a SR22 bond, go to an agency, ask for a SR22 bond and that's what they get, a bond. It's important to note the difference between a insurance policy and a bond; when an at-fault accident occurs, the insurance policy will absorb the cost, the bond will pay the cost and then request repayment from the bond holder. Sort of like a line of credit for the driver that must be repaid. This comes as quite a shock to most drivers who think they're insured.

SR26 forms: A filing done by insurance companies to cancel a SR22 or SR22a. Most states require notice in advance (usually 10 days) when a SR22 is being canceled. To avoid mix ups in SR22/SR26 filings, it a GOOD idea to get your insurance bills paid ON TIME.

Friday, August 24, 2007

Liability Insurance: The Most Overlooked Piece of the Financial Planning Process?

By: Stephen J. Evanko, Jr., CPCU, LUTCF, AAI
Delaware Insurance Advisors

Liability insurance – you probably have it now and don’t give it a second thought. You see, it’s part of your car insurance policy – the coverage that protects you if you are found liable for causing injuries or damaging property. It’s also included with most home policies – just in case someone slips and falls at your house or Fido decides to become too aggressive and bite someone.

If you own a business, your business liability insurance protects you from things such as customer’s accidents on your property, your negligent activities or your faulty products (i.e. food poisoning).

How can this important protection so often be “overlooked”? Very simple… you have a life. Let’s face it, you’d rather plan your vacation than bring out and dust off the car, home and business insurance policies. You know they haven’t been looked at in years…and you’re probably thinking “if it isn’t broke, why fix it?”

Here’s why you should pay close attention: everything you have earned could be lost because of one careless accident. What if you are briefly distracted and don’t allow enough distance between you and the car in front of you. Or, what if your employee fails to clean up a spill at your business?

Don’t take your protection and security for granted. Get those policies out and make sure your liability protection equals or exceeds your assets. Your assets (both personal and business) are those that you have earned, worked hard for or even inherited. So, why risk them?
The purpose of liability insurance is to protect your assets from people who want to take them away from you due to your negligence. You want to ensure that you and your family can maintain your lifestyle! Of course, there are always exceptions. Before making important decisions, be sure to work with the help of an experienced, credentialed and licensed insurance advisor.

Contact Stephen at 740-369-1040 or

Thursday, August 23, 2007

Track Down a Life Insurance Policy

Q - My Father died and we can't find his life insurance policies anywhere. My Mother died years ago and much paperwork had been misplaced. Any way to track down a life insurance policy?

A - Unfortunately, insurance policies are considered private transactions between an insured and the insurer. There is no single repository of life insurance policies that you can search. I'll touch on one service that could help you track down the policy if it's been purchased in the last 15 years or so, but you're really going to have to put on your CSI hat for this one. Most life insurance policies have premiums that need to be paid in order to keep the policy in force. Start any search by looking for the money trail.

First how old was the person who died? Did they die during their working years or after retirement?

For younger working people:

  1. Inquire at their place of work, perhaps they had a group policy or payroll deducted premiums, examine pay stubs and question deductions.
  2. Search check registers and bank statements for cancelled checks or direct withdrawals.
  3. Check with the Financial Advisors or the Property & Casualty agency that handled other investments or lines of business for the deceased; sometimes they keep notes of when they discuss life insurance issues with their insureds.

For older people, the insurance products sold 25 - 30 years ago were a little different than what is popular today. Older people would have been more likely to purchase permanent Whole Life(WL) policies that could stay in force until age 100, give or take a few years. There were a few flavors of WL sold back in the day, some they paid until a pre-determined age (usually 60) other types they paid premiums their entire life. Since WL builds a cash value, the insured had a option to:

  1. Pay premiums, keep policy in force.
  2. Skip premiums and the policy will fund itself from cash value until that runs out.
  3. Cancel policy and keep cash values.

Try to remember any discussion you've had regarding life insurance you had with the deceased. Ask their friends or neighbors if they ever had an insurance conversation with the deceased. This may give hints on where to look. Also:

  1. Check registers, SS or pension checks(for deductions) savings & investment accounts for withdraws.
  2. Check tax returns going back as far as possible (cashing a WL policy is a taxable event)
  3. Rack you brains for mention of a salesman or insurance company. Search orphaned policies on ; if the company merged or was purchased by another company, this link may help.
  4. Check unclaimed property office of the state. As a last resort, insurers pay death benefits to the state office if beneficiaries can't be found.
Finally, for newer policies, you can also check the Medical Information Bureau ( which has a database of all applications for individual life insurance that were processed during the past 10-15 years. The policy locator service costs $75 per search. Good luck in your search.

Thursday, August 16, 2007

Insurance for Rehab projects

Q - How do I find an insurance company to cover my home rehab projects?

A - You've got a few options; if we're talking residential houses (1-4 units) go to and do an agent search; Foremost will do vacant property in rehab up to two years. The agent who handles your P&C may have another company they use. Make sure any policy in endorsed for Vandalism (VMM) and Liability. If Liability is not available, you may be able to extend Liability from your Homeowners policy. Make sure the coverage is in the name of the person(s) or entity that purchased the policy.

If you're a real contractor (with insurance, bonding, licencing) then your P&C guy may have access to a builders risk program that allows vacant property under rehab.

Each program will have underwriting guidelines and restrictions you'll have to follow. Good Luck

Wednesday, August 1, 2007

Insuring old buildings

Q --Who insures old buildings? We have purchased a building constructed in the 1880s and all insurance companies seem to be terrified of the structure. Most won't insure anything over 75 years old.We are setting up a ceramics studio on the ground floor and will be living on the second and third floors. We did find one company that will charge us an outrageous amount, but we'd like to find something friendlier.

A -- You don't have a problem, you have TWO problems: AGE and USAGE.

The first problem with older buildings is dealing with replacement cost. Most of them cannot be re-built, so either actual cash value or functional replacement is necessary. If a insurer only sells a replacement cost policy, you're ineligable.

The other AGE related problems can be dealt with by pointing out all updates done in the past 10-15 years:

  • Electric - modern three strand wiring with circuit breakers all up to code
  • Smoke & security alarms and other safety features inspected and up to code
  • Updated plumbing
  • Updated HVAC
  • Updated Roof
  • General good repair of entire building, surrounding area sidewalks
  • Sprinklers ? This would be a plus.

Show that these issues have been addressed and an insurer will more likely think of the building as a rehab, not a piece of history.

The USAGE problem is a little trickier. Old buildings are high risk, ceramic studios (if MAKING ceramics is involved ie ovens, heat, flames; retail stores no problem) are high risk, mixed residential and commercial are high risk. Trying to get all three together AND getting good coverage for all will be difficult at best.

Try breaking down the liability (as a disclaimer, I am not an attorney and laws vary from place to place, please consult the appropriate legal council).

  1. Establish an LLC to own and manage the building
  2. Establish an LLC for the ceramics business then rent from the building LLC
  3. Rent the top two floors from the building LLC as residential space (maybe buy as a Condo?)

Now get insurance coverage:

  1. Commercial building general liability (GL) and property coverage for the first LLC
  2. Business GL with contents or business owners policy (BOP) for ceramics business
  3. Renters/Condo coverage with endorsement for improvements to cover personal property

Ideally you get all three from the same company; this may be difficult, but possible. The three coverages are more comprehensive than one combined policy, and easier to place. Not cheap, but the best way to get insurance.


Friday, July 27, 2007

Homeowners insurance: Covered or Not?

Q: Does Homeowners insurance cover ANYTHING? Seems all I hear is people getting denied coverage, what a rip-off.

A: Homeowners and property insurance commonly has exclusions. As "all-risk" it generally covers any UNEXPECTED OCCURRENCE as long as it's not excluded.

Let's see.. excluded items:

  • Acts of War
  • Flood
  • Earth movement (earthquake (may be covered under an endorsement))
  • Nuclear accidents
  • Animals, birds or fish (Pets that is)
  • Motor vehicles
  • Aircraft except models or hobby aircraft
  • Property of roomers unless related or added through endorsement
  • Wear and tear
  • Inherent vice or latent defect
  • Smog, wet or dry rot
  • Discharge of pollutants
  • Settling or expansion of pavement walls or roof
  • Damage caused by vermin, rodents or insects

For property insurance including renters, vacant or 'standard market' property can be written on DP1 or Broad form coverage. This covers named perils:

  • Fire and lightning
  • Wind Hail Aircraft
  • Riot & Civil commotion
  • Vehicle damage
  • Volcanic eruption
  • Explosion
  • Smoke
  • Vandalism MAY be covered with an endorsement but usually is excluded if property is vacant
  • May be endorsed for loss of use/rent

DP-3 Special form for property listed above but generally not vacancies. May be endorsed for replacement cost. Includes named coverages of DP-1 and also includes:

  • Vandalism
  • Collapse
  • Glass coverage
  • FD service charges
  • Trees and shrubs (for named perils)
  • Falling objects
  • Weight of Ice & Snow
  • Water leakage
  • Freezing of plumbing or explosion of steam and hot water systems
  • Power surge
  • Damage caused by burglars
  • May be endorsed for liability and loss of use/rent
HO-# the "Homeowners Policy" provides "All Risks" coverage includes above and any other UNEXPECTED EVENTS that are NOT EXCLUDED related to Owner occupied dwelling:

  • Comprehensive policy covers all personal owned property; dwelling AND contents
  • Covers personal liability both on and off premises.
  • Covers personal property on and off premise
  • Loss of use – payment if you cannot live in property
  • Separate structures: garages, sheds, pole buildings fences, pools, any stand alone structure on property
  • Covers Theft and mysterious disappearance
  • Damage to property of others
  • First aid to guests
  • Typically endorsed for replacement cost

This is a fairly comprehensive list. Keep in mind that policies vary by state, company and type of property. To get a idea of what is covered under your policy, consult your agent or read the policy language.


Tuesday, July 17, 2007

10 Mistakes People Make With Their Life Insurance

(At the end of this article -- -- you can learn how to get a FREE report that will benefit you and your family.) To learn how… read on!

Are you guilty of these mistakes?

If you answer yes to one or more of these questions… we need to talk immediately!

Did you buy a life insurance policy…

1. From an inexperienced agent? Do not buy from someone new to this business. Do you really want to place your family’s future in the hands of someone licensed for only a short while?

2. Over the internet? One simple mistake could see your cash going to the wrong person, or even worse -- the government.

3. That’s the wrong kind? There are so many different types of insurance policies and coverages. Remember… you don’t need the same policy as your neighbor!

4. For the wrong amount? Life insurance is for the loved ones you leave behind. They must be protected!

5. That costs too much? Overpaying for life insurance only hurts your loved ones. A good agent will have many options available. Do not settle for someone who can only offer you a policy from one company!

6. And not understand the purpose for the policy? You will need a different type of policy for estate tax planning than for mortgage repayment.

7. Over five years ago? Things change – work with someone who will review your policy regularly (every couple of years). In the old days, we used to call this “service after the sale”.

8. Based on an emotional decision? Again, situations change. Maybe you don’t even need that particular policy anymore.

9. To save for retirement? In all but the rarest circumstances, this is not a practical idea.

10. From a company without a strong financial rating? Not all life insurance companies are created equal! The financial stability of the company is critical! What happens to your family when that company goes out of business and your policy is worthless?

Contact me at or call me at (740) 369-1040 and I’ll send you my FREE report “How To Protect Yourself And Your Family If You Die… What Everyone Must Know About Life Insurance!” Or… if you have questions, call me at 740-369-1040.

Insurance Guy with the Funny Tie - Stephen Evanco

©2007 Delaware Insurance Advisors LLC – Stephen Evanko

Friday, July 13, 2007

Life Insurance as an Investment

Life insurance, the ultimate family planning tool, should be a core element of almost every family's financial plan; a large infusion of cash just when your family needs it. Being a fan of life insurance and investing, I'm always skeptical of schemes that combine life insurance protection with savings, especially saving for retirement. Death and retirement seem like opposite ends of a pole, how can one help the other? How does spending help saving? I’ve also learned to look twice when dealing with financial sales people. Their commissions are steep and have to be paid by someone. So logically, it will be the investment product you buy.
There are thousands of life insurance companies in the US and in foreign companies that do business in the US. If you were to compile a list of all available policies, add in all policies issued over the past fifty years and include policies being developed today, you could have one monstrous database with tens of thousands of different life insurance plans. To simplify this discussion, I’ll focus on three major types of life insurance policies:

Term Life (TL): A policy issued for a fixed period of time with no cash value building within the policy. The death benefit is paid if the insured dies during the period of time the policy is in force. If the insured outlives the policy term, they receive nothing.
Whole Life (WL): A policy where the policy term lasts the entire life of insured or until some fixed age (say 100) where insured is guaranteed to be paid face value of policy. If they die it’s paid as a death benefit. If they live, it’s a return of cash value. Either is guaranteed as long as the policy premiums are paid. Paid premium invested in the policy is paid back at a predetermined rate of return; usually a very conservative 2-3%. The return is projected to the penny for the life of the policy and is written as a policy illustration.
The two previous plans have fixed benefits and fixed payments. The third plan gets a little more complicated:
Universal Life (UL) or Variable Universal Life(VUL) : The naming difference is due to the underlying investments. UL is based on some conservative guaranteed investment, similar to a savings account or a money market; your return is guaranteed to never be negative, but the return rate will fluctuate with market interest rates. VUL is similar but premium dollars are invested in a type of mutual fund called a subaccount. The subaccount could be any type of investment: money markets, bonds, stocks, and foreign stocks; any type of investment that is deemed suitable by the SEC and is available as a mutual fund. Your returns could be positive or negative based on the underlying investment and your principle is not guaranteed.

Both policies have a variable premium and variable benefits. This is the way it works:Your agent/broker will give you a range of payments from minimum to maximum. Let's say that your minimum is $30.00/month your maximum is $120.00/month and your midpoint payment is $65.00/month for an insurance policy with a death benefit of $50000. You select a payment; let's say $40.00/monthEvery time you make a payment that money will go into the account that pays interest or into a subaccount which is invested. Every month, your insurance company will withdraw the expense of insuring you for $50,000 from that account (I’ll talk more about the expense later). The balance will grow if principle with interest is greater than the insurance expense or if your subaccount has a positive return and the return outpaces the insurance cost.Here is the tricky part: Every year that goes by, you become older. Therefore the cost of insuring you goes up. In the first years that’s not a big difference, but after 10 or 20 years it will add up. So every year the company will withdraw a bigger amount of money from that account to keep you insured. Remember that the balance will grow with interest which may go up or down based on market rate, or in your subaccount depending of the rate of investment return. So the more you pay on the earlier years, the less you will have to pay in the later years. In some cases -if you’re funded well early- the insurance company will ask you to stop payments temporarily; the opposite is also true, if you funded very lightly or your subaccounts lose money, the insurance company will require you to raise your payments or you will lose the policy. Depending on your overall rate of return, you could end up with a substantial amount of money OR a life policy which needs extra money to stay in force OR a useless life policy which crashed and burned because you were unwilling or unable to pay additional premiums to keep the death benefit in force.

The sales pitches typically discuss the positive rate of return and the substantial amount of cash built within the policy. This money can grow tax deferred and can be borrowed tax free. Another golden nugget for your retirement; tax free money you can spend in your twilight years and life insurance that lasts a lifetime.
Sounds great in theory, but there are several sticking points in reality. For one thing, the expenses I talked about earlier. To pay agent commissions, show the insurance company a profit and pay investment fees on subaccounts each payment has certain charges subtracted:
· Sales load: Typically 6%
· Investment fees on subaccounts: Typically 2% per year; a drag in the investment returns.
· Cost of life insurance for face value of policy: Actuarial charge based on policyholders’ age at time of payment. Sex and other rating factors (smoker/non-smoker, health, occupational or lifestyle factors) are also factored in.
And depending on the insurer, you may not be getting a very good price on the basic insurance protection either. Most policies are quoted and sold at standard rating or will only offer preferred rating for policies with face values of above a certain amount, say $150K.

And while the borrowing scheme may seem like an easy enough way to turn investment gains into tax-free payouts, there are complications there too, the largest being that if the policy lapses after you've been borrowing money from it throughout retirement, you will pay taxes on the borrowed money as taxable income not capital gains like a mutual fund.
All in all, I don't think these policies are worth the trouble. That said, I suppose you could make a case for one if someone were already maxing out tax-advantaged alternatives like 401(k)s, IRAs and the like OR if a business was paying for it OR you have money coming out of every space in your house and can’t fit it anywhere else. I don't think it's a very compelling case.
But I suppose someone who really wanted to use (or sell) one of these policies could come up with a rational. But I doubt that even the biggest proponents of investing through life insurance would suggest that you do so before you had contributed all you can to all available tax-deferred investments. After all, it makes no sense to give up the lucrative up-front tax breaks that a 401(k) and traditional IRA offer (or the more straightforward tax-free withdrawals of a Roth IRA) in favor of an insurance strategy that's a lot more expensive and fraught with potential complications.
My advice for the 80% of Americans who don’t own an individual insurance policy? Buy a substantial Term policy; $500K or 5 to 10 times your annual income does nicely for most people. Then maximize your 401K, IRA or other investments you make. Have more money than you can invest tax deferred? Lots of investment opportunities in the world: tax advantaged mutual funds, real estate, business ventures the list goes on. Or just take a nice vacation with your cash. Just think twice before buying the ‘lifetime protection’ policy.

Tuesday, July 10, 2007

Down to Work

July 10, 2007 - Check has arrived from Sentry and sent to the bank for deposit. To my chagrin, the claims adjuster put 4 months worth of loss-of-rent coverage in the same check as the property damage. Not the biggest problem in the world, but the bank will need to deposit the money then cut me a check.

So now it's time to get the contractors to work. I've selected a local guy and am now getting him to produce paperwork so we can get the ball rolling. The process so far:
  • Mortgage company sends check for ACV, sets up account for me to draw on.

  • Contractor submits estimate, draw schedule and W-9 to mortgage company

  • As work is completed, money is paid out.

  • At some point, mortgage company will send inspector to evaluate work.

Following up on the call I received from Erie Insurance; the claims adjuster they sent in is on vacation for the next three weeks. I thought Erie was from Pennsylvania not France? Maybe I'll hear something by, I don't know, August?

Friday, June 29, 2007

Q & A - How much commission does an Insurance Agent earn?

Q - How much commission do Insurance Agents make? How do I start an agency?

A - First things first, you'll need to get licensed in your state and other states you want to do business in(not too hard) you'll need appointment with good companies that sell marketable policies (a little harder) then they'll require you to sign a producers agreement (better look both ways before crossing that street).

Life policies usually pay between 30 and 100% of first year premium, so let's say a policy is $40 / month = $480/year then first year commission = $144 to $480. Some companies pay renewal commission but it's usually a smaller %.

P&C pays around 15% for new and renewal business. Some more, some less, others have smaller renewals, whatever, but let’s use 15% for computations. Then how much you make depends on how much premium you write. Say you write a medium sized trucking company for $2M / year then 15% = $300K/ year - a soft living. If you sell personal lines, and say average HO in your state = $600/year and average auto = $1,800/year then to get to $300K you'll need 833 1/3 customers paying and renewing every year. Since either of these clients is going to work you to death, you'll need to hire some help, pay for an office, buy supplies, marketing E&O insurance and so on..

After a few years in the biz, companies can pay other bonuses: profitability (keep your claims down) retention (keep your customers) and growth (keep them coming to us!!) this can add maybe another 5-10% commission to your bottom line.

Needless to say, unless your dad owns an established insurance agency, this won't be easy. You’ll work years and your success is not entirely in your hands, you’re partners with your insurance companies.
My advice: if you want to work in sales, find a more lucrative profession

Wednesday, June 20, 2007

Commercial Vehicle Insurance -- Why is it needed?

I'll be writing several articles on commercial vehicle insurance, so to get started let's begin with the "why". In general, personal auto policies (PAP) are easy to obtain and offer wide coverage to people and their vehicles. In some cases a PAP is not available due to usage, type or owner of the vehicle. Commercial use is unacceptable or excluded under the policy language of a PAP. This may lead to a denial of coverage confrontation with an insurer, so understanding the difference is critical to the vehicle owner. What three factors determine personal vs commercial use?

1. Use of the Vehicle

What is generally acceptable for personal use?
  • Day to day commuting or personal errands
  • Car-pooling
  • Volunteer work for an organization
  • Infrequent business related errands
  • Infrequent business use where auto is owned by an individual and used solely by the individual.
  • No hauling of dangerous materials.
  • No more than three job site visits a day.
  • Consumer oriented sales or service or direct home sales (Realtors, Avon) May require a Business Use endorsement to a PAP.

A Business use endorsement on a PAP is usually a 20% (or so) surcharge.

Unacceptable Business Uses for PAP include:
  • Pick-up and delivery of goods (pizza, newspapers, or any other products).
  • Transport of persons or property for a fee. Includes livery or taxi service.
  • Transport of clients, children, hotel/motel guests, medical patients or migrant workers during the course of employment.
  • Snow removal.
  • Vehicles made available or assigned to employees on a regular basis.
  • Any other business use of vehicle that is not indicated under acceptable business use.

2. Type of Vehicle - What the vehicle is built FOR is a good indicator of commercial usage. Commercial vehicles include:

  • Vehicles with a manufacturer-rated capacity of greater than 3/4 ton (some insurers will offer PAP for vans or pick-ups if used for personal use).
  • Limos, ambulances or hearses.
  • Vehicles with printing or advertising.
  • Vehicles altered for business related use with permanent equipment; sometimes ladder racks are acceptable.
  • Vehicles used for plowing snow.

So if you buy a truck tractor just because you like the way they ride, you will still need commercial coverage.

3. Owner of Vehicle - Over the years, accountants and business owners have tried to save tax dollars by purchasing or leasing their vehicles under a business name then tried to save premium dollars by insuring under a PAP. Again, a denial of coverage situation. If a business entity is the vehicle owner, then the vehicle must be insured commercially.


Tuesday, June 19, 2007

Vatican publishes "Pastoral Care of the Road"

Why are Christian virtues – justice, prudence, charity and forgiveness– so hard to practice in your car? I've always felt a person's auto gives them some feeling of anonymity; another faceless driver tooling through the world, and in a sense that's somewhat true. Come to think of it, it's difficult to remember most of my drive times. The tens of thousands of miles I've traveled through the world are just a blur, the countless run-ins with other drivers a fading memory.

I do sometime listen to religious CDs in my car, sometime John Hague (like his sermons, hate his politics) or my all time favorite Charles Stanley. They make the drive time more pleasant and lift my spirits the rest of the day. Now if only other drivers would do the same, wouldn't every one's drive experience be so much more rewarding.

As if to fill a void in the world, the Vatican has come out and published some drive time rules of the road. As you can guess, I'm not Catholic. I've always felt as an outsider the Vatican was invasive in people's lives in some senses and strangely silent in others. Doling out a odd mix of forgiveness and condemnation depending on which way the wind is blowing. On this subject, I'm glad they weighed in and published something useful. Maybe they'll produce air fresheners with this printed for their congregations. They can smell like that incense they burn at Mass.

Here are 1 - 10 as I've found searching the web:

I: You shall not kill. And continue
II. The road shall be for you a means of communion between people and not of mortal harm.
III. Courtesy, uprightness and prudence will help you deal with unforeseen events.
IV. Be charitable and help your neighbor in need, especially victims of accidents.
V. Cars shall not be for you an expression of power and domination, and an occasion of sin.
VI. Charitably convince the young and not so young not to drive when they are not in a fitting condition to do so.
VII. Support the families of accident victims.
VIII. Bring guilty motorists and their victims together, at the appropriate time, so that they can undergo the liberating experience of forgiveness.
IX. On the road, protect the more vulnerable party.
X. Feel responsible toward others..

The news on the web said there were 15 rules published; if anyone can find the others and send them to me I'll publish them here.

Tuesday, June 12, 2007

Save money on auto insurance

The best ways to maximize your income is spend less of it, especially for a losing proposition like purchasing auto insurance. Why is this a losing proposition? Auto insurers have a goal to pay around 60 to 80 percent of all premium dollars received on claims. This is like investing $1 and getting an average return of negative 40%. No one would invest like that. So why buy insurance? To pay for REALLY big claims, the unexpected accident that totals your vehicle and causes serious injury. But in the meantime, let’s focus on saving premium dollars. Here are some steps you can take.

1. SHOP. Take advantage of a soft insurance market by shopping around. Times are good for insurance companies. Solid returns in equity markets and positive results in underwriting have company coffers flush with money. Some companies will take advantage of the good times to expand their customer base, and nothing attracts new customers like lower premiums. A particularly good time to investigate your alternatives is when your current policy is up for renewal. Most companies start renewal processing 45 – 60 days before your policy expires so look for your policy’s renewal declarations (Dec.) page in the mail. The Dec. page is particularly useful since it lists your vehicles with VIN numbers, drivers, coverages and rating address printed neatly on one sheet. When you ask insurance professionals to quote you, you can scan and fax the Dec. page around for a neat apples to apples comparison of rates. Independent agents have rating software to match you to the best companies. Single company agents only have one insurer to quote through, but still may be worth a look. Agents may even recommend coverage changes to improve your policy.
2. Increase your deductibles: For many people, raising the deductible on their auto insurance is a good way to cut the cost of the policy. Sometimes you can reduce your annual premium by 10 percent or more if you increase your deductible from, say, $250 to $500. If $500 is no stretch, move it to $1,000. If you do this, you’ll be your own insurance company for small claims, so make sure you have the financial resources to handle the larger deductible when the time comes.
3. Narrow the scope of your coverage: One seemingly obvious solution is to eliminate certain types of coverage from the policy. Most states require you to have liability coverage, but other non-mandatory coverages may be expendable. Be careful, though, because you don't want to be underinsured if you're in an accident. Even though medical payments, uninsured motorist, collision, and comprehensive coverages may be optional in some states, it's usually not advisable to get rid of them altogether. Be aware of your financial situation and get the right amount of coverage needed to protect your assets and get yourself back on track.
4. Drop Comp & Collision. If you drive an older car it's worth investigating the dropping of collision and comprehensive coverage. Ask yourself, if this car were totaled, would I want or need the insurer to fix it? Is there a loan on the vehicle? If the answer is no, drop the coverage. Be mindful of what this does to your other coverages as some companies will not offer their best programs to policies with liability-only vehicles. If you drop collision, consider adding UMPD or Uninsured Motorist Property Damage (if available); this will cover your vehicle (up to ACV or policy limits) if you’re damaged is not-at-fault and caused by an uninsured driver.
5. Drop what you can live without: Consider dropping any options you may have added to your policy like towing and labor, replacement car rental, accidental death or any other loss of income coverage. Removal of these items will reduce your premium somewhat, but will also expose you to the costs in question. So ask yourself: Can you afford the occasional tow? Do you have a spare vehicle if yours is in the shop for 30 days? If the answer is yes, live without the coverage.
6. Evaluate your coverage amounts: You can also reduce the amounts of certain coverages. Again, be careful. You don't want to be inadequately insured, especially in the area of liability. You should almost always keep your liability coverage at as high a level as possible because this is where you can have the greatest losses. You may be able to lower your coverage amounts in other areas (such as collision and comprehensive). Do you park a vehicle in the winter? Drop coverage to Comp. only. Now don't rush into a decision just to save a few bucks. Talk it over with your agent first.
7. Drive less: If you drive less than a certain number of miles in a year (say, 7,500), you may qualify for a low-mileage or pleasure use discount. If your insurer offers this discount, try to limit your driving as much as possible. If you commute to work, try telecommuting, four day work weeks or use public transportation instead of driving. When you go away on vacation, fly, take the train or rent a larger vehicle for your trip. Be careful not to lie or even stretch the truth with your insurer; if you commute 5 days a week, don’t tell them it’s for pleasure use; you’re setting yourself up for a denial of coverage confrontation.
8. Don't use your car for business purposes: Since work-related driving generally subjects you to a higher premium than pleasure driving, it may be in your best interest to stop using your car for business purposes.
9. Drive more safely: You may be eligible for a price break on your policy if you maintain a clean driving record for a specified period (usually three years). Some companies offer claims free discounts so review # 5 and ask is the coverage worth losing discounts in the future. A clean driving record generally means no accidents, serious moving violations, drunk driving convictions, etc., during that period. The best way to qualify for the applicable discount is to drive carefully and defensively at all times.
10. Buy a low-profile car: Drive your fathers Oldsmobile. Cars are rated on a risk scale for auto insurance purposes. In general, sports cars and other high-performance, flashy vehicles are classified as higher risks because they are common targets for thieves and vandals, and because statistically, the people who own them tend to drive more recklessly. If you own such a vehicle, you will likely pay a higher premium than if you owned a station wagon, sedan, or other low-risk vehicle.

11. Move: Insurance companies rate everything by territory. If you live in a rural community with little crime and traffic congestion, your premium will generally be lower than if you live in an urban area where your car is more likely to be stolen, vandalized, or involved in an accident. Granted, you shouldn't move just to cut your auto insurance costs. However, one community may be in a lower rated territory than another. This may be one of many factors in your decision if you're thinking about relocating.
12. Keep your car in a garage or at least off street. : Cars parked in garages are less likely to be stolen, vandalized, or struck by other vehicles. Using a garage to store your car may entitle you to a slight premium reduction.
13. Inquire about multifamily/multipolicy discounts: You may receive a discount from your insurance company if you buy more than one type of insurance through that same company (e.g., auto and homeowners). A discount may also apply to your auto insurance if you insure multiple cars under the same policy or with the same company.
14. Ask you agent about other discounts: Other discounts may be available if you meet certain criteria, so ask. Examples include discounts for not smoking, participating in a car pool, staying with the same company for a number of years, being over 50 years of age, and having a covered child who attends school at least 100 miles away or paying automatically by bank draft.
15. Beware of fees: Policy fees, reinstatement fees, bounced check fees, SR22 fees, billing & installment fees, stop payment fees. The list is long and insurance companies love to get extra money with no risk to them. Ask yourself what can you do to get your own financial house in order and stop paying money for nothing. Can you use bank draft and make payments automatically? Doing so will eliminate half the fees listed and could save you $60 to $100 per year.

Pay some attention to your auto policy. The savings ideas listed may take several years to accomplish but will save you big bucks in the long run.

Friday, June 8, 2007

Some progress

Get a call from Kym the adjuster, she has my numbers ready. She also says Sentry has cut a check for May & June for loss of rent and mailed then out.

Bottom line for numbers: Total damage estimate: $144K, additional coverage for asbestos removal: $12K (up to 10% of coverage) grand Total $156K. Yikes. Total figure is above policy limits so I can't complain too much. Don't mean to sound like a commercial for Sentry, but way to go team.

In the next few days I'll be digesting the 26 page estimate and kicking around any options I may have. At this point I can:
  1. Use the contractor who did the estimate.
  2. Use my own contractor.
  3. Ask for a ACV settlement, pay out the mortgage company and sell the property.

I'll have to kick it around for the weekend and see what I come up with.

Thursday, June 7, 2007

Slow motion claims payment

June 07, 2007 - Notice I haven't posted in the past week about my claims settlement. Mostly because there hasn't been one! I'm hoping today will be the day.

Called Kym on Monday, she's waiting to hear back from a contractor on the asbestos cleanup. Tuesday same answer. Wednesday, still nothing so I call Joel from Sentry Wednesday afternoon and leave a voicemail. Joel calls me back around 5:15 local and is surprised nothing is done yet. He wonders why 'my' contractor is taking so long. I explain that the contractor helping Kym with the estimate is one she recommended and this puzzles him more. Anyway, he promises to at least send out a partial payment for loss of rent for May & June (funny the mortgage company still wants to be paid) and he'll kick Kym's chair today. He does say the initial estimate for damage is in the $130K range.

Hopefully today will be the day. Posted by Ernesto.

Wednesday, May 30, 2007

Fire claim creeping along

May 30th, 2007 - Memorial day has come and gone, and still no word from the insurance company. I called Tuesday, but no call back from Kym. If I don't hear something by this afternoon, I'll call Sentry directly.
Last week I received a call from Larry S. Larry is a Certified Fire Inspector from a Cleveland area company called S.E.A. I'm guessing the adjusters report and the fire marshals report were not enough information for Sentry Insurance, so they ordered a fire inspector to make sure the house next door burned down and caused my fire. Whatever.
Last Saturday, I had a meeting with a local contractor to got an estimate for the damage repair: $93,000 is his estimate. He didn't have anything in writing for me; I'm guessing so I won't use his work as reference material. Anyway, it's a starting point for when I hear back from my adjuster.
The house next door has been cleared away, nothing left but a foundation and a few pipes where Columbus water came in. Since the debris had been cleaned away, you can get to my house. Now some more windows will need to be boarded up.

I'm working on the replacement cost article, it should be done shortly. More later.

Friday, May 25, 2007

Replacement cost

One of the great mysteries of the property insurance world is replacement cost. During my agent days, I was frequently asked to insure property and determine a replacement value of someones house. Talk about conflicts, here's what I'm up against: I've got a homeowner who doesn't want to pay anything for house insurance, a mortgage professional who dictates to me how much coverage he needs and an insurance underwriter who has her own idea of what it should be insured for. Try keeping all three happy at the same time. For my own peace of mind, I always imagined delivering a check, in person, after a total loss and asked myself: would these people be happy with the results? I always aimed for satisfied, not mad (too little) or ecstatic (too much).

To imagine the difference in property valuations, let's look at two different but similar sized houses. One is a Duffy home (I'm just picking a random builder) built in 2001 and the other is a 2 1/2 story federalist style brick home built in 1860 in a historic district of town. Both have a market value that is roughly the same, but the construction techniques are very different.

The Duffy home has 2800 SF and a combo of vinyl and stone facing on the exterior. Common asphalt roof, poured concrete basement, framed with 2X4, 2X6, engineered floor trusses and manufactured roof framing. Steel exterior doors and wood/vinyl windows. Interior is plywood sub-floors with carpet,ceramic tile,vinyl sheet tiling, and engineered wood flooring, walls are drywall. Interior doors are hollow core 6 panel with basic oak baseboard and door trim. Kitchen has standard appliances, granite tile counter tops and semi-custom cabinets. It also includes a Pre-fabricated gas fireplace with manufactured mantel and surround. Modern furnace & HVAC. A very nice home in a upscale neighborhood, market value around $400,000. Good quality all around, but nothing unusual in the construction materials. Almost everything in the house can be purchased or ordered at Lowe's and any competent handyman or construction crew can repair the house.

The 1860 house at 2200 SF has original antique brick exterior with a slate roof. The basement walls are field stone and mortar; at some point the original basement floor has been replaced with poured concrete. The framing is full dimensional lumber with original hardwood floors. Original solid wood exterior doors, original wood windows some leaded decorative windows. Solid wood interior doors, antique oak trim, including hardwood stairs, handrails, chair rails, crown molding (man you'd think the stuff grew on trees). Original brick fireplaces (four of them) and original gas lights (refitted for electric). Modern kitchen and cabinetry, upgraded plumbing, electric & HVAC. A historic home in a upscale historic neighborhood, market value also $400,000. All materials in home need to be repaired since replacement is difficult. To find existing or matching trim, material needs to be salvaged or recreated from antique material. Handymen are usually not up to the job, craftsmen with a specialty in older construction are needed and they don't work cheap.

So what would replacement cost be on both houses? On the newer house, a percentage of the retail value comes from the price of land in a trendy of the neighborhood. Using an industry calculator, the replacement cost for the house would range from $290k to $360K depending on features inside the house. This would suggest the land value of the lot is around $75K.

Using the same calculator on the older house, replacement cost would range from $650K to $750K. The price of the house is dictated more by the market demand for this type of house and less by the value of the land and reconstruction costs. Yet at a real estate closing table, both parties want to see the same replacement cost on their insurance policy. In fact, even after a extensive explanation of historic house replacement, the owner of the 1860s house insisted on a lower replacement cost to keep his homeowners premium down.

Now before we discuss how these two figures are calculated, here are some definitions of property replacement techniques:

Like kind and quality: replace damaged property using the existing construction techniques and similar materials.

Modified replacement Cost: Modifies loss settlement to repair or replace home with “commonly used and available materials”
Extended replacement cost: Will pay to repair or replace home up to 125 percent of insured value.
Guaranteed replacement cost: Will pay to repair or replace home no matter what it costs.
Replacement cost of Personal Property: replace old damaged personal property with new property at current cost without depreciation using current products
Replacement: Rebuilding old from scratch.

Reconstruction: Rebuilding damaged property.

Actual Cash Value: Insuring for the market price of a property. Not enough to rebuild but enough to buy the house next door.

Issues that control the cost of replacement or reconstruction of houses and the major differences between older (say pre-1940) and newer homes.

Replacement Cost.
Valuations based on the cost to replace with similar quality and utility. New replacement cost valuation methods fully consider the additional costs involved in rebuilding a home, particularly older homes, for both partial and total losses.
–For older homes, Full dimensional lumber, original wood flooring, lath and plaster walls and ceilings, heavy rafters and sheathing, stone foundations, extensive use of solid wood trim and doors, crown moldings, etc.
–Impacts of requiring updating to building codes, environmental issues, such as lead paint and asbestos which have to be remediated (particularly older homes).
–Demolition and debris removal costs.
–Higher average labor costs in a rebuilding project.

Reconstruction Cost
Includes more accurate valuation estimates for rebuilding an exact replica of the home, including original materials. Replacement cost contracts require this unless the insured is willing to accept commonly used materials (or if the insured doesn't know he has modified replacement cost on his policy). It also recognizes the higher costs in most situations to rebuild a home – even a newer home.
»Time is of the essence in helping the displaced property owner.
»Wages paid to subcontractors on a single job often are higher.
»Materials costs can be higher due to loss of volume discount and normal demand and availability factors.
»More special orders may be required.

Cost for each type of construction vary widely based on cost of materials and cost of labor in different areas of the country. To improve accuracy, insurers use location adjustment programs that are based on the full Zip code, not just the first three digits.

The intent of any cost valuation program is to maintain a high level of accuracy, recognizing that costs are subject to change. To do this, the programs:
- collect data quarterly from over 2,600 areas in the U.S.
- collect union and wage rates for more than 75 trades
- contain over 30,000 line items of construction, including productivity rates and crew sizes to install each of them.
- take into account regulations, debris removal stipulations and license fees for all municipalities.
- study reconstruction/replacement cost data from past claims to more closely reflect the cost insurers pay when a loss occurs.
- consider local cost concerns such as building code requirements, hillside foundation costs, architect fees, and variables for older structures.
- conduct extensive quality control analyses to validate real cost activity from claim settlements, both partial and total.

Accurately generating replacement cost is a important step to take when closing on a house or reviewing homeowners coverage. It is particularly important to the owners of pre-1940 houses and restoration buffs all over the US. Take time to review your policy or ask your agent pointed questions about your coverage.

Thursday, May 24, 2007

Dogs and Insurance

Dog Liability and Homeowners Insurance
Insurance companies have paid particular interest to dogs in recent years and have worked at field underwriting all Homeowners and Renter’s policies for dog exposures. Their main focus is to eliminate exposure to severe losses. In 2002, dog-bite claims cost insurers almost $350 million, and accounted for a full fourth (1/4) of all liability claims. The potential exposure is significant, so underwriters, looking to earn their keep, have come up with ways to reduce their exposure.

At a typical insurance company, information on all large losses where money has not been subrogated, is gathered and periodically reviewed. Usually a committee of senior underwriters reviews what happened and then try to determine if the event was a truly unforeseen occurrence or was the loss something that they could have avoided by changing or enforcing current underwriting guidelines. From this work they have produced the policies that apply to dogs.
Since a significant percentage of the population owns dogs, insurance companies have choices to make on how to cover dogs. Some of their options:

1. Exclude dogs from coverage. With this option they risk alienating dog owners who don’t have aggressive animals and take their chances that a sharp penciled plaintiff attorney won’t pick the exclusion apart in court.
2. Price policies taking all breeds types into account. Look at all dog bite cases and charge everyone enough to pay for the large losses. The insurance companies that choose this are at a disadvantage for two reasons: (1) they will be priced higher than their competition that restricts dogs and (2) people with dangerous dogs will seek coverage growing their risk exposure, not spreading it out (called adverse selection in insurance terms).
3. Write an endorsement and charge dog owners more money for dog coverage. Again, you’ll get adverse selection with dangerous breeds flocking to you. You'll also alienate owners of less aggressive dogs who can go elsewhere for less money.
4. Identify which dogs account for the majority of bites. Then expand underwriting rules to eliminate these exposures by making them ineligible for coverage. If a risk does not have a policy, then there’s no exposure. This option means less business and fewer premium dollars, but fewer large losses. It also does not alienate dog owners with less aggressive breeds.

The only company I’ve seen that offers option one (1) is Foremost Insurance , a standard market company out of Michigan that offers policies to higher risk properties. A few companies have not restricted dog breeds; Farmers Insurance only restricted dogs with a bite history. As you can probably guess, most preferred-market companies have opted for option 4, so I’ll touch on their restricted dogs list.

Several states have tried to restrict an insurer’s ability to underwrite dog exposures by trying to outlaw breed discrimination. With opposition from insurance company lobbyists these bills have gone nowhere.
Underwriting Rules do not allow aggressive or potentially dangerous animals. The lists vary by insurance company but most have listed the following breed of dogs as unacceptable:
Pit Bull Terriers, Doberman Pinschers, and Rottweilers, or any mix of these breeds.
These are just a few of the breeds that are more susceptible to aggressive behavior and it does not mean these are the only breeds insurers are concerned with. There are some carriers that have a more extensive list of unacceptable breeds. Breeds that appear on these lists include:
Akita, Alaskan Malamute, Chow, German Shepard, Presa Canario, Husky, Staffordshire Terrier and wolf hybrids to name a few.
Insurers reserve the right to decline coverage based on the overall exposure, or where they have inadequate information.
A challenge in underwriting dog exposures is that ANY dog, regardless of breed, has the capability to cause severe injury to others. Just like people, animal behavior can be a product of their environment. In addition, much depends on the lineage, how the dog was bred and how they have been treated or trained. The presence of other dogs on the premises can also have an impact on their demeanor.
The fact that insurance reports (CLUE) do not reflect a claim or that an applicant has had coverage with another carrier while owning the dog does not mean the exposure is acceptable. Keep in mind that some carriers have addressed the issue by excluding any animal liability.
There is a misconception by some that the first dog bite is “free”, meaning the exposure to loss is less. This is a fallacy. In many jurisdictions, strict liability prevails for a dog bite, particularly in those situations where it can be proven the animal is inherently unstable, the insured has had the dog trained to be aggressive or where the dog has attacked with no provocation. These factors illustrate why insurers underwrite each and every dog a homeowner or renter has. Exceptions and exclusions will not be an option.

To properly determine the acceptability of a dog exposure, your insurer will ask questions to develop specific information through inquiry and inspection of your premises:
1. What breed is the dog? A mutt or mixed breed is not an acceptable answer. They need to know the specific breed to properly assess the exposure. If you can’t determine this, then they would want to review a photo of the dog before coverage is bound or even request a statement from their veterinarian on the mix.
2. How long has the Insured owned the dog? It would be appropriate to find out if you’ve owned the dog since it was a pup. If you got it as an adult, where did you obtain it? What was the reason the prior owners gave it up? Was it because of aggression?
3. What is the dog’s demeanor? Is it good with children? Has it shown aggressive tendencies? If there is any indication of inherent aggressiveness, or does not tolerate children well, insurers are not interested in taking a chance.
4. What is the dog’s history (has it attacked before)? If so, insurers will not write the exposure – period.
5. Has the dog been to obedience school? You need to differentiate obedience vs. training for other purposes, i.e. being a guard dog.
6. Where is the dog kept? Is it fenced, chained, or in the home? Is the dog left unattended for long periods, i.e. when the owners are working?
7. What type of fence or enclosure is used, if applicable? Is it in good shape? How tall is the fence? Is there a pen? For any of these, what’s the likelihood of escape?
8. What are the local ordinances involving keeping the dog? This is especially important if kept outdoors.
9. Does the insured live in a metropolitan or rural area? What is the proximity to small children?
If you are unsure on whether or not a dog exposure is acceptable once you’ve asked pertinent questions, I'd encourage you to call your agent to discuss.

If a sign is posted on the property this should send up red flags for a potential liability hazard, even if the insured does not currently own a dog. Perhaps you “dog sit” for a friend or a relative which is still a liability exposure for the insured.
If you do not own a dog but are using it as a theft deterrent you should remove the sign. You would be advertising for a potential loss if you have someone visiting with a dog since both parties can be held liable.

Landlords and Dogs
A landlord who allows a tenant to have a dog on the premises can and has been held liable.
There, it’s been said, you’ve been warned. When interviewing tenants you need to ask what breed of dog they have. If their eyes roll up and to the right, they’re looking for a creative answer because they don’t want to tell you pit-bull. Sometimes they’ll tell you a boxer mix – yeah mixed with pit-bull (been there - done that). Insist on seeing the dog. Approach the dog, is he hostile or aggressive? If yes, find different tenants. On my leases, I write an addendum for animals, that way I can revoke the animal privilege without rewriting the lease.
Insurers will never stop underwriting dogs when writing homeowner policies. Dogs are a liability hazard for insurance companies, and the risk associated with insuring their owners is too great to overlook. Addressing an unacceptable exposure after a loss occurs is too late. Take the time to identify your own exposure. By doing so, you help protect yourself and lessen the risk of lawsuits and insurance issues.

Monday, May 21, 2007

Enter the Contractors

May 21, 2007 - It's been two weeks since the fire and ten days since the Adjuster (Kym T from GAB Robins) has walked through the property. I left a message this morning but have not heard back. I figure for any contractor to walk through and give me an estimate, it is going to take significant work, so I'm not panicking yet. If I haven't heard back in a week or so, I'll call the the Sentry adjuster in Wisconsin.

After the fire, I received a letter from the Columbus Department of Development. Boy, what a group; of all the broken down houses in Columbus, I show up on their radar. Since they've gotten involved in this, now any contractor I work with will have to work with them. Our tax dollars at work.

On Saturday, I walked through the property with a contractor I got in touch with through a referral. Some of the items we discussed: hundreds of gallons on Binz paint to cover up the smoke and water damage; examining the structural damage to the roof and walls and determining what can be salvaged and what needs removal. Supposedly, if the fire charred less than 1/8 inch of the wood in the structure, it can be scrapped, resealed and reused (???). Hmmm, this code nugget I'll have to see for myself.

In the meantime, the house next door is still collapsed on mine. That will need removal before much significant work can be done.

I keep promising a article on replacement cost, I'll get that out soon.

PS - got a call from the adjuster..Kym says she's waiting to hear back from the contractor and things should be rolling this week. Let's prey I'm not calling a claimant attorney this week.

Insider Insurance Secrets

Special Report . . .

“Insurance Insider Reveals Dirty, Behind The Scenes Secrets Your Auto & Home Insurance Company Doesn’t Want You To Know…”

What you need to do to stack the deck in your favor so you won’t ever get ripped off again!

By Stephen J. Evanko, Jr.
Insurance Advisor, Author & Speaker

What you have in your hand -- right now -- is “insider information”! This information is so explosive that your insurance company doesn’t want you to know about it. Even your current insurance agent hopes and prays you never read this!

You’re probably asking yourself… who is this guy? Why is he willing to spill his guts to me? And, why should I believe him?

Let me explain. It started many years ago in October 1982. That’s when I entered the insurance business. I was young, inexperienced and believed everything I was taught & trained to say and do. Boy… was I naive!

I began putting all these bits & pieces together and realized what was being said and what was being done were two different things.

Since then… I’ve made it my mission in life to educate you about these “little secrets” and how they affect your wallet! This way… you are armed with the information to move the odds in your favor.

So… let’s peel back the layers of these institutions and lay them bare. After reading the next five topics, you will learn how insurance operates, how to cut through the clutter and be equipped to take total control of your situation. REMEMBER: knowledge and information are power!

“Rating Territories: Where You Live Can Cost You Big Bucks!”

Rating territories are geographic lines that insurance companies draw up to price their policies. Territories look a lot like election districts – – they are cut up for a purpose.

That purpose is designed to charge you the proper rate for insurance. Example: A densely populated urban area is more expensive to insure than a sparsely populated rural area. More people… more claims… higher rates!

However, some insurance companies don’t have enough customers to develop proper rates. So they act conservatively and charge high rates too!

To be fair, most companies divide territories up by city, county or township. Although, there are some who can pinpoint it down to your 9 digit zip code!

Do not assume all insurance companies place you in the same territory!

It is possible that your neighbor, right across the street, is paying 27% less than you for their auto & home insurance!

Why is that?

You see… some insurance companies have lost fists full of cash in certain territories because of excessive claims. So what do they do? They choose to price their products higher in those territories.

This means you are paying more than your neighbor because his company hasn’t lost money in your territory and has taken a rate decrease.

Are you one of the lucky ones who’s getting a great deal or are you one of the unlucky ones who is paying for other people’s screw-ups?

The funny thing is -- -- you wouldn’t even know about this unless you’ve had an agent give you multiple proposals from different insurance companies.


“Rate Decreases: Get Yours While You Can!”

As of this writing, insurance companies want more business in Ohio. We are in what the insurance industry calls a “soft market”. Every insurance company is aggressively going after your business. That means… most have taken rate decreases in the past year!

Have your rates gone down? If not, one of two things is happening… you’re with the wrong insurance company or your agent is not doing his/her job!

Remember… your agent should work for you not just take your money every 6 or 12 months!

You have the right to receive multiple insurance proposals from multiple insurance companies!

Don’t treat your insurance policy like a utility bill! You know what I mean -- -- you received a quote 10, 8, 5 or 1 year ago -- -- you paid for the policy -- -- you put the policy in a drawer -- -- and another year goes by -- -- and the cycle starts all over again.

If you want the answer to this problem… read on!


“Service: Expect and Demand More!”

A long time ago… once the insurance agent sold you the policy, the insurance company did all the rest and the only time you saw the agent was to pay your bill.

Well, times sure have changed! Now everything related to your policy is handled by your local insurance agent.

This is good for you if… your agent is proactive, up-to-date on technology and enjoys building relationships with clients!

However, it is a nightmare for those whose agents are indifferent, under-staffed, improperly trained and just downright lazy!

Let’s face it – as Americans we’re so beat down, that average service now
qualifies as good service. Actually… a prompt return phone call is even considered amazing!

When was the last time your agent contacted you? (No – it doesn’t count if you called them to change a coverage on your policy!)

This day and age with the modern conveniences of technology (phone, cell phones, fax, email, regular mail) there is no excuse for not staying in touch with a client!

Every insurance agent should treat his/her client like GOLD!!! After all… you are a valuable asset to the agent and it’s time he/she realized it!

You see… communication is the key to protecting you, your family, your business and your assets!

Does your insurance company or agent tell you about the changes in your policy, the insurance industry or how these changes will affect you? If not… you’re not getting the best service & advice possible! And -- -- if you’re not getting the best service & advice -- -- you’re not getting the best protection!

Don’t get lulled in to thinking average is good!

You deserve nothing but the best!!


“Secrecy: Only The Insurance Companies Know What They Are Charging You!”

Back in the old days (1996), every adult got close to the same rate. That’s not true any more!

Let me explain… your rate is now based on hundreds of different factors. Anything from your address, your age, your credit rating, if you rent or own your home, your outstanding loans, your claims history, your marital status – just to name a few.

The computer types call it “multi-variate rate analysis”. To me – it’s just plain confusing!

It’s confusing to both the agents who sell & service the policies… and even more confusing to you, the clients!

To make matters worse -- -- every insurance company ranks these “variables”
differently! This means… you may be a wonderful prospect for one company and an average prospect to the next.

In some cases, you have no control over the rate you are charged by an insurance company.

What you do have control over is what company you do business with!

The Answer: Get professional advice and multiple insurance proposals to see what company offers the best protection for you and your situation!


“Auto & Homeowners Insurance After 9/11: This Does Affect You!”

This horrific event not only turned our nation upside down… it changed the insurance industry forever!

Every insurance company in the U.S. operates dramatically different since that tragic day!

Did you know that insurance companies have insurance on themselves? It is called “Re-Insurance”

After 9/11, the re-insurance companies analyzed their contracts and re-negotiated these contracts with the insurance companies. What does this mean? It means only the best, most profitable, well run insurance companies got the “lowest rates”.

How does this affect you? If your insurance company met the high standards of the re-insurers -- -- they received the low rates -- -- which were passed down to you!

If your insurance company didn’t meet these standards, their rates went up… and so did yours!

I’m sure you’re saying to yourself, “That was in 2001 and this is now!” So what?

Well here is a “little know fact”…

When the owners decided to insure the World Trade Center Towers, they decided the odds of losing both towers completely were astronomical. So they only bought enough coverage to rebuild one tower.

That way if one tower was totally destroyed they were covered or if both towers were partially destroyed they were still covered. No one ever thought that both towers would ever be totally destroyed at the same time! How wrong they were!

Therefore, the additional loss had to be absorbed by the re-insurers -- -- who passed the expense to the insurance companies -- -- who passed the expense to you. (Get the picture?)

And… a loss of this magnitude is felt for many, many years to come!

9/11 also forced the insurance companies to change the policies offered to you by altering coverages!

Did you know… that most insurance companies no longer voluntarily cover acts of terrorism! For obvious reasons -- another massive terrorist attack could have bankrupted the insurance industry.

It is also more difficult for certain business to obtain insurance coverage because they are considered “terrorist targets”.

No one event, in modern history has ever affected the insurance industry so dramatically!


Yes, there’s a lot of information in this report. And, it’s o.k. if you need to go back and re-read it to fully understand how it impacts you, your family, your business and your assets.

What’s your next step… you need to step back and examine your situation!

Ask yourself: Have I switched insurance companies in the last 5 years? Do I have an understanding of what I’m paying for? Does my current agent have choices for me to consider? Am I the only one who is proactive? And finally, do I get regular reviews from my current agent?

If you answer NO to any one of these questions, you should contact me immediately!

Who else has given you this valuable information? Why stay loyal to an insurance company or agent who doesn’t give you the time of day? What would cause you to do business with someone who doesn’t give more than he/she gets?

If your current agent doesn’t offer you choices -- contact me. I have 11 top rated insurance companies line up for your business!

If your current agent hasn’t explained, in detail, what your policy covers and why you’re paying exactly what you’re paying… call me now! You deserve the right to know! I offer explanations in words you can understand… not “insurance-ese”.

If your current agent hasn’t contacted you (and it doesn’t count if you call him) for your annual review – – you must talk with me! My clients receive a review of their insurance portfolio, at least once a year.

Have you even taken your policy out of the drawer in the last year?

You must do so right now! Do not delay!

Don’t treat your insurance policy like a utility bill. (It shows up and you just pay it without thinking twice about it!) You have everything to lose in a blink of an eye!

Contact me and experience what an insurance advisor has to offer!!!

Stephen J. Evanko, Jr.
Insurance Advisor, Author & Speaker
Delaware Insurance Advisors LLC
Call: (740) 369-1040 or (614) 888-4405
Fax: (614) 474-1672

(This is not intended as a solicitation for anyone outside the State of Ohio)

© 2006, Stephen J. Evanko, Jr. The reader assumes all responsibilities for his/her own actions in regards to any items discussed in this report. Adherence to all applicable laws and regulations, federal, state and local, governing the use of any product or service described in this report in the US or any other jurisdiction is the sole responsibility of the reader. The publisher and author assume no responsibility or liability whatsoever on the behalf of the reader of these materials. The reader is encouraged to consult directly with his/her insurance professional.