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.