Courtesy of iii.org

Pop quiz: what’s one of the most common types of homeowners insurance claims? (Hint: it’s not fire.)

It’s water damage. Maybe that’s not surprising – it rains a lot in many places. But what may surprise you is that things like pipe bursts and broken appliances are increasingly the main causes of water damage in homes.

In insurance-speak, these are called “non-weather water damage claims.” Worryingly, these claims are happening more often and are getting a lot more expensive. A Best’s Review article reports that the average homeowners water damage claim is now over $6,700. Large losses (over $500,000) have doubled in number over the past three years. Non-weather water damage is now costing insurers (and their policyholders) billions in losses every year.

This is happening for several reasons. Our housing stock is aging, as is our infrastructure. More houses are being built and they’re getting bigger – many houses now have extra bathrooms and second-floor laundry rooms, which means more piping. (The story is probably different in Florida. You can read why that is here.)

But the worst part is that many – if not most – water damage claims are preventable. Inspecting pipes or conducting routine maintenance can go a long way. That’s where the internet of things (IoT) comes in. Smart devices and connected sensors installed on piping can detect leaks before they occur or before they cause too much damage. They’re basically smoke detectors, but for water.

And they work. Best’s Review noted that installing IoT devices can reduce water losses by up to 93 percent.

The Review quoted an IoT company CEO who claimed that leak detection devices could save insurers and their customers $10 billion every year.

Homeowners have admittedly been slow to install IoT to help detect leaks. But insurers are hopeful that raising awareness about the issue, offering policyholder incentives like premium discounts, and encouraging IoT installation during home construction will begin to turn the tide.

Update: Of interest, Washington state adopted a rule in 2018 that specifically mentions water monitors and water shut-off systems as permissible tools for an insurer’s risk reduction program.

Courtesy of iii.org

How gap insurance works

When you buy or lease a new car or truck, the vehicle starts to depreciate in value the moment it leaves the car lot. In fact, most cars lose 20 percent of their value within a year. Standard auto insurance policies cover the depreciated value of a car—in other words, a standard policy pays the current market value of the vehicle at the time of a claim.

If, when you finance the purchase of a new car and put down only a small deposit, in the early years of the vehicle’s ownership the amount of the loan may exceed the market value of the vehicle itself.

In the event of an accident in which you’ve badly damaged or totaled your car, gap insurance covers the difference between what a vehicle is currently worth (which your standard insurance will pay) and the amount you actually owe on it.

When you might need gap insurance

It’s a good idea to consider buying gap insurance for your new car or truck purchase if you:

• Made less than a 20 percent down payment
• Financed for 60 months or longer
• Leased the vehicle (carrying gap insurance is generally required for a lease)
• Purchased a vehicle that depreciates faster than the average
• Rolled over negative equity from an old car loan into the new loan

Where you can get gap insurance

Your car dealer may offer to sell you gap insurance on your new vehicle. However, most car insurers also offer it, and they typically charge less than the dealer. On most auto insurance policies, including gap insurance with collision and comprehensive coverage adds only about $20 a year to the annual premium.

 

Courtesy of iii.org

BACKGROUND

Cellphones play an integral role in our society. However, the convenience they offer must be judged against the hazards they pose. Their use contributes to the problem of inattentive driving, which also includes talking, eating, putting on make up and attending to children.

As many as 40 countries may restrict or prohibit the use of cellphones while driving. Countries reported to have laws related to cellphone use include Australia, Austria, Belgium, Brazil, Botswana, Chile, the Czech Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hungary, India, Ireland, Israel, Italy, Japan, Jordan, Kenya, Malaysia, the Netherlands, Norway, the Philippines, Poland, Portugal, Romania, Russia, Singapore, the Slovak Republic, Slovenia, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan, Turkey, Turkmenistan, the United Kingdom and Zimbabwe. Most countries prohibit the use of hand-held phones while driving.

Supporters of restrictions on driving while using a cellphone say that the distractions associated with cellphone use while driving are far greater than other distractions. Conversations using a cellphone demand greater continuous concentration, which diverts the driver’s eyes from the road and his mind from driving. Opponents of cellphone restrictions say drivers should be educated about the effects of all driver distractions. They also say that existing laws that regulate driving should be more strictly enforced.

Earlier Studies: Over the past decade numerous studies have been conducted on driver inattention, in particular focusing on the use of cellphones. Below is a summary of some these studies.

Motorists who use cellphones while driving are four times as likely to get into crashes serious enough to injure themselves, according to a study of drivers in Perth, Australia, conducted by the Insurance Institute for Highway Safety. The results, published in July 2005, suggest that banning hand-held phone use will not necessarily improve safety if drivers simply switch to hand-free phones. The study found that injury crash risk didn’t vary with type of phone.

Many studies have shown that using hand-held cellphones while driving can constitute a hazardous distraction. However, the theory that hands-free sets are safer has been challenged by the findings of several studies. A study from researchers at the University of Utah, published in the summer 2006 issue of Human Factors, the quarterly journal of the Human Factors and Ergonomics Society, concludes that talking on a cellphone while driving is as dangerous as driving drunk, even if the phone is a hands-free model. An earlier study by researchers at the university found that motorists who talked on hands-free cellphones were 18 percent slower in braking and took 17 percent longer to regain the speed they lost when they braked.

A September 2004 study from the National Highway Traffic Safety Administration (NHTSA) found that drivers using hand-free cellphones had to redial calls 40 percent of the time, compared with 18 percent for drivers using hand-held sets, suggesting that hands-free sets may provide drivers with a false sense of ease.

A study released in April 2006 found that almost 80 percent of crashes and 65 percent of near-crashes involved some form of driver inattention within three seconds of the event. The study, The 100-Car Naturalistic Driving Study, conducted by the Virginia Tech Transportation Institute and the NHTSA, broke new ground. (Earlier research found that driver inattention was responsible for 25 to 30 percent of crashes.) The newer study found that the most common distraction is the use of cellphones, followed by drowsiness. However, cellphone use is far less likely to be the cause of a crash or near-miss than other distractions, according to the study. For example, while reaching for a moving object such as a falling cup increased the risk of a crash or near-crash by nine times, talking or listening on a hand-held cellphone only increased the risk by 1.3 times.

Employer and Manufacturer Liability: Although only a handful of high-profile cases have gone to court, employers are still concerned that they might be held liable for accidents caused by their employees while driving and conducting work-related conversations on cellphones. Under the doctrine of vicarious responsibility, employers may be held legally accountable for the negligent acts of employees committed in the course of employment. Employers may also be found negligent if they fail to put in place a policy for the safe use of cellphones. In response, many companies have established cellphone usage policies. Some allow employees to conduct business over the phone as long as they pull over to the side of the road or into a parking lot. Others have completely banned the use of all wireless devices.

In an article published in the June 2003 edition of the North Dakota Law Review, attorney Jordan Michael proposed a theory of cellphone manufacturer liability for auto accidents if they fail to warn users of the dangers of driving and talking on the phone at the same time. The theory holds that maker liability would be similar to the liability of employers who encourage or demand cellphone use on the road. Holding manufacturers liable would cover all persons who drive and use cellphones for personal calls. Michael notes that some car rental agencies have already placed warnings on embedded cellphones in their cars.

Courtesy of iii.org

Many businesses—especially small businesses with fewer employees—depend on a single person or a few key people for their success. If a key person becomes unable to work or dies, the business might lose valuable accounts or be temporarily unable to operate, resulting in lost revenue.

The loss of an important employee can hurt the morale of a business, but the financial impact can be mitigated if a business purchases key person insurance. This type of coverage can enable a business to continue paying its bills and fund the search for a new employee. In unfortunate instances where a business cannot survive without the key employee, the funds from key person insurance can be used to pay severance to employees, distribute funds to investors and close the business in an orderly manner.

Key person insurance is usually owned by the business, which pays the premiums. This coverage is also a requirement of most banks and lending institutions when applying for financing or credit.

Who qualifies as a “key person”?

There are no hard-and-fast rules for identifying key persons in your business. Generally, anyone who directly contributes to a company’s bottom line or is fundamental to its operations might be considered a key person. Examples include:

• C-Suite Executives—such as a CEO or COO.
• Leading sales personnel.
• Heads of product development.
• Engineers or other difficult-to-replace personnel.

Types of key person insurance

Key person insurance comes in the following two forms:

• Key Person Life Insurance—This type of coverage differs from regular life insurance in that it specifically covers individuals in a business who are crucial to company operations. It provides the business with an infusion of cash if an insured key employee dies, regardless of cause or place of death. These funds can help compensate for revenue lost as a result of the death, as well as pay off debts, buy out surviving shareholders’ interest from heirs and finance the costs of a new employee search or training programs. Key person life insurance can be purchased as term insurance lasting for a defined period of time or as extended universal or whole life coverage. The amount of coverage is based on a key person’s income, overall business revenue and the portion of revenue attributable to the key person.
• Key Person Disability Insurance—This policy will provide funds to a business if an insured key employee becomes disabled and unable to work—partially or entirely. While standard disability insurance covers an employee’s lost salary and medical expenses, a key person disability policy provides funding to a business to make up for lost revenue, the cost of hiring a new employee and other related expenses.

Like other disability and life insurance policies, the cost of premiums for key person insurance depends on the age, health and role of the key employee, as well as the risks the employee takes in their personal life—for example, does the CEO fly her own plane?

“First-to-die” key person coverage

A cost-effective option for buying key person insurance is for a group of executives to join together on a “first-to-die” policy that insures just the first of the group who passes away. Once the policy is used to cover the loss of the first person to die, another member of the group becomes eligible for coverage. Thus, the key person insurance continues for the new members of the leadership team, but premiums reflect the fact that only one life is being covered at a time.

This type of insurance can be a useful tool when it comes to succession planning for your business—and having a succession plan is crucial to ensure the successful transfer of your company or business interests.

Your insurance professional can provide guidance on options and costs of individual and first-to-die key person coverage.

Courtesy of iii.org

“When thunder roars, go indoors!” is a truism that actually holds up. But much of what we think we know about lightning is fiction. Here are some common myths, along with the facts that will keep you and your loved ones safe in a storm.

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At any given time on our planet Earth, there are 1,800 thunderstorms in progress—and with them comes lightning. Property damage from lightning is covered by standard homeowners insurance for your home, and the comprehensive portion of an auto policy for your car—but bodily harm from lightning isn’t easily remedied.

During a thunderstorm, it’s best to take shelter in a house, other structure or a hard-topped, fully enclosed vehicle. But as one of these options may not be available to you, your safety and wellbeing may depend on knowing the difference between these lightning myths and the facts.

• Myth #1 – Lightning never strikes twice in the same place.

• Fact: Lightning often strikes the same place repeatedly, especially if it’s a tall, pointy, isolated object. The Empire State Building was once used as a lightning laboratory because it is hit nearly 25 times per year, and has been known to have been hit up to a dozen times during a single storm.

• Myth #2 – Lightning only strikes the tallest objects.

• Fact: Lightning is indiscriminate and it can find you anywhere. Lightning may hit the ground instead of a tree, cars instead of nearby telephone poles, and parking lots instead of buildings.

• Myth #3 – If you’re stuck in a thunderstorm, being under a tree is better than no shelter at all.

• Fact: Sheltering under a tree is just about the worst thing you can do. If lightning does hit the tree, there’s the chance that a “ground charge” will spread out from the tree in all directions. Being underneath a tree is the second leading cause of lightning casualties.

• Myth #4 – If you don’t see rain or clouds, you’re safe.

• Fact: Lightning often strikes more than three miles from the thunderstorm, far outside the rain or even the thunderstorm cloud. Though infrequent, “bolts from the blue” have been known to strike areas as distant as 10 miles from their thunderstorm origins, where the skies appear clear.

• Myth #5 – A car’s rubber tires will protect you from lightning

• Fact: True, being in a car will likely protect you. But most vehicles are actually safe because the metal roof and sides divert lightning around you—the rubber tires have little to do with keeping you safe. Convertibles, motorcycles, bikes, open shelled outdoor recreation vehicles and cars with plastic or fiberglass shells offer no lightning protection at all.

• Myth #6 – If you’re outside in a storm, lie flat on the ground.

• Fact: Lying flat on the ground makes you more vulnerable to electrocution, not less. Lightning generates potentially deadly electrical currents along the ground in all directions—by lying down, you’re providing more potential points on your body to hit.

• Myth #7 – If you touch a lightning victim, you’ll be electrocuted.

• Fact: The human body doesn’t store electricity. It is perfectly safe to touch a lightning victim to give them first aid.

• Myth #8 – Wearing metal on your body attracts lightning.

• Fact: The presence of metal makes very little difference in determining where lightning will strike. Height, pointy shape and isolation are the dominant factors in whether lightning will strike an object (including you). However, touching or being near metal objects, such as a fence, can be unsafe when thunderstorms are nearby. If lightning does happen to hit one area of the fence—even a long distance away—the metal can conduct the electricity and electrocute you.

• Myth #9 – A house will always keep you safe from lightning.

• Fact: While a house is the safest place you can be during a storm, just going inside isn’t enough. You must avoid any conducting path leading outside, such as electrical appliances, wires, TV cables, plumbing, metal doors or metal window frames. Don’t stand near a window to watch the lightning. An inside room is generally safe, but a home equipped with a professionally installed lightning protection system is the safest shelter available.

• Myth #10 – Surge suppressors can protect a home against lightning.

• Fact: Surge arresters and suppressors are important components of a complete lightning protection system, but can do nothing to protect a structure against a direct lightning strike. These items must be installed in conjunction with a lightning protection system to provide whole house protection.