Advocate Claim Service Newsletter July 2008
It is with great satisfaction that we bring this newsletter to you. In this issue and in coming months, we will discuss
pertinent insurance topics which may affect you. We sincerely hope that you will find this newsletter informative and
please do not hesitate to contact us should you have any questions or needs.
This months topics:
Outlook for 2008 Hurricane Season Worsens -
Check Your Insurance Coverages Before Its Too Late
According to the latest forecast from researchers at
Colorado State University, the U.S. coastline has an
above-average chance of getting hit by at least one major
hurricane this season. Researchers estimated the likelihood
of at least one hurricane with a category of 3, 4 or 5
making landfall this season at 69%, above the average for
the last century of 52%.
The official Atlantic hurricane season runs June 1st
through November 30th. Once a storm is within range of
land it is too late to change or add coverage. Therefore,
it is imperative that homeowners review their insurance
policies now.
Make sure your homeowners’ policy reflects your
needs in the following areas related to hurricane coverage:
Hurricane Deductible - Multiple states have implemented
separate deductibles for hurricanes based on a
percentage of the home’s insured value. In Florida, these
deductibles are available in two, five and now ten percent
options. According to new Florida legislation, a homeowner
is responsible for just one deductible in the event
of multiple claims caused by multiple hurricanes.
Note that wind damage caused by non-hurricane
storms is subject to your policy’s general deductible not
the hurricane deductible.
Flood Insurance - Flood damage is not covered under
a standard homeowners’ policy, but flood insurance is essential
in high risk areas.
Replacement Cost vs. Actual Cash Value - Replacement
Cost policies cover the amount needed to replace
or repair a home without a deduction for depreciation.
These policies generally cost about
10 percent more, but they provide
much more comprehensive coverage
than Actual Cash Value policies.
Guaranteed or Extended Replacement
Cost - Provides additional
coverage if widespread damage
inflates the cost of building materials
and labor.
Inflation Guard - Automatically adjusts policy limits
to reflect changes in construction costs so you do not
have to increase your limits each year.
Building Code Upgrades - If your home is severely
damaged, it will need to be rebuilt to comply with current
building code standards that could add increased
building costs. Law and ordinance coverage ensures these
extra costs are covered.
Additional Living Expenses - Covers the costs of
living elsewhere while your home is being rebuilt or
repaired.
To protect your assets in the event of a hurricane,
also:
- Inventory, photograph or video tape all household
items. Keep receipts, inventory lists, copies of your
insurance policy and insurance company contacts in
a safe place that can be accessed in the event of a
storm.
- To minimize losses, take steps to protect your property
when a hurricane is imminent, such as covering your windows with shutters, siding or plywood.
- Keep materials such as plywood and plastic on
hand in case you need to make temporary repairs
after a storm. Keep receipts as repairs are made, as
they may be reimbursable by your insurance company.
- Be wary of rushing into a contract or placing a
hefty deposit with a company for repairs. Unfortunately,
fraudulent contractors often flock to natural
disaster sites, so it is important to consult your
insurance agent before hiring anyone.
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Consider Four Key Areas
When Buying Homeowner’s Insurance
You buy homeowner’s insurance to protect your
biggest asset, so it’s important to purchase enough
coverage to suit your needs. By looking at a few key
factors, you could end up saving yourself a lot of money
and heartache should you ever have to make a major
homeowner’s insurance claim. Be smart and ask yourself
the following four questions when considering how much
coverage to purchase.
How much will it cost to rebuild?
When you’re figuring out the cost to rebuild your
home, use current construction prices. Don’t add in the
cost of the land, and don’t base your cost estimates on
how much you originally paid for the house.
Even though your mortgage lender may require you
to have homeowner’s insurance, you still may not be
adequately protected. In most cases, the policy limit is
the amount owed on your mortgage, which may not be
enough to rebuild at current prices.
To estimate the amount of insurance you need, multiply
the total square footage of your home by the building
costs per square foot. You can get information about local
building costs by calling your real estate agent or home
builders association.
You should select an extended replacement cost
policy for several reasons:
- It pays for your home to be repaired with materials
that are similar in kind and quality to what was originally
used.
- There is no deduction for depreciation or wear and tear.
- If the demand for materials and construction workers
exceeds the supply because of a widespread disaster,
and prices skyrocket, an extended replacement cost
policy will pay whatever is necessary to restore your
home to its original condition.
How much will it cost to replace my personal
possessions?
Most homeowner’s insurance policies cover your personal
possessions for 50 to 70 percent of the total coverage
amount on your home.
Conducting a home inventory will help you determine
if this is enough. Create a detailed list of everything
you own and how much it will cost to replace these items
should they be stolen or destroyed. If you feel you are
underinsured, ask you agent about increasing the coverage
limits for your possessions.
Will I have any additional living expenses as a result
of an insured disaster that damages my home?
When a disaster strikes, you may be forced to live
somewhere else while your home is being repaired. Standard
homeowner’s policies covers hotel bills, restaurant
meals and other living expenses incurred while you are
living away from home. In addition, if you rent out the
property that was damaged, this coverage will reimburse
you for any rent you would have received from tenants
while the home is being repaired.
Additional living expenses coverage varies among
companies. The standard is 20 percent of the total
amount of coverage on your house. There are also policies
that cover unlimited additional living expenses for a
specific period of time.
Ask your insurance agent to tell you how much coverage
you have and how long the coverage stays in effect.
If you don’t feel you have sufficient coverage for additional
living expenses, consider increasing it.
How much coverage do I have in the event I am
named in a lawsuit for bodily injury or property damage
caused to others?
The standard homeowner’s policy covers you, your
family members, and your pets in the event of injury
caused to others. The coverage extends to both the cost
of defending the case in court and any damages you are
required to pay.
The majority of homeowner’s insurance policies provide
$100,000 worth of liability insurance; however, you
can get higher amounts. Conventional wisdom says that
homeowners should carry at least $300,000 to $500,000
worth of liability protection.
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Don’t Let Your Hard Work Get Washed Away
Just because you don’t live anywhere near a body of
water doesn’t mean you don’t need flood insurance. No
one’s home is flood-proof. In fact, the Federal Emergency
Management Agency (FEMA) says that 25 percent of all
flood insurance claims are paid to homeowners in low or
moderate risk areas. That’s because it doesn’t take a body
of water, or even a major storm, to cause a flood. Anything
from a broken sewer line to a slow moving rainstorm
can be a culprit.
Flood damage isn’t covered under your homeowner’s
policy, so you must purchase a separate flood insurance
policy. FEMA is the only provider of this type of coverage;
however, they make it available to the public through
insurance companies. That means you can purchase a
policy from the same insurance agent that wrote your
homeowner’s insurance.
There are two types of coverage:
- Standard Flood Insurance Policies - If your home is
in a high-risk zone, you need this policy. The cost
starts at about $500 a year but can run to almost
$1,500, depending on a number of factors.
- Preferred Risk Policies - If your home is in a low or
moderate risk zone, your may qualify for a low-cost
Preferred Risk Policy. Premiums start at just under
$119 a year.
To get specific information about premiums, you
can log on to the FEMA web site at http://www.floodsmart.gov/floodsmart/pages/flood_policies/premium_schedules.jsp.
Flood insurance policies provide two types of
coverage: one for the structure and another for its
contents. They can be purchased separately or together,
and the FEMA website will show the premiums if you
buy them individually or in combination. There is a 30-day waiting period before both of the coverages take
effect.
The structural coverage is “replacement cost” coverage,
which means the insurer will pay what it costs to
replace or repair the structure with materials similar in
type and quality to what was originally used when the
structure was built, without deducting for depreciation.
The maximum amount of structural coverage available
for one-to-four family homes is $250,000.
Contents coverage is “actual cash value,” which
means the insurer will pay what the item is worth after
it has deducted depreciation. The maximum amount of
contents coverage is $100,000. Renters can also purchase
contents coverage.
In addition to purchasing flood insurance to protect
the contents of your home, you can also protect your
valuables by taking individual photos of each item, or
by taking a video of your home and zooming in on
everything of value. This is extremely important if you
need to provide your insurer with a detailed list of your
possessions.
Keep the photos or video, along with any receipts
you may have for the merchandise, in a safe location
outside of your home, like a bank safe deposit box.
This will ensure that your documentation isn’t lost if a
flood or other natural disaster destroys your home.
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Managing Technology with a Little Help:
Equipment Maintenance Insurance
The technological revolution is a double-edged sword.
For every new piece of equipment that lightens our
workload, there is the possibility that the machine can
malfunction or breakdown completely. And the more
advanced the piece of equipment is, the more time consuming
and costly its repair is. As organizations are
forced to run leaner operations, skyrocketing equipment
repair costs can become a significant drain on an already
strained budget.
To help keep these costs under control, insurers are
now offering commercial insurance coverage known as
equipment maintenance insurance (EMI) to organizations
and governmental entities that depend on electronic
equipment, such as copiers, fax machines, computers,
audiovisual equipment, telephones and security systems.
The purpose of this coverage is to consolidate all of an
insured’s office equipment service contracts into a single
insurance contract. EMI not only simplifies the administration
of service contracts, but can also save the policyholder
money too.
When a business owner buys office equipment or a
medical facility buys medical equipment, it is usually protected
if it breaks down during the warranty period. The
general warranty period, however, only lasts for 90 days.
If the buyer wants added protection, it means having
to buy an extended warranty contract or an equipment
maintenance agreement. If an organization has multiple
pieces of equipment, this kind of expenditure can represent
a large cash outlay and juggling multiple contracts
and vendors.
EMI is a viable remedy to this type of situation. The
coverage is applicable to a range of industries that need
an affordable alternative to traditional equipment maintenance
agreements. Each EMI account is individually
underwritten based on the type of equipment, its age,
the preventive service it has received and service logs
that document that maintenance. As the basic warranty
on each piece of equipment expires, the insured can roll
coverage for that item over into their EMI account. This
eliminates keeping track of individual vendor maintenance
contracts in order to ensure that coverage is current.
Depending on the way in which the EMI contract
is worded, it can cover not only the cost of equipment
repairs but also the cost of renting a replacement unit,
for a period of time, if the damaged equipment has to be
sent out for servicing.
Equipment maintenance insurance provides broader
coverage than most vendor maintenance agreements. It
may reimburse for losses connected with power surges,
human error or negligence, in-house repairs, preventive
maintenance inspections and damages that result from
environmental causes. Extending coverage in this way
certainly makes EMI insurance a useful tool for organizations
to more effectively manage their resources.
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Families Should Have an Emergency Communication Plan
Severe weather is one of the most common sources
of natural disasters, and no region of the U.S. is off
limits. Does your family know what they should do in the
event a weather-related natural disaster strikes?
According to the Home Safety Council, fewer than 30
percent of U.S. families have created and discussed an
emergency communication plan. One of the reasons that
so few families have developed one is that many people
believe it requires considerable time and effort.
Creating an emergency communication plan is actually
easier than you may think. The first component that
you should have, according to the Home Safety Council,
is a corded land line phone in your home. It is the most
reliable source of communication in an emergency because
it will continue to operate even if the power goes
out in the house.
The second component is an emergency communication
card that each family member should carry at all
times. The Home Safety Council teamed up with EMBARQ,
a communications services provider, to create
wallet-sized emergency communication cards that include
space to list important phone numbers and medical information. The cards can be downloaded at http://www2.embarq.com/newsroom/docs/EmergencyCardFinal.pdf. Families should discuss how they would communicate
during an emergency situation, and then record important
plan information on their emergency cards.
In addition to a communication plan, the Home
Safety Council offers the following recommendations:
- Have a “Ready-to-Go-Kit” – In a duffel bag or backpack,
place one gallon of water per person, non-perishable
canned food, a can opener, paper plates and
cups, plastic utensils, a flashlight and extra batteries,
a battery-operated radio, a change of clothes for each
family member, personal hygiene items, a small firstaid
kit, and pet food and supplies. Keep the kit near
any medications you would need to take with you in
an emergency.
- Have a “Ready-to-Stay Kit” – You may have to stay
inside your home for an extended period of time, and
this kit will help you survive. In a large plastic tub
with a cover, or easily accessible cabinet designated
for this purpose only, place three gallons of water per
family member, enough non-perishable canned food
and snacks for at least three days, a can opener, toilet
paper, blankets, books and games to keep you busy,
a flashlight and extra batteries, a battery-operated radio,
a small first-aid kit, paper plates and cups, plastic
utensils, a change of clothes for each family member,
personal hygiene items, and pet food and supplies.
- Designate a safe meeting place outside your home.
- Designate a safe place to seek shelter in your home
in case of severe weather. Your survival supplies
should be stored in this location.
- Teach young children how to use the phone to call
for help.
- Update wireless phones with “in case of emergency”
(ICE) contact information.
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Disclaimer
Information contained
in this newsletter about product offerings, services, or benefits
is illustrative and general in description, and is not intended
to be relied on as complete information. While every attempt
is made to ensure the accuracy of the information provided, we
do not warranty the accuracy of the information. Therefore, information
should be relied upon only when coordinated with professional
tax and legal advice.
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