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:
www.nasd.com (non-profit broker-dealer regulation, consumer advisories)
www.quatloos.com (non-profit website to educate consumers about scams)
www.nasaa.org (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 www.ohioinsurance.gov or through the Department's toll-free Consumer Help Line 1-800-686-1526.

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.

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.
EVEN BEFORE YOU START LOOKING FOR A HOME
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.
• HOUSE HUNTING:
  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.
  PLACING A BID
  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.
  PURCHASING THE HOUSE AND INSURANCE
  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
  Inflation-guard
  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.
• AFTER YOU PURCHASE YOUR NEW HOME
  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.

RESOURCES
ChoicePointwww.choicepoint.com

To order a CLUE report, see www.choicetrust.com

Fair Isaacwww.fairisaac.com

To order a credit report, see www.myfico.com

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

Institute for Business & Home Safety www.ibhs.org

Insurance Information Institute www.iii.org

Insurance Information Network of California www.iinc.org

ISO www.iso.com

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

National Flood Insurance Program www.floodsmart.gov

Ten Most Asked Questions

Here you go: The most commonly asked insurance questions in the history of asking insurance questions:
1.
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.
2.
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: http://www.insuranceyak.com/2007/09/20/find-a-lost-life-insurance-policy/ Sorry for your loss and good luck with your search.
3.
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.
4.
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 http://ohio-insurance-forum.blogspot.com/2007/06/q-how-does-insurance-agent-earn.html for a rundown on commissions earned and learn how big you’ll have to be in order to survive the business.
5
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:
http://ohio-insurance-forum.blogspot.com/2007/07/homeowners-insurance-covered-or-not.html

Tune in next week for questions 6 - 10

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.
Ernesto

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 sevanko@colinsadv.com

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 https://external-apps.naic.org/orphanedpolicy/ ; 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 (www.mib.com) 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.
Ernesto