FAQ

Auto

1. What is uninsured or underinsured motorist property damage coverage?
   
2. Is my American auto insurance coverage valid in Canada?
3. Is my American auto insurance coverage valid in Europe or other parts of the world?
   
4. What kinds of questions will I have to answer when applying for an insurance policy?
   
5. What should I consider when purchasing insurance?
   
6. What are some things I can do to lower my insurance rates?
   
7. If my friend borrows my car, is he/she covered under my policy or theirs?
   
8. What is the difference between collision and comprehensive physical damage coverage?
9. What factors affect the cost of my insurance?
10. I've never had an accident. why do my rates keep going up?
11. I'm renting a car. Do I have to buy the extra insurance at the rental company?

Home

1. What is homeowners insurance and who should buy this type of coverage?
   
2. What is the difference between "actual cash value" and "replacement cost"?
3. What factors should I consider when purchasing homeowners insurance?
   
4. Do I need earthquake coverage?
5. We had a heavy rain and now water is coming in through my basement walls or up through my sewers. Is this covered?

Other

1. What is a personal umbrella liability policy?
   
2. How much life insurance should I own?
   
3. Should term insurance or cash value life insurance be purchased?
   
4. Why would I want to buy renters insurance?

Auto

1. What is uninsured or underinsured motorist property damage coverage?
Uninsured motorist property damage coverage protects you if your vehicle is damaged in an accident involving a driver who has no insurance coverage. This coverage generally pays up to the limit you purchase.

Underinsured motorist property damage coverage protects you if your vehicle is damaged in an accident involving a driver who has insufficient insurance coverage. This coverage typically pays the difference between your coverage limit and the other driver's property damage coverage limit.

2. Is my American auto insurance coverage valid in Canada?
Your American auto insurance coverage typically covers driving in Canada. Check your auto insurance policy for full details.

3. Is my American auto insurance coverage valid in Europe or other parts of the world?
If you're driving outside the U.S. and Canada, your American auto insurance is typically not in effect.

You can purchase car insurance from the car rental company. Make sure that the insurance provided by the rental company complies with regulations where you plan to drive.

4. What kinds of questions will I have to answer when applying for an insurance policy?
When applying for an insurance policy, you will be asked a number of questions. The agent will ask your name, age, sex, address, etc. You will be asked a number of other questions which will be used to determine what type of risk you are.

An insurance company will want to know about the person's previous driving record, recent accidents or tickets, what type of car is to be insured.

Once the insurer has decided that your risk profile is consistent with the types of risks it accepts, the answers to the questions will be used to determine whether you should be offered insurance at the high or low risk driver rate.

This process is known as the underwriting process.

5. What should I consider when purchasing insurance?

• Consider the quality of the company's claims service.
  
• Consider the amount of liability coverage you believe you should purchase.
  
• Consider which optional coverages you want.
  
• Don't base your decision on price alone. Carefully consider policy and company value. In an unpleasant situation, little differences will matter a lot.

6. What are some things I can do to lower my insurance rates?
There are a number of things you can do to lower the cost of your automobile insurance. The easiest thing to do is compare prices. Insurance quotes can vary by hundreds of dollars on the same coverage. Another way to lower the cost is discounts. Some companies offer discounts for multiple cars and driver education courses. Ask your agent if any discounts are applicable to your policy.

Another way to lower the cost of your insurance is to raise the deductible. You should make sure that the deductible you decide on is within your financial reach.

7. If my friend borrows my car, is he/she covered under my policy or theirs?
Generally, the insurance follows the car. If a friend borrows your car and gets in an accident where they are at-fault, your insurance covers any costs to repair damages. Keep in mind that it will be your insurance that goes up or gets cancelled.

8. What is the difference between collision and comprehensive physical damage coverage?
Collision is defined as losses when you collide with another car or object. If you hit a car in a parking lot, the damages to your car will be paid under collision coverage.
Comprehensive provides coverage for most other physical damage losses you incur. Damage to your car from a hailstorm will be covered under comprehensive coverage.

9. What factors affect the cost of my insurance?
A number of factors can affect the cost of your insurance:

• The type of car you drive
  
• Your driving record
  
• Where you live
  
• Your marital status

10. I've never had an accident. why do my rates keep going up?
Insurance companies are forced to raise rates to keep up with increasing expenses like higher medical costs, higher auto repair costs, and a great increase in the number and size of lawsuits filed for auto accidents.

11. I'm renting a car. Do I have to buy the extra insurance at the rental company?
Most companies apply your policy to autos that you rent for 30 days or less. If you do not have full coverage on your vehicles, then you do not have full coverage on any car you rent. Then, you would be required to purchase additional insurance from the rental company. Check with your agent for further details.

Home

1. What is homeowners insurance and who should buy this type of coverage?
Homeowners insurance is one of the most popular forms of personal lines insurance. The typical homeowners policy has two main sections:
Section I covers the property of the insured.
Section II provides personal liability coverage to the insured.
Almost anyone who owns or leases property needs this type of insurance. Homeowners insurance is usually required by the lender to obtain a mortgage.

2. What is the difference between "actual cash value" and "replacement cost"?
Covered losses can be paid on an actual cash value basis or a replacement cost basis. Actual cash value is means the policy owner is entitled to the depreciated value of the damaged property. Replacement cost coverage means the policy owner is reimbursed an amount necessary to replace the damaged property with an article of similar type and quality at current prices.

3. What factors should I consider when purchasing homeowners insurance?

• Consider the quality of the company's claims service.
  
• Consider the amount and type of coverage you need.
  
• Consider which optional coverages you want.
  
• Don't base your decision on price alone.

Carefully consider policy and company value. In an unpleasant situation, little differences will matter a lot.

4. Do I need earthquake coverage?
Earthquakes are not covered under the standard homeowners insurance policy. You probably do not need this coverage unless you live in an area that is prone to earthquakes.

5. We had a heavy rain and now water is coming in through my basement walls or up through my sewers. Is this covered?
Water damages are considered flooding and is excluded from virtually all homeowner's policies. Sewer or drain back-up coverage is excluded from virtually all homeowners policies. Consult your agent for more information about adding these types of coverage.

Other

1. What is a personal umbrella liability policy?
The personal umbrella liability policy is designed to accomplish two goals. First, it increases the liability protection beyond what the policy owner already has in his or her homeowners and automobile insurance policies. Second, the personal umbrella policy is designed to fill in the gaps in a policy owner's liability coverage since several types of liability exposures exist that are not covered by automobile and homeowners policies.

Together with homeowners and automobile insurance policies, broad personnel liability protection is attained through the purchase of a personal umbrella policy.

2. How much life insurance should I own?
Rough "rules of thumb" suggest an amount of life insurance equal to 6 to 8 times annual earnings. However, many factors should be taken into account in determining a more precise estimate of the amount of life insurance needed.
Important factors include:

1. Income sources (and amounts) other than salary/earnings
   
2. Whether or not the individual is married and, if so, what is the spouse's earning capacity
   
3. The number of individuals who are financially dependent on the insured
   
4. The amount of death benefits payable from Social Security and from an employer sponsored life insurance plan
   
5. Whether any special life insurance needs exist (e.g., mortgage repayment, education fund, estate planning need), etc.

It is recommended that a person's insurance adviser be contacted for a precise calculation of how much life insurance is needed.

3. Should term insurance or cash value life insurance be purchased?
In any life insurance purchasing decision, there are at least two basic questions that must be answered:

1. "How much life insurance should I buy?" and
   
2. "What type of life insurance policy should I buy?"

The question contained in (1) involves an "insurance" decision and the question contained in (2) requires a "financial" decision.

The "insurance" question should always be resolved first. For example, the amount of life insurance that you need may be so large that the only way in which this needed amount of insurance can be afforded is through the purchase of term insurance with its lower premium.
If your ability to pay life insurance premiums is such that you can afford the desired amount of life insurance under either type of policy, it is then appropriate to consider the "financial" decision--which type of policy to buy. Important factors affecting the "financial" decision include your income tax bracket, whether the need for life insurance is short-term or long-term and the rate of return on alternative investments possessing similar risk.

4. Why would I want to buy renters insurance?
Renters insurance provides important coverage for both you and your possessions. A standard renters policy protects your personal property in many cases of theft or damage and may pay for temporary living expenses. It can also shield you from personal liability. Anyone who leases a house or apartment should consider this coverage.