Hello one and all, and happy Fourth of July! Today we are going to start a four part series addressing common mistakes people make while attempting to save money on their insurance. Rather than quick blurbs, Sammy’s idea was to go a bit more in depth each week. Off we go!
This week we are going to cover one of the main ways that we all attempt to save money – by adjusting the coverages on our policies. We’re going to cover both general and specific tips, and we DEFINITELY would like some feedback – questions and comments are invited!
Sammy suggested that we should title this week’s installment “Adjusting the wrong coverages,” and while it may be a bit negative, it does hit on our central focus. There are many changes that you can make to your policy to save money. The problem arises when the money that you save, versus the reductions in coverage you are accepting, do not make it worth while.
In general, when reviewing potential reductions in coverage, always consider what you are losing. Does the amount of premium you are saving really pay for itself, when compared to the coverage you lose? For example, if you are increasing your deductible from $500 to $1,000 to save $50 annually, is it worth it? In order to make up for the extra $500 you will pay in the event of a loss, you would have to save $50 a year for ten years to make up the difference! And that’s just to break even!
In addition, if you are looking at removing a coverage completely, make sure that you are comfortable that if you were to have a loss, you would be able to pay for it out of pocket. For example, if you remove comprehensive coverage on your car, and it’s stolen – could you afford to buy another car to replace it?
Other things to consider BEFORE making changes:
If you are going to increase your deductible on your auto policy, make sure that you increase the right one. Increasing your comprehensive deductible, in general, will not save you NEARLY as much as the collision deductible. In addition, it will dramatically increase your out of pocket cost on smaller claims like cracked windshields.
If you are going to remove physical damage coverage completely, consider at least leaving comprehensive on the policy. It doesn’t cost much, and provides lots of good coverages for the price – repairing cracked windshields (usually for free) or replacing them if necessary, hitting an animal, if your vehicle is stolen, vandalized, or catches fire. It also covers unusual claims like if your vehicle is damaged or lost in a flood, hail damage, trees falling on vehicles, animal damage (such as a rodent taking up residence in your vehicle!), or if your vehicle gets painted accidentally by a line crew. If you heard about the paving truck on the PA turnpike who leaked tar all over the road and damaged hundreds of vehicles – comp claim!
If you are considering reducing the building limit on your homeowner’s policy, you might do better by increasing your deductible. Oftentimes, when you jump from one deductible level to the next, the building coverage rates drop dramatically more than if you just reduce your coverage. Thus, you will accomplish two things – save more money on premium, and have better coverage in the event of a total loss – you will pay more for the deductible, but will not have diminished limits to contend with! And, there is the nasty possibility of a co-insurance penalty – which I can address in comments, if you have questions!
If you are considering reducing the liability limit on your homeowners, look at a smaller reduction, but on the auto policy instead. This one is “hairy”, though – it’s not often a good idea to reduce your liability limits – this is the protection you have in the event someone else sues you. If you are dead set on reducing liability limits, get information on how much you would save by taking a smaller reduction on the auto policy. In other words, you will likely save more money by reducing your auto liability limit by $50,000 ($100K to $50K) than reducing your homeowners by $200,000 ($300K to $100K). Again, though, this is a LAST RESORT recommendation ONLY.
This is a lot of information. Bottom line– when looking to save money on your insurance, spend an extra 20 or 30 minutes to discuss your options with your agent. Most agents are more than willing to see what they can do to keep their clients happy! And if you end up saving money, while not losing much coverage-wise – all the better!
Did you just buy a car recently – new or used? Doesn’t matter. You better call your insurance agent, just to make sure that your new vehicle is listed on your policy. A lot of times, the dealership tells people that they will call your new vehicle information in – and most times they do. But there are occasions that it doesn’t happen for whatever reason, and the vehicle doesn’t get added. If you don’t call it in, people like my daddy won’t know to add it.
Make sure your vehicle is insured BEFORE the loss occurs!! Call your agent.
Hi hi! I’m back this week to see what we can do to help our local business owner’s out. Last week we went over some basic insurance annoyances. This week we are going to take a look at how to avoid some of that pain come claims time! The three main coverages we are going to review apply to virtually every business – but I’m also going to go over a special one just for contractors & one for restaurant owners! It’s a busy week!
Employment Practices Liability (EPL) – The first coverage I’m going to dig into is quite possibly the most relevant one for any business owner with employees. It’s also one that many people never heard of!! Coverage is going to vary from company to company, but I’ll give you a basic break down – if you have employees, and one of them sues you for wrongful termination, sexual harassment, EEOC violations or discrimination, failure to hire/promote, etc, EPL will cover two things – the cost of defending yourself against the suit, and any settlement or award that’s granted (up to policy limits, of course!). There are other coverages that can be added (such as making wage or overtime errors, or harassment of a client or vendor), but that’s the general idea! Even with a lower limit, you can at least hire an attorney to protect you with minimal out of pocket cost.
EmployeeDishonesty – While we are on the topic of employees, why not look at it from the other direction? Let’s say that you have an employee who is stealing moneyor goods from you – how would you cover that loss? Obvious answer here – Employee Dishonesty! “Wait a minute,” you might say, “that’s already covered on my policy!” “Well, yes and no” says Sammy. You might have policy that includes a throw-in amount of this coverage, but it’s usually minimal – $10,000 or $25,000. If you have a larger operation, or sell higher valued items (cars, machinery, jewelry etc), it may not be enough! What if an employee at a jewelry store decides they are quitting, and on their last day walks out with a handful of diamond rings? Or, consider this – there was a case recently where an employee of an auto dealership had been stealing smaller amounts of money from each sale, and ended up getting caught after stealing MILLIONS! $10,000 is a drop in the bucket in cases like these – and you have to cover the rest of the loss yourself! Basically, take a look at what you’ve got and make sure you are comfortable with it!
Business Income & ExtraExpense (BI/EE)– Are you running an operation that depends on a building, or the contents within? Who isn’t! Virtually everyone could have a BI/EE loss, but not everyone is carrying the coverage. To make it simple, BI/EE provides you with the income that you lose out on in the event of a covered loss (a fire, theft, etc) that prevents you from operating your business for any length of time. For example, you run a store that sells widgets, and you have a fire that destroys your location – the building and all your contents are gone. Not only have you lost those goods, but you are also losing income while the business is rebuilding! BI/EE protects you against this loss! It’s complicated to explain, and would take a lot more space to go into in depth. Basically, business income protects the actual income that’s lost, while extra expense provides you the ability to do what you can to start earning income again ASAP. It’s the extra expenses you incur to start earning income again – for instance, renting a second location to sell widgets while your original one is being rebuilt.
Phew! That’s a good start! Now, on to coverages specifically for contractors or restaurant owners!
Voluntary Property Damages – Contractors: Do you ever find yourself moving a client’s TV, furniture, appliances, etc in order to complete your work? Happens all the time, right? Guess what – if you drop or break any of those things, that’s almost never covered by your general liability policy! Boy, I’m chock full of good news today….! However, there is a quick and easy remedy for this situation – add Voluntary Property Damages! For most smaller operations (1-5 employees), $5,000 or $10,000 of this coverage should be sufficient, commonly includes a $250 or $500 deductible, and is relatively inexpensive. Better to have and not need……
Utility Services Off-Premises Power Failure – Direct Damage & Time Element – Whew, that’s a mouthful, eh restauranteurs? But make sure you can say it to your agent – it’s a crucial one! “But I’ve got spoilage coverage” says you. “Not if the food spoils due to an interruption of power off your premises” says Sammy. If someone crashes their car into a telephone pole a quarter mile from your building, for instance, that loss would be excluded under your ordinary spoilage coverage – you’d need the coverage above. Direct Damage provides for the food that’s lost, while time element is for the income you lose while replenishing your stock.
Well, I hope that you made it through all of this information alive and well! If you have any questions, you can always feel free to comment, email, or call my daddy – he loves telling people about insurance coverages!
I mean, who doesn’t hate insurance, right? You know what I’m barking about. All the money paid out, and for what? Make my agent rich! Go figure.
This blog is devoted to my top 3 bones to pick (get it, bones?). What do you mean, my daddy has to pay more for his policy? That’s less treats, less trips to the doggy park (and less trips to the kennel. This may not be all bad). What do you mean, the claim is denied? Who’s gonna pay for it now…. me?? I think not!
Without further ado:
I haven’t had a claim in forever! I’ve NEVER had a claim, for that matter. Why does my premium keep going up?This is one my daddy cries about all the time – he gets this question a lot, and he comes home and has to bend my ear at least once or twice a week about it. So, believe me, I know ALL about this one.
I’ll keep it simple. Basically, when my daddy pays his insurance premium, that money goes into a bucket – a big bucket full of money from everyone’s monthly premiums. Claims are paid out of that same bucket. So when there are too many claims, or the claims are too expensive, the bucket gets empty. When the bucket gets empty, then my daddy’s premium goes up a little, even if he hasn’t had a claim. Those who have had claims pay more, but everyone sees a little bit of an increase: that’s what insurance is – the spread of risk of a large loss over a large number of people paying premium. And so, that’s why, some times, premiums go up even if you haven’t had a loss!
What am I even paying for here?! My claim was denied!! This is one that really stresses my daddy out. There are a lot of reasons that a claim could be denied, and he says that some times there’s a lot to explain. Insurance can be difficult to understand, but basically, a claim would be denied if the policy does not provide the coverage. Insurance does not cover everything, and that’s something that more people like my daddy need to help clients to understand. For example, insurance is not meant to be a warranty – if your car breaks down, the cost of repair would not be covered. Also, apparently, if the dog chews up his mommy’s glasses (who would do something like that?!), that also wouldn’t be covered. Another thing to keep in mind is that not every policy is comprehensive, but in most cases, the coverage can be added. For example, any surface water (overflowing rivers, heavy rains, an above ground pool that bursts [yes, that HAS happened!]) that comes into our house and does damage is NOT covered by homeowners; however, if you purchased flood insurance, it WOULD be.
This might as well be written in Chinese. I don’t understand how insurance works at all!Daddy tells me that I should be more patient with people. I just don’t get why people don’t want me to jump up and say hello, a few kisses to the face, that sort of thing. He says that not everyone likes that, and not everyone understands that it’s my love language. Insurance is kinda like that – it has it’s own language, and most people don’t get it. What people need is someone who can translate all the mumbo jumbo and make some sense out of everything. There IS a logic behind it, and all it takes is someone who is patient enough to sit down and explain it all, answer questions, etc. There ARE answers out there, there ARE translators out there… it just takes some time, effort, and patience to find them and listen to them.
That’s all for me today. It’s been a busy day, and I’m dog tired (enough already!!). I hope you have a wonderful evening!
This is just a brief thank you to my beloved wife, who has always supported me. I would not be the man I am, in the career I am, without her unquestioning, unwaivering support. She stands by me in everything I do, and I go to bed each night knowing that I have a partner in all that I do. I love you honey.
Hi! I’m Sammy Bo Journey, the Dog Blogger. Believe it or not, I blog about insurance. Read more about that in my about page.
I’m here to tell you a little bit about myself. I’m relatively young, but my daddy has taught me a lot about insurance because of all the times that I’ve been bad… I guess it’s cost him a lot of money. But I couldn’t help it, right?
Needless to say, he’s gotten mad at me a few times. So what I took the car out for a spin? So what I might have chewed up a couple of valuables? Don’t even get me started on when Demon Doggy takes over – things get quite interesting…..
Anyway, I’m here to pass on some of the valuable insights I’ve learned about protection and coverage through all my various mistakes. I hope that you learn something… I know I sure did!