Ooops! I dropped my smartphone over the side of the boat!

Stuff happens when you’re on vacation. If you’re like my son-in-law and granddaughter, you walked into the ocean with your smartphone in the pocket of your shorts. If you’re like a former client, you dropped it over the side of your boat when cruising the lake.

Does your homeowners insurance policy cover the loss of your phone? Well … maybe.

If you have the kind of policy without any bells and whistles, it probably doesn’t. Most homeowners policies provide much broader coverage for your home than they do for your belongings.

In fact, while your home is covered for anything that happens to it other than events that are specifically NOT insured (i.e., excluded), your belongings are only insured for about 18 different events. Unfortunately, drowning is not one of them.

If you want to be sure your most valuable belongings have the broadest coverage available–either all the time, or when you travel–you have 3 different options:

-1- Add open perils coverage to your homeowners policy. It will provide essentially the same coverage for your stuff that it provides for your home. This is the most expensive option, and the policy deductible will apply to any claims.

-2- Purchase an inland marine policy, or floater. This policy is designed for property that moves around, has only a few exclusions (based on the type of property you insure), and usually does not apply the policy deductible to any claims. You can buy two types of floaters for your stuff while traveling:

-a- One type of policy is designed specifically for those who travel with their belongings. It does not cover property that typically remains at home.

-b- The other type of policy is designed to insure items that are specifically listed on the policy, with their value. The value of the property is established based on criteria for that type of property.

Most insurance companies also allow coverage for one or both floaters to be added by endorsement to your homeowners or renters policy.

So … if my son-in-law, granddaughter, and client had one of these floater policies or endorsements, YES, their policy would have provided coverage. And my sister’s policy would have provided coverage for her camera if she dropped it out of the hot air balloon while she was on safari in Africa – once she added the floater, that is. And yes, her asking me how to arrange for coverage before her trip really happened. Don’t wait until AFTER your trip to call your own agent.

Why Not Reporting the “Little” Changes Can be a HUGE Mistake

People are required by all insurance policies, including their auto and homeowners policies, to report changes to their insurance companies or agents–usually within 30 days. Often, the failure to report a required change within a specific time period results in the denial of a claim.

Example:  Your son got his driver’s license 3 months before your policy renewed and you forgot to tell your agent and/or insurer. When the policy was ready to renew, you glanced at the renewal form you received in the mail and, because you still insured the same vehicles, tossed it away because you thought, Nothing has changed.

Unfortunately, something HAD changed: you had a new licensed, family member–something you are required to report. If your son drove your car and was involved in an accident after the policy renewed, your insurer could deny the claim for misrepresentation (i.e., lying).

Although you didn’t lie intentionally, the fact that you forgot to report the change, twice, might be interpreted as if you had lied because you didn’t comply with requirements of the policy (a requirement that would increase your premium) . Of course, your insurer may believe you and may simply charge you premium retroactively to the first day you son was licensed. But it doesn’t have to.

One of the changes on homeowners insurance policies that often go unreported involve different family members moving into and out of the home. Technically, a homeowners insurance policy is only intended to provide coverage for the resident owner(s) of the home–the people whose names appear on the deed AND who live there.

Example: Dad moved out of the home and into a nursing home permanently, and you moved from your apartment into his house. The homeowners policy wasn’t designed to provide coverage for this situation because you are NOT the owner. The change should be reported to the insurer and the company will cancel the policy and either issue a dwelling fire policy in Dad’s name or require coverage to be issued on some other type of policy that insures tenant-occupied buildings. Even if you are not paying rent, you need to buy a renter’s policy.

I know, I know, that’s more expensive for everyone and you and Dad don’t want to pay more money–things are already tight. But the reason it’s more expensive is because a loss is more likely to occur when a home is not occupied by the person who owns it.

If an insurance company learns someone other than the owner his living in a home (especially shortly after the policy is written), it will issue a cancellation notice for the homeowners policy. In the same way an auto insurer will deny a claim if a change isn’t reported on a renewal form, a homeowners carrier will refuse to provide insurance.

Please report all changes to your agent promptly. He or she will help you find the most cost-effective way of making sure your coverage does apply in the event of a loss. Think about it: if you save $100 a year by not reporting a change and the insurer doesn’t pay a claim afterwards, you not only didn’t save $100, you incurred a much higher cost.

Pardon the pun, but honesty IS the best policy!

#1 Thing to Know About Renting a Car

Did you know that when you sign a rental car agreement, you obligate yourself legally to be responsible for ANYTHING that happens during the term of the rental–even if you would not otherwise be liable if you hadn’t signed the agreement?

Yep. Read the agreement. Each rental car company phrases its contract differently, but every contract I’ve ever read says that when you sign the agreement you agree to pay for everything that happens to the car, or involving its use, while you’re renting it. Even if you’re not at fault and even if the event that causes damage or injury is outside your control.

Example: You’re driving your rental car down the street and a drunk driver rear-ends you, pushing your car onto the sidewalk, where you strike a pedestrian. If you did not purchase additional insurance or the LDW/CDW, you are contractually and legally responsible not only for the damage to the rental car but also for the injuries sustained by the pedestrian and any other fees and costs incurred by the rental company, including attorney fees if the pedestrian files a lawsuit. Yes, I know the drunk driver was at fault. But you signed a legal contract that said you agreed to be legally responsible for everything, no matter what. So you are.

There is a way to avoid this situation. At the time you rent a car, rental car companies offer a Loss Damage Waiver or Collision Damage Waiver provision that can be added to the rental contract, in the same fashion that any amending provision can be added to a contract. The purchase is like adding a codicil to a will or an endorsement to an insurance policy. The LDW/CDW provisions remove some or all the language in the rental agreement that requires you, the renter, to be 100% responsible for any losses and damages that occur.

A full or comprehensive waiver generally states the rental company removes the rental agreement’s provisions deeming the renter legally responsible for damages and costs. A partial or limited waiver states the rental company waives the renter’s responsibility up to a certain dollar amount (e.g., $25,000) and/or only for certain types of loss or damage (e.g., damage to the rental car).

Of course, the good news comes with a cost. The price tag for a LDW/CDW ranges from $15 to $25 per day, on average. As far as I’m concerned, that’s a small price to pay for the peace of mind knowing you don’t have to handle any insurance claims on your own (or pay the rental company’s costs and attorney fees) if your rental car is involved in a loss. Especially since every auto policy I read does NOT extend all the coverage necessary, in the manner required by the rental agreement, if you wreck the rental car. But that’s a story for another day.

Free advice: If you become a member of the car rental company’s rewards program, the savings you realize on the daily cost of a rental offsets some or all of the extra cost you incur when purchasing a LDW/CDW. As a licensed insurance agent, I haven’t EVER rented a car without purchasing a full LDW/CDW. You shouldn’t either.

P.S. Thanks to my Enterprise associates, Rebecca and Keith, for the photos taken at the IAIP convention earlier this month.

What’s the difference between brand name and generic drugs?

During the Medicare webinar I presented yesterday for A.D. Banker & Company, we were talking about Medicare Part D and prescription drugs. When I explained the differences between brand name and generic drugs, nearly everyone was amazed that there were differences–they thought brand name and generic drugs had to be the same, but only with different names. Wrong.

One of my students suggested I write a blog post about the subject, so, thanks to her, here is some information you may not have known:

Brand name drugs are designed and manufactured by pharmaceutical companies that obtain patents for the drug. Once the company files for the patent, no other company can manufacture the drug for the term of the patent, which is 20 years from the date of filing. These drugs are issued two names: the brand name and a generic equivalent. For example, Tylenol® is the brand name drug and its generic equivalent is acetaminophen.

Generic drugs are similar, but not identical to brand name drugs. They’re required to have the same active ingredients and different inactive ingredients. Once the brand name drug’s patent expires, other companies are able to sell the generic equivalent. That’s why your RX migraine tablet is blue and round one month, and a different shade of blue and in an oblong shape the next month–your pharmacist used generic drugs from different manufacturers when filling your prescription.

Similarities

Brand name and generic drugs must:

a) Have the same ingredients

b) Have the same dosage strength and form

c) Be administered in the same way

d) Deliver similar amounts of the drug to the bloodstream

Differences

Brand name and generic drugs:

a) Must look different, as required by law

b) Must have different inactive ingredients

Generics may vary by manufacturer and usually cost less than their brand name equivalents because much the costs of R&D have been recouped by the original manufacturer during the 20-year term of the patent. Once multiple companies are legally permitted to sell the drug, the single company holding the patent now has competition, which causes the price to drop.

Sometimes the difference in inactive ingredients affects a patient, either because of their interaction with other drugs being taken or side effects. In this case, a doctor might prescribe the brand name drug, rather than its generic equivalent.

Click here to see what the FDA has to say about generic drugs. Obviously, I am not a doctor or pharmacist and you should direct your medical inquiries about the differences between brand name and generic drugs to the appropriate medical professional.

I hope you found this information interesting. Bet you didn’t know how easily so many things in our society affect the cost of insurance!

 

What Activities Void My Rental Car Agreement?

Allowing an unauthorized person to drive your rental car is the biggest mistake you can make when renting a car. Not only does it void your rental agreement, it will probably result in your insurance policy declining to pay any claim for damage that results while the unauthorized person is driving.

Auto insurance policies only provide coverage when authorized drivers use or have possession of a vehicle. Language exists in personal auto policies that SPECIFICALLY EXCLUDES COVERAGE for two types of unauthorized drivers–you need to read your policy (or ask your agent to do so) to determine which exclusion applies to you:

  1. A person who does not have the permission of the vehicle’s owner to drive the vehicle
  2. A person who does not have a “reasonable belief of entitlement” to drive the vehicle

So, what’s the difference? Here’s a brief story that explains:

Doris detests her daughter’s boyfriend. When Irene borrows her mother’s car, Doris informs her daughter that her boyfriend is not allowed to drive the car. Irene agrees. However, when they leave the restaurant after dinner later that evening, Irene gives her boyfriend the car keys and asks him to drive. The boyfriend is tailgating and rear-ends the car in front of him when it stops at a red light.

  1. If Doris’ auto insurance policy excludes coverage for a driver operating a car without the owner’s permission, the policy WILL NOT PAY for this accident. (Doris did not give the boyfriend permission and, in fact, withheld permission in her instructions to Irene.)
  2. If Dori’s auto insurance policy excludes coverage for a driver operating a car without a reasonable belief of entitlement to drive the car, the policy WILL PAY for this accident. (When Irene handed the boyfriend the car keys and asked him to drive, it was reasonable for him to believe he had permission to drive.)

What does this story have to do with renting cars? Well, if you allow an unauthorized person to drive your rental car, your insurance company will recognize that the driver did not have (1) permission of the rental car company to drive AND DID NOT HAVE (2) a reasonable belief he or she was able to do so … everyone knows (or should know) you can’t drive a rental car unless your name is on the agreement. Therefore, you not only voided the rental agreement, you also triggered one of your auto policy’s exclusions.

People rent cars when they go on vacation or travel for business. But they also rent cars because they want to conduct activities they’d rather not engage in while driving their own cars … such as all the things that prompt rental car companies to devise their list of prohibited uses. Not all rental car agreements contain these prohibitions, but they all contain MOST of the following activities that result in a loss that occurs:

  • During the commission of a crime
  • While the driver is under the influence of alcohol or drugs
  • While carrying people or cargo for a fee
  • While pushing or towing anything
  • During any type of race or speed contest
  • While teaching someone to drive
  • While using the rented vehicle outside the area stated on agreement
  • While driving on unpaved roads
  • While having more passengers than there are seatbelts
  • While transporting children without approved seatbelts
  • While the vehicle’s fluid levels are low
  • Because inadequately secured cargo, or an animal, inside the vehicle caused damage
  • While the vehicle is unlocked or the keys are lost, stolen, or left in the vehicle while not in operation
  • Because the driver did not allow enough height or width clearance
  • By theft and the renter does not return all the keys that were provided at the time of rental
  • Because the renter allowed an unauthorized driver to use/drive the car

Does Your Auto Insurance Follow You When You Rent a Car?

I can’t tell you how often I’ve heard this question. And the answer is yes … AND no!

Item 1

Under your PERSONAL auto insurance policy, the broadest coverage applies to the cars you own and insure on the policy. While coverage does follow you when you drive certain types of cars you don’t own, that coverage is limited. Most BUSINESS auto insurance policies do NOT follow the business or its employees when driving non-owned cars–unless the business has specifically purchased this coverage.

Item 2

When you rent a car, you sign a contract. That contract contains all kinds of terms and conditions. If you don’t read the contract, you don’t know what those terms and conditions are. If you don’t show the contract to your insurance agent, he or she doesn’t know what they are, either.

Regardless of whether you or anyone else reads the contract, you are still bound by its terms once you sign it!

Other Items of Note

I’ve read LOTS of auto rental agreements and ALL of them include terms that surprise most people who sign them, such as:

  1. You agree to be legally responsible for anything that happens to the car, or resulting from the car, during the term of your agreement. This agreement applies even if you would not otherwise be legally responsible under law.
  2. You agree to replace the car at a value determined by the rental car company if it is destroyed  (this includes numerous fees and charges the rental car company also determines). Unfortunately, your auto policy usually only provides coverage at book value, which is generally much less than the amount demanded by the rental car company.
  3. You agree that your insurance policy will pay first, before all other insurance policies pay, in the event of a claim. Unfortunately, the auto policies in most states say they’ll pay AFTER the rental car company’s policy pays first.

So, what does all this mean? Here are some examples of the three points I just mentioned:

  • When driving a rental car you are the middle car in a 3-car accident. Although the person who hit you from behind is legally responsible for your damage and damage to the car it pushed you into, when you signed the rental agreement, you agreed to be responsible for the damage to your rental car and the car you struck.
  • Your rental car is torched while parked in the lot at Disney World. The rental car company says the car’s replacement value is $33,000. However, your insurance company says it will only pay the car’s actual cash value (i.e., book value) minus your deductible, or $21,000. You signed the contract, so you’re legally responsible for the $12,000 difference.

In most states, your auto insurance company will not make payment for damage to the rental car until AFTER the rental car company’s policy pays first. It will eventually pay, but it could take months…

Trust me, the rental car agreement contains other provisions that disagree with your auto policy–these are just three of the big ones. If you have any questions, ask away…

6 Things INDIVIDUALS Need to Know About ObamaCare

You’re hearing all kinds of things about health care reform, commonly referred to as ObamaCare (the Patient Protection and Affordable Care Act [PPACA] or Affordable Care Act [ACA]).  But how much of what you’re hearing is TRUE?  In addition to misinformation being passed around, scammers have been cropping up at an alarming rate.  Here is a list of 6 things you need to know about ObamaCare if you’re an INDIVIDUAL:

(1) Unless you’re exempt under law, if you don’t have federally approved health insurance in place by January 1, 2014, you’ll be subject to a “shared responsibility payment.”  Technically, this payment is NOT a fine or penalty–it’s a tax payable when you file your federal income tax return.  [This provision of the PPACA is referred to as the Individual Mandate.]

(2) If you have insurance in place right now, the following plans meet requirements of “approved” health insurance under the PPACA beginning in 2014:

    • Medicare Part A
    • Medicaid, CHIP
    • TRICARE
    • Federal Employees Health Benefits Program (FEHBP)
    • any government plan
    • any Indian tribal government plan
    • any health plan offered in the individual or group marketplaces

The following plans will NOT be considered “approved” health insurance under the PPACA beginning in 2014:  Medicare and TRICARE supplements, long-term care, disability, dental or vision plans (when issued without health insurance), accident-only, and workers’ compensation.

(3) The shared responsibility payment for individuals is the greater of an established amount per person (a family maximum applies) or a percentage of the family’s household income. For example, in 2014, each adult will be required to pay $95, each child will be required to pay $47.50, the family maximum is $285, and the percentage of family income is 1%.  These figures increase until 2016, after which they’ll be adjusted by annual cost of living increases. In 2016, they’ll be $695 per adult, $347.50 per child, $2,085 family maximum, and 2.5% of family income.

(4) Exempt Americans (those who are not subject to the shared responsibility payment) include:

  • individuals who are NOT required to file an income tax return based on income
  • undocumented immigrants
  • individuals serving time in jail or prison
  • members of an Indian tribe
  • members of a religion that is opposed to receiving health care (meaning the religion AND members are opposed)
  • individuals whose employee-only cost of group health insurance is more than 9.5% of their household incomes

(5) Beginning in 2014, the manner in which health insurance is rated will change.  NO health insurance rates may be based on a person’s health status or medical condition(s)–meaning pre-existing conditions exclusions and limits will no longer be permitted by law. Only four elements may be used when establishing premium rates beginning in 2014:  age, the geographic location of residence, tobacco use, and whether enrollment is for an individual or a family.

(6) Premium tax-credits (i.e., federally approved reductions in the cost of health insurance) will be made available to Americans who buy health insurance from one of the Health Insurance Exchanges IF the following eligibility requirements are met:

    • the individual is not eligible for Medicare, Medicaid, CHIP, TRICARE, employer-sponsored health insurance, a grandfathered plan, and a few other types of coverage (a few exceptions apply)
    • household income must fall between 100% and 400% of the federal poverty level (FPL); in 2013, the FPL for a single individual is $11,490 and for a family of four it’s $23,550

Individuals purchasing insurance directly from an agent, as opposed to through an exchange, are NOT eligible for premium tax credits.

(7) Fraudsters are already capitalizing on consumers’ lack of familiarity with the provisions of the PPACA and people are being defrauded EVERY day as the deadline for compliance approaches. Here are some links for you to learn more about the Affordable Care Act and how to avoid becoming the victim of health insurance fraud as the PPACA rolls out:

P.S. I’m qualified to talk about health insurance because I’ve worked for more than 30 years in the insurance industry as a licensed agent, consultant, instructor, and education provider. In fact, after selling the second of my two insurance agencies in 2011, I began working full-time as a course developer and writer, putting together insurance courses for continuing education and pre-licensing purposes. My clients are insurance companies, professional insurance organizations, and national and regional insurance education providers. I’ve developed and written several continuing education courses on the subject of the PPACA, including a two-hour webinar for A.D. Banker and Company that I present on a monthly basis.

P.P.S.  Check in later in the week to learn about what businesses need to know about ObamaCare.

You don’t have to be an insurance agent to attend the A.D. Banker webinars I’m presenting on the Affordable Care Act … although you do have to pay for the presentations and CE filing fees. Cost: $27. Click this link for more information about A.D. Banker’s PPACA webinar. Upon arriving at the A.D. Banker website, click on Webinar and choose Health Insurance and the PPACA.

Click this link f you’d like to subscribe to my mailing list to be notified of about other webinars and presentations. I plan to begin presenting informational webinars about insurance to the general public before January. A nominal fee will be charged for these presentation (i.e., $5 – $10)