Molly's Musings | Questions Addressed About Insurance

Molly's Musings

Questions addressed that may be a bit amusing.

Why is my credit a rating factor?

The number one reason why insurance companies use your credit information is to submit the information they obtain to all of the government agencies. That’s right, you heard me… The FBI, the CIA, the ATF, and the IRS. Your credit score is also beamed up to a satellite strategically located on Mars so alien life form can steal your identity.

All joking aside I understand why people are wary about the use of credit in insurance. Especially if your credit is not so great. Having a low credit score does not make you a bad person nor is it necessarily your fault. Scores tend to plummet after a divorce especially if the partner responsible for paying the bills feels like he/she is no longer responsible for paying the bills. You may be loaded under huge medical bills that any reasonable person would have a hard time staying on top of. Or you could be like me and forget to take back books to the library and get sent to collections. Thanks Multnomah County! (True story)

Just because you have marginal credit doesn’t mean your insurance is going to be sky high. Credit is just one factor. If you have a clean driving record and at least six months prior insurance the impact won’t be as great as it would be if your driving record reads like a Tom Wolfe novel.

OK now I’ll get to the dreaded answer of WHY. Each key I type feels like a leaded weight at this point. Can we talk about bunnies or rainbows? Those actuary elves I’ve discussed before have numbers saying that the lower your credit score the more likely you are to turn in claims. That’s the gist of it.

Insurance companies cannot use your credit as a rating factor AFTER the initial policy is written unless you give your permission to have your credit re-run. They can’t decline new business coverage or existing coverage based solely on your credit score. That my friend is Big Brother looking out for YOU!

 

Why won’t Huggins Insurance reinstate or re-write my policy if I cancel within the first six months of starting coverage?

It really irritates me when someone comes in to get auto insurance coverage just to get their car out of impound only to cancel the policy 2 days later so they can drive uninsured yet again. The process would keep continuing if we kept re-writing these people. That’s a lot of time wasted on one person that could be spent alphabetizing my CD collection, or searching for my true love on craigslist. Basically this practice is akin to returning your prom dress at Nordstrom’s after wearing it one night. It’s just rude.

If you cancel within the first six months for non-payment I understand. It’s not easy for everyone to afford insurance however letting your policy cancel for non-pay so early in a policy is a pre-cursor to the future. It takes a lot of time and money to have a policy cancel only to have to re-write it every other month.

 

Explain my auto Insurance Coverage.

Glad you asked. It’s good to be informed on any product you are purchasing. Especially if said product is not a tangible item i.e. insurance. Here is a dictionary of terms you will find on your policy.

There are two types of ways the liability portion of your insurance can be written. You could have split coverage which delegates how much will be paid to any one person, then to a group of people, and finally to the damage to the property in question. We will start with this coverage.

Bodily Injury per person: This is how much money the insurance company will pay to one person in the event of an accident.

Bodily Injury per accident: This is the amount of coverage that will be paid out period regardless of how many people are involved.

Property Damage: This is the amount of coverage that will be paid out to the damage that’s incurred to the other party’s car, fence, house, garden gnome collection, whatever you happen to run into. You could also have a single limit coverage which is a flat coverage that would encompass all of the above items.

Uninsured Motorist Bodily Injury

This coverage will either be a split limit or a single limit as mentioned above. This is my favorite coverage. It slips off the tongue like a Shakespeare sonnet. Plus if a person without insurance decides it would be a good idea to bump into your car at 120 mph and you end up losing a couple of limbs you will have coverage for the prosthetics and your pain and suffering.

Uninsured Motorist Property Damage

While not as eloquently named as the coverage previous this coverage will cover the damage to your car. For example you park in a parking structure and take up two spaces because your car is very precious to you. Someone finds this extremely annoying and while you are shopping for matching oven mitts and kitchen towels they back into your car with their 1982 Ford F250 and leaves the scene of the crime. Your uninsured motorist property damage will cover the damage to your car. The secret little clause in this coverage is that it carries a deductible of between $200-$300 depending on the company and the circumstances surrounding the incident.

Comprehensive Coverage

This coverage isn’t named very well. If it was really comprehensive coverage it would cover anything that could happen to your car including alien abduction. Really this coverage covers physical damage incurred to your car that is not the result of a collision. This includes but is not limited to:

  • Glass Damage
  • Theft
  • Fire not the result of a collision
  • Tempests
  • Magnetic Pulses
  • Etc.

There is a deductible involved. The higher the deductible the lower the premium. This coverage is generally cheap so I recommend deductibles on the lower end. $100 would be optimal.

Collision Coverage

This coverage is pretty self explanatory. If you run into somebody this coverage would cover the physical damage to your vehicle. Again there is a deductible involved. If you are trying to save money to counteract your driving record or your age increasing this deductible may save you quite a bit depending on the type of car you drive.

Towing

Man could they make these terms any simpler? The insurance companies are making sure the layman can understand insurance terms. We’re here for you! This coverage, while not necessary, is cheap. Depending on the company it runs between $6-$12 for the policy term. Some companies have limits as to how much they will pay or how far they will let your car be towed so if you know a really cute tow truck driver and ask him to drive from Oregon to Hawaii for the view make sure you can swim and the tow truck can float. You’re insurance company will not be paying for your trip but will wish you luck in your romantic endeavors.

Loss of Use

Please purchase this coverage!!!!! It’s cheap and I know from personal experience the necessity of this coverage. If your vehicle is laid up as a result of an accident and you need a rental car this coverage will pay for one, subject to the limit your insurance company provides.

 

What is the cheapest car to insure for my young driver?

Buicks! Buicks are by far the cheapest to insure. You don’t see many Buick drivers driving 80 miles over the speed limit now do you? Do your teenager a favor and get him/her a white Buick with Baby on Board stickers. First of all your teenager will be so embarrassed to be riding in the car he/she won’t bring ten friends into the car for joy rides. Secondly your face will shine with happiness knowing how much you will be saving on insurance premiums.

 

Why do I need homeowner’s insurance?

Why do I breathe oxygen instead of carbon dioxide? Why is a flat looking earth round? Who invented the ponytail? These are one of the many complicated questions in life. Fortunately the age old question of why you need homeowner’s insurance is relatively simple. If your neighbor flicks a smoldering cigarette butt onto porch and burns your house to the ground how are you going to pay for re-building your house? This isn’t a trick question. You guessed it. The answer is insurance.

The complicated questions arise as a subset of the initial question. Do I have enough coverage? Do I have too much coverage? (You can NEVER have enough coverage is probably what you think I’m thinking but that’s not true.) What is covered? More importantly what is excluded? What is the meaning of life?

Let’s first discuss the coverages that are included in a standard homeowner’s insurance policy.

Dwelling – This would be your actual house and structres attached to the home such as decks, balconies, garages etc.

Other Structures – This includes but is not limited to sidewalks, patios, detached decks, detached garages, emotionally detached sheds etc. I’m getting tired of saying detached so I’ll stop here and elaborate later.

Contents – This is your stuff such as your clothing, furniture, donkey kong figurine collections, so on and so forth. There are some limitations to this coverage that I will delve into later.

Loss of Use – If you can’t live in your house due to a loss this coverage will pay for the EXTRA expense for a hotel, food, etc. This isn’t an all expense paid outing to a penthouse in Portland unless the house that you lived in was a penthouse in Portland.

Liability – This coverage is for incidents in which you are found liable for. Imagine that. If you don’t clear off ice on your driveway and your pesky little neighbor coming to dish you a helping of scones and gossip slips on the sidewalk and twists her legs into positions you didn’t think were possible she could sue you. Your liability coverage would kick in.

Medical Payments – This coverage is lovingly called “good-will” coverage in the insurance world. (I would not want to live in this world. All of the buildings would be made of reinforced concrete and the occupants would carry around lead-lined pocket protectors.) You don’t have to be liable for this coverage to kick in. If your mother-in law trips on her shoe lace and you feel like saving yourself from an exhorbitant amount of whining you could have your insurance cover the medical costs for said mother-in-law even though it wasn’t your fault.

There are more coverages available on your homeowner’s insurance policy but my hands are sore. If you want to know about more options on your policy the sky is the limit. Feel free to talk to your agent who is most likely going to be me. Be NICE to me.

Replacement Cost

Chances are if you have a standard homeowner’s insurance policy you have replacement cost on your dwelling and your contents. If not you need to check with your agent and relay your extreme displeasure with them unless your agent is me. If your agent is me then there is probably a good reason why you don’t have this coverage. Namely your home is too old to qualify for the coverage or the home is vacant.

If you have a home built in the 1950’s and you have replacement cost on your home if your home burns down to the ground you will receive from your glorious insurance company the amount it costs to replace your home. (subject to the policy limits of course) If you don’t have replacement cost on your house you will only get the depreciated value of the house which is going to be considerably less than what it would cost to rebuild it due to its age.

The same goes for your contents. If you have a couch made in the 1950’s and you have replacement cost you will get a brand spanking new couch that has that new couch smell. If you don’t have replacement cost you will be taking an excursion to the goodwill to find a couch similar to the couch you had. Now I have nothing against the goodwill. I spent a good amount of time there in the 90’s in the attempt to emulate the style of the late Kurt Cobain but I doubt you would want to replace all your furniture and clothing there.

There is a limit to how much your insurance company will pay even with replacement cost. Most standard companies will pay a little bit more than the policy limits. If your home is listed on the policy at $100,000 and you have an extended replacement cost of 25% you will have limits up to $125,000. (I am a MATH wizard. I should have gone to MIT and counted cards in Vegas.) Some companies have a 50% extended replacement cost. Other companies don’t have a limit. This is called guaranteed replacement cost meaning the insurance company will pay for the cost to replace your home to what it was like before no matter if the cost exceeds the limits on the policy. A company that includes guaranteed replacement cost will also go to the nth degree to make sure your policy limits are adequate. Be prepared for a little insurance gnome to wander around your house with a tape measure and a laptop.

Deductibles

As you probably know the higher the deductible you have on your homeowners insurance policy the lower your premium will be. Most insurance companies have a minimum deductible of $500. Depending on the insurance company you get you can choose deductibles of up to $10,000. Picking your deductible is a personal matter. You have to weigh how much of a savings you will incur by choosing the higher deductible and how much of a blow to your pocket book you can take at the time of a loss. Sometimes the savings isn’t worth bumping up your deductible. Keep in mind you’re not going to want to turn in a bunch of small claims (I’ll get into this later.) so it may behoove you to pick a higher deductible. Behoove is an incredible word. You can just slam it into a sentence and make the sentence that much greater.

Exclusions (cue the pipe organ and Count Dracula)

The exclusions listed below are what you most likely will find on most homeowners insurance policies. Each company is different. There are definitely more exclusions than what I’m going to list below but I don’t have enough space to include all the exclusion. These are some of the biggies.

Flooding - is excluded whether it be man-made or made by the cruel hand of nature. If you live in a place that could flood call your agent and discuss purchasing a flood policy.

Earthquake – is excluded. You can purchase this coverage as an endorsement on your homeowners policy or you can purchase it as a separate policy. Mold – Most homeowners insurance policies exclude mold. Most companies out of the kindness of their hearts offer the coverage back with limits ranging from $5000 to $10,000.

Business use of other structures – If you have any kind of items used for a business in a detached structure the structure will not be covered. Even if you only have one tool used in your business in this structure the insurance policy WILL NOT cover the structure. You can talk to your agent about covering the structure that contains items used in a business but the insurance company must be notified and most likely there will be a separate charge.

Age related deterioration – If you haven’t replaced your roof since the Cleveland administration and the roof starts to leak your insurance company will not pay to replace or fix your roof. The damaged structure will not be covered if it was damaged due to neglect.

Continuous Exposure – If you notice that your toilet is leaking and don’t take care of the leak immediately most likely you won’t have coverage for damage that has been incurred. Notify your insurance company immediately after noticing damage to your home especially if the loss is water-related.

Limitations of Contents Coverage

Your contents are covered anywhere in the world under your homeowners insurance policy except for other property’s that you own or rent.

 

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