Business Insurance

What kinds of questions should I be expected to answer when I apply for an insurance policy--and why?

When you apply for an insurance policy, you’ll be asked a number of questions. Among other things, the agent might ask you your name, age, gender, and address. You’ll also be asked a number of other questions which will be used to determine how likely you are to make a claim.

When an insurance company is deciding whether or not to offer automobile insurance to a potential customer, it wants to know about the person’s previous driving record, whether he has any recent accidents or tickets, and what type of car is to be insured.

Insurance companies have different programs for different customers. Adults with good driving records will generally pay less for Orange County auto insurance than a young driver with traffic tickets will. In order to determine which program you qualify for, an insurance company needs basic information about you.

In addition to your age, gender, and driving experience, they will also need information about the vehicle you drive and how you drive it to determine a fair price. For example, a large luxury car costs more to repair or replace than a sub-compact; and someone who commutes 30 miles each way is more likely to be in an accident than someone who rides the bus to work and drives only on weekends.

What are the advantages to using an agent to purchase insurance?

By using an agent to purchase insurance, the policy holder receives more personal service. An agent with whom there is direct contact can be vital when purchasing a product and absolutely necessary when filing a claim. A local independent agent is able to deliver quality insurance with competitive pricing, as well as local personalized service.

What is Employment Practices Liability and why do I need it?

Employment Practices Liability is insurance coverage that protects businesses against claims made by their employees. This type of coverage protects against claims that employees’ legal rights as workers have been violated by the employer.

Businesses need this type of coverage because no company is invincible to lawsuits. Even a seeming minor situation can turn into a costly lawsuit. EPL coverage can protect your businesses from lawsuits involving:

• Discrimination
• Breach of contract
• Sexual harassment
• Wrongful termination
• Wrongful discipline
• Negligence
• Infliction of emotional distress
• Failure to employ and promote
• Infliction of emotional distress
• Mismanagement

What is an Experience Mod and how do I get one?

An Experience Mod, or Experience Modification Factor, is an important component in calculating the premiums on your workers compensation insurance coverage. Generally, the more injuries and workers compensation claims a business has, the higher its experience mod is and in turn, the higher its premiums become.

California workers compensation insurance is purchased so that an employee’s wages can be paid for, should an injury occur on the job. Essentially, the insurance company is not paying these wages for a business, but rather providing a way for businesses to finance the costs of the wages and costs of injuries. The Experience Mod is what determines the rate at which a business “pays back” the costs of injuries and wages to its insurance company. Depending on how costly an injury is, “points” can be added to an Experience Mod, making rates higher.

The rate of an Experience Mod is based on a few different factors:

• Costs of injuries by employees
• Number of “points” for each type of injury
• Current year’s increase in premium costs due to injuries

How do I evaluate what deductible to choose?

Choosing a deductible for insurance, especially for businesses, is not something to rush through. Although it may seem easy to let your insurance agent create business owner policies for you, this approach can end up costing you.

When choosing a deductible, you want to make sure that your business will have the ability to pay it should something happen. Choosing a higher deductible will usually result in a lower premium, but you do not want to set your deductible so high that your business will have trouble covering it in the event of a claim, accident, etc.

Consider the worth of your business and its ability to cover costs when choosing a deductible. You don’t want to set it too low and end up paying additional premium, but you also don’t want to set it so high that you cannot afford to cover it should something happen.

Do I need an umbrella policy?

An umbrella policy, often referred to as excess liability coverage in the business world, is essential for all businesses and companies. Most business owners’ policies will have liability coverage within them, but it is often not enough. An umbrella policy can cover the costs of liability issues that go beyond the liability coverage of your BOP. Umbrella insurance provides your business with protection in case of lawsuits that develop as a result of something your company is being accused of doing in regard to injuries, property damage, etc.

For example, say your business is sued because someone was injured on your property. The costs of the claim and lawsuit add up to $150,000, but your BOP liability coverage only goes up to $100,000. Who do you think will be responsible for paying the extra $50,000? Not your insurance company; the responsibility lies solely with the business owner/operator and the company to pay for any costs that reach beyond the insurance policies’ coverage.

Every type of business can benefit from an umbrella policy. Accidents happen every day and lawsuits are everywhere; no business is invincible. Purchasing a liability policy helps protect you, your business, and those who rely on it from potentially crippling debt.

How do I reduce my Workers Compensation Costs?

Workers Compensation costs can increase in no time. There are, however, some practices to help reduce high costs and reduce the amount businesses are spending on California workers comp insurance. Building a solid OSHA program can be extremely helpful and can reduce the costs of Workers Compensation to your business. It is important for your business to be in complete compliance with OSHA in order to both reduce the risk of accidents and reduce the rate of coverage. Here are some suggestions:

• Develop workplace programs as required by OSHA standards
• Integrate such programs into the daily operations of your business
• Thoroughly investigate all injuries and illnesses
• Provide training and programs for all employees to develop safety competence in the workplace
• Audit the programs and training you implement in the workplace on a regular basis; this can stimulate improvement on OSHA compliance in the long run
• Complying with OSHA standards is required by law in most states, and for those in which it is not, it’s a great way to reduce incidents, injuries, accidents, and costs to your business.

What exactly is Hired and Non-Owned Auto Insurance?

Hired Auto is an insurance line that provides liability coverage for when you are or an employee is driving a rented, hired, or borrowed vehicle for your business.

Non-Owned Auto is an insurance line that provides liability coverage for when an employee has to drive his personal vehicle for business purposes—a car that your business does not own or has not rented, hired, or borrowed.

Any business that makes use of rental, hired, borrowed, or any employee’s own personal vehicle needs to purchase Hired and/or Non-Owned Auto insurance coverage. It may be difficult to get enough coverage for these types of vehicles in a regular commercial auto policy, since your company does not own them.

What is a waiver of subrogation?

A waiver of subrogation is a contractual agreement that states you have given up your right to sue a third party if a claim should present itself. Such a waiver must be written and signed PRIOR to loss and liability issues. For example, if you rent out a hall for a party and they ask you to sign a waiver of subrogation in your agreement, you’re giving up your right to sue the hall should anything happen to someone at or while leaving the party.

In business, a waiver of subrogation is usually used in regard to Workers Compensation. In terms of California workers compensation, a waiver of subrogation would ensure that third parties would not be held liable for claims.

For example: A painting company is painting a home. Should an employee of the company be hurt on the customer’s property, without a waiver of subrogation in their Workers Compensation contract, the insurer of the painting company can try to collect some of the cost of the claim from the customer. If there is a waiver of subrogation in the contract, then the insurer will pay the whole claim cost and would not be able to go after the customer.

Does my company need Directors & Officers Liability Insurance?

Directors & Officers Liability Insurance is a policy that all business owners should look into purchasing. General liability and excess liability insurance coverage can help up to a point, so you may find yourself needing additional and more specialized coverage should you be faced with a claim and/or lawsuit. Any company that has a board of directors and chief officers needs this coverage in case of lawsuits in conjunction with performance of duties in relation to a company. (Do not confuse this with Errors & Omissions coverage, as this is concerned primarily with the performance of products and services, not individuals.)

Businesses should definitely purchase Directors & Officers Liability Insurance for the following reasons:

• Employment practices lawsuits make up the single largest areas of claims under Directors & Officers policies (over 50 percent).
• You don’t want investors, officers, and board members/directors to have to risk their personal assets to serve your company (oftentimes, they aren’t willing to do this).
• Employee, stockholder, and client claims will be made against the investors, officers, board, and company. These individuals are directly responsible for the company’s operations and can pay a big price in both the company’s assets and their own personal assets should a lawsuit ensue.

What is the difference between an employee and an independent contractor?

Especially in today’s rough economy, hiring an independent contractor can be beneficial to the expenses of business owners. Business owners do not have to provide independent contractors with contractual salary/wages, benefits, workers compensation, overtime, payroll taxes, etc.—all things that must be provided to employees. Usually the basic costs to the employer for hiring an independent contractor are to supply a workspace, equipment, tools, and work related supplies.

You must be careful to know the difference between an employee and an independent contractor because you can face huge penalties from the government. You must submit a separate tax form for independent contractors that proves they are not regular employees, and prove that the aforementioned coverages and procedures need not be taken for them.

If you cannot prove to the IRS that you have not “abused” the privilege of hiring an independent contractor, then you can be faced with costly punishments.

In order for someone to be characterized as an independent contractor and NOT an employee, that person must have total control of the work he does. In other words, a business owner can control the result of the work of independent contractor (i.e. order that something else be done if they are unsatisfied with the work after completion), but they cannot give them orders on how to get the work completed. The company that the independent contractor is actually employed by is who takes charge of how/when their work gets done. A business owner can in no way control the work of an independent contractor, but can bring in a different independent contractor should the work not meet their expectations.

How Does Business Income Coverage work?

In the most basic of terms, Business Income Coverage is protection against the loss of your income should anything happen to your business. For example, if a fire occurs on the property of your business and you are unable to operate and make money for a period of time, Business Income Coverage will make sure that you are still paid and have income. This kind of coverage not only protects you as a business owner, but also protects your employees and their income.

Business Income Coverage policies and their limits, like most Orange County business insurance coverages, are determined solely by the business owner/operator. There are a few things to factor into the makeup of your coverage.

• Period of restoration is the amount of time your business may take to recover from a loss, and the amount of time you and your employees will need income coverage.
• Calculate an anticipated amount of income that will be lost by you and your employees.
• Calculate an anticipated amount of money you may need to cover the physical rebuilding/restoration of your business and the lease/rent of the property.
• Calculate any “extra expenses” outside a normal coverage range. (i.e. if your business has specialized and expensive equipment that needs to be replaced)
• Calculate the anticipated expenses of your business for up to a 12 month period. You never know what can happen and in order to adequately cover your business and your employees, you should plan for the worst case scenario.
• Finally, consider what is called an “extended period of indemnity.” This is a period of time which your business may need to get “back on its feet,” even after it is repaired and brought back to operating status. This type of coverage protects you if it happens to take a while before your customers start coming back.

Auto Insurance

What is auto insurance?

Orange County auto insurance protects you against financial loss if you have an accident. It is a contract between you and the insurance company. You agree to pay the premium and the insurance company agrees to pay your losses as defined in your policy.

Orange County auto insurance provides property, liability and medical coverage:
• Property coverage pays for damage to or theft of your car.
• Liability coverage pays for your legal responsibility to others for bodily injury or property damage.
• Medical coverage pays for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.

An Orange County auto insurance policy is comprised of six different kinds of coverage. Most states require you to buy some, but not all, of these coverages. If you’re financing a car, your lender may also have requirements.

Most auto policies are for six months to a year. Your insurance company should notify you by mail when it’s time to renew the policy and to pay your premium.

What is in a basic auto policy?

Your auto policy may include six coverages. Each coverage is priced separately.

1. Bodily Injury Liability

This coverage applies to injuries you, the designated driver or policyholder cause to someone else. You and family members listed on the policy are also covered when driving someone else’s car with their permission.

It’s very important to have enough liability insurance, because if you are involved in a serious accident, you may be sued for a large sum of money. Definitely consider buying more than the state-required minimum to protect assets such as your home and savings.

2. Medical Payments or Personal Injury Protection (PIP)

This coverage pays for the treatment of injuries to the driver and passengers of the policyholder’s car. At its broadest, PIP can cover medical payments, lost wages and the cost of replacing services normally performed by someone injured in an auto accident. It may also cover funeral costs.

3. Property Damage Liability

This coverage pays for damage you (or someone driving the car with your permission) may cause to someone else’s property. Usually, this means damage to someone else’s car, but it also includes damage to lamp posts, telephone poles, fences, buildings or other structures your car hit.

4. Collision

This coverage pays for damage to your car resulting from a collision with another car, object or as a result of flipping over. It also covers damage caused by potholes. Collision coverage is generally sold with a deductible of $250 to $1,000; the higher your deductible, the lower your premium. Even if you are at fault for the accident, your collision coverage will reimburse you for the costs of repairing your car, minus the deductible. If you’re not at fault, your insurance company may try to recover the amount they paid you from the other driver’s insurance company. If they are successful, you’ll also be reimbursed for the deductible.

5. Comprehensive

This coverage reimburses you for loss due to theft or damage caused by something other than a collision with another car or object, such as fire, falling objects, missiles, explosion, earthquake, windstorm, hail, flood, vandalism, riot, or contact with animals such as birds or deer.

Comprehensive insurance is usually sold with a $100 to $300 deductible, though you may want to opt for a higher deductible as a way of lowering your premium.

Comprehensive insurance will also reimburse you if your windshield is cracked or shattered. Some companies offer glass coverage with or without a deductible.

States do not require that you purchase collision or comprehensive coverage, but if you have a car loan, your lender may insist you carry it until your loan is paid off.

6. Uninsured and Underinsured Motorist Coverage

This coverage will reimburse you, a member of your family, or a designated driver if one of you is hit by an uninsured or hit-and-run driver.

Can I drive legally without insurance?

NO! Almost every state requires you to have auto liability insurance. All states also have financial responsibility laws. This means that even in a state that does not require liability insurance, you need to have sufficient assets to pay claims if you cause an accident. If you don’t have enough assets, you must purchase at least the state minimum amount of insurance. But insurance exists to protect your assets. Trying to see how little you can get by with can be very shortsighted and dangerous.

If you’ve financed your car, your lender may require comprehensive and collision insurance as part of the loan agreement.

Do I need auto insurance if I lease a car?

If you lease a car, you still need to buy your own auto insurance policy. The auto dealer or bank that is financing the car will require you to buy collision and comprehensive coverage. You’ll need to buy these coverages in addition to the others that may be mandatory in your state, such as auto liability insurance.

If you’ve financed your car, your lender may require comprehensive and collision insurance as part of the loan agreement.

• Collision covers the damage to the car from an accident with another automobile or object.
• Comprehensive covers a loss that is caused by something other than a collision with another car or object, such as a fire or theft or collision with a deer.

The leasing company may also require “gap” insurance. This refers to the fact that if you have an accident and your leased car is damaged beyond repair or “totaled,” there’s likely to be a difference between the amount that you still owe the auto dealer and the check you’ll get from your insurance company. That’s because the insurance company’s check is based on the car’s actual cash value which takes into account depreciation. The difference between the two amounts is known as the “gap.”

On a leased car, the cost of gap insurance is generally rolled into the lease payments. You don’t actually buy a gap policy. Generally, the auto dealer buys a master policy from an insurance company to cover all the cars it leases and charges you for a “gap waiver.” This means that if your leased car is totaled, you won’t have to pay the dealer the gap amount. Check with the auto dealer when leasing your car.

If you have an auto loan rather than a lease, you may want to buy gap insurance to protect yourself from having to come up with the gap amount if your car is totaled before you’ve finished paying for it. Ask your insurance agent about gap insurance or search the Internet. Gap insurance may not be available in some states.

Do I need insurance to rent a car?

When renting a car, you need insurance. If you have adequate insurance on your own car, including collision and comprehensive, this may be enough.

Before you rent a car:

1. Contact your insurance company.

Find out how much coverage you have on your own car. In most cases, the coverage and deductibles you have on your personal Orange County auto insurance policy would apply to a rental car, providing it’s used for pleasure and not business. If you don’t have comprehensive and collision coverage on your own car, you will not be covered if your rental car is stolen or if it is damaged in an accident.

2. Call your credit card company.

Find out what insurance your card provides. Levels of coverage vary.

If you don’t have Orange County auto insurance, you will need to buy coverage at the car rental counter. The following coverages are available to you at the rental car counter:

1. Collision Damage Waiver (CDW).

Sometimes called a Loss Damage Waiver (LDW), this coverage relieves you of financial responsibility if your rental car is damaged or stolen. The CDW may be void, however, if you cause an accident by speeding, driving on unpaved roads or driving while intoxicated. This coverage generally costs $9-19 a day. If you have comprehensive and collision on your own car, you may not need to purchase this coverage.

2. Liability Insurance.

This provides excess liability coverage of up to $1 million for the time you rent a car. Rental companies are required by law to provide the minimum level of liability insurance required by your state. Generally, this does not offer enough protection in a serious accident. If you have adequate liability coverage on your car or an umbrella policy on your home/auto, you may consider forgoing this additional insurance. It generally costs about $7-9 a day. If you don’t own a car, and rent cars often, consider purchasing a non-owner liability policy. This costs approximately $200 – $300 per year. Frequent car renters sometimes find this more cost-effective than constantly paying for the extra liability coverage.

3. Personal Accident Insurance.

This provides coverage to you and your passengers for medical/ambulance bills. This type of insurance, usually costs about $3 per day, but may be unnecessary if you are covered by health insurance or have adequate medical coverage under your auto policy.

4. Personal Effects Coverage.

This provides coverage for the theft of personal items in your car. However, if you have homeowners or renters insurance, you may be covered for items stolen from the car, minus your deductible. You need to have receipts or other proof of ownership. This type of insurance usually costs about $1.25 per day. Some rental car companies combine personal accident and personal effects coverage together as one type of insurance, while others sell it individually.

The cost of insurance at the rental car counter will vary depending on the rental car company, state, and location of the dealer and the type of car you rent.

Some rental car companies may check your credit and driving history and may deny coverage. Check with the rental car company to find out its policy.

I have an older car that currently has a very low market value. Do I really need to purchase automobile insurance?

Most states have insurance laws that require drivers to have at least some automobile liability insurance. These laws were enacted to ensure that victims of automobile accidents receive compensation when their losses are caused by the actions of another individual who was negligent.

It is often the case that the cost of repairing the damages to an older car is greater than its value. In these cases, your insurer will usually just “total” the car and give you a check for the car’s market value less the deductible. Many people with older cars decide not to purchase any physical damage coverage, because the cost of coverage is not worth amount they may receive.

What's the difference between Collision Physical Damage coverage and Comprehensive Physical Damage coverage?

Collision Physical Damage coverage is defined as losses you incur when your automobile collides with another car or object. For example, if you hit a car in a parking lot, the damages to your car will be paid under your collision coverage.

Comprehensive Physical Damage coverage provides coverage for most other direct physical damage losses you could incur, including theft. For example, damage to your car from a hailstorm will be covered under your comprehensive coverage.

What's the difference between cancellation and non-renewal?

There is a big difference between when an insurance company cancels a policy and when it chooses not to renew it. Insurance companies cannot cancel a policy that has been in force for more than 60 days except:

• If you fail to pay the premium.
• You have committed fraud or made serious misrepresentations on your application.
• Your driver’s license has been revoked or suspended.

Non-renewal is a different matter. Either you or your insurance company can decide not to renew the policy when it expires. Depending on the state you live in, your insurance company must give you a certain number of days notice and explain the reason for non-renewal before it drops your policy. If you think the reason is unfair or want a further explanation, call the insurance company’s consumer affairs division. If you don’t get an explanation, call your state insurance department.

What factors can affect the cost of my automobile insurance?

A number of factors can affect the cost of your automobile insurance, some of which you can control and some of which you can’t. The type of car you drive, the purpose the car serves, your driving record, and where the car is garaged can all affect how much your automobile insurance will cost. Even your marital status can affect your cost of insurance. (Statistics show that married people tend to have fewer and less costly accidents than single people do.)

Homeowners Insurance

What are some practical things I can do to lower the cost of my homeowners insurance?

There are a number of things you can do to lower the cost of your Orange County home insurance. The easiest thing to do is get a comprehensive review of your policy and needs from your local agent.

It’s not surprising to find quotes on homeowners insurance that vary by hundreds of dollars for the same coverage on the same home. When you shop, be careful to make sure each insurer is offering the same coverage.

Another way to lower the cost of your Orange County home insurance is to look for any discounts that you may qualify for. For example, many insurers will offer a discount when you place both your Orange County auto insurance and Orange County home insurance with them. Other times, insurers offer discounts if there are deadbolt exterior locks on all your doors, or if your home has a security system. Be sure to ask us to look into these discounts for you.

Another easy way to lower the cost of your Orange County home insurance is to raise your deductible.

What does homeowners insurance cover?

The typical Orange County home insurance policy has two main sections: Section I covers the property of the insured, and Section II provides personal liability coverage for the insured. Almost anyone who owns or leases property has a need for this type of insurance. Usually, homeowners insurance is required by the lender to obtain a mortgage.

What factors should I consider when purchasing homeowners insurance?

Here’s a checklist of things you should consider when you purchase homeowners insurance:

• Determine the amount and type of insurance that you need. The coverage limit of your house should equal 100 percent of its replacement cost. If your policy limit is less than 80 percent of the replacement cost of your home, any payment from your insurance company will be less than the full cost to replace your home. You’ll have to pay the rest out of your own pocket. Also, decide if the personal property and personal liability limits are adequate for your needs.
• Determine which, if any, additional endorsements you want to add to your policy. For example, do you want the personal property replacement cost endorsement, an earthquake endorsement, or a jewelry endorsement?
• Once you’ve decided on the coverage you want in your Orange County home insurance policy, consult us. We’ll be able to help you determine if there are any gaps in coverage you might not have been aware of and explain the details of the policy’s exclusions and limitations, as well as recommend an insurance company that will live up to your expectations.

What are the policy limits (i.e., coverage limits) in the standard homeowners policy?

*Note: this answer is based on the Insurance Services Office’s HO-3 policy.

The dwelling and other structures on the premises are protected on an “all risks” basis up to the policy limits. “All risks” means that unless the policy specifically excludes the manner in which your home is damaged or destroyed, there is coverage. The policy limit for the dwelling is set by the policy owner at the time the insurance is purchased. The policy limit for the other structure is usually equal to 10 percent of the policy limit for the dwelling.

Losses to your personal property are covered on a “named perils” basis. “Named perils” means that you have coverage only when your property is damaged or destroyed in the manner specifically described in the policy. The policy limit on the coverage is equal to 50 percent of the policy limit on the dwelling. Limits for the coverage for the additional expenses (that the policy owner may incur when the residence cannot be used because of an insured loss), is equal to 20 percent of the policy limit on the dwelling.

The coverage limit on personal liability is determined by the policy owner at the time the policy is issued. The coverage limit on medical payments to others is usually set at $1000 per injured person.

Where and when is my personal property covered?

Personal property (except property that is specifically excluded) is covered anywhere in the world. For example, suppose that while traveling, you purchased a dresser and you want to ship it home. Your Orange County home insurance policy would provide coverage for the named perils while the dresser is in transit, even though the dresser has never been in your home before.

Do I need earthquake coverage? How can I get it?

The standard insurance policy does not pay for direct damages caused by earth movement. “Earth movement” is a much broader term than “earthquake.” It includes earthquakes, volcanic activity, and other earth movement. This coverage may be available by endorsement for an additional charge. If you live in an area that is more likely to have an earthquake, you’ll pay more than if you live in an area that is unlikely to have one. We can help you weigh the costs and benefits of this coverage before you decide to purchase.

Life Insurance

How much life insurance should an individual own?

Rule of thumb suggests an amount of life insurance equal to 6-8 times annual earnings. However, many factors should be taken into account when determining the right amount of life insurance for you and your family.

Important factors include:

• Income sources (and amounts) other than salary/earnings
• Whether or not you are married and, if so, what your spouse’s earning capacity is
• The number of individuals who are financially dependent upon you
• The amount of death benefits payable from Social Security and from an employer-sponsored life insurance plan
• Whether any special life insurance needs exist (e.g., mortgage repayment, education fund, estate planning need, etc.)
• Calculating the correct amount of life insurance to buy is not as simple as it appears. We recommend contacting us for help determining the right amount of coverage. As independent agents, we are unbiased advisors that will help you avoid buying too much, show you appropriate optional coverage for your needs, and recommend a company that will best serve your interests