Courtesy of iii.org

For many people, their home is their greatest asset, so it is crucial to avoid being underinsured. To properly insure your home, it is important to ask your insurance professional four key questions.

1. Do I have enough insurance to rebuild my home?

Your policy needs to cover the cost of rebuilding your home at current construction costs. Unfortunately, some homeowners simply purchase enough insurance protection to satisfy their mortgage lender. Others confuse the real estate value of their home with what it would cost to rebuild it. Quite simply, you should have enough insurance to rebuild your home in the event that it is completely destroyed. Be sure to consider the following:

• Replacement cost – Most policies cover replacement cost for damage to the structure. A replacement cost policy pays for the repair or replacement of damaged property with materials of similar kind and quality.
• Extended replacement cost – This type of policy provides additional insurance coverage of 20 percent or more over the limits in your policy, which can be critical if there is a widespread disaster that pushes up the cost of building materials and labor.
• Inflation guard – This coverage automatically adjusts the rebuilding costs of your home to reflect changes in construction costs. Find out if your policy includes this coverage or if you have to purchase it separately.
• Ordinance or law coverage – If your home is badly damaged, you may be required to rebuild it to meet new (and often stricter) building codes. Ordinance or law coverage pays a specific amount toward these costs.
• Water back-up – This coverage insures your property for damage from sewer or drain back-up. Most insurers offer it as an add-on to a standard policy.
• Flood insurance – Standard home insurance policies provide coverage for disasters such as fire, lightning and hurricanes. They do not include coverage for flood (including flooding from a hurricane). Flood insurance is available through the federal government’s National Flood Insurance Program (www.floodsmart.gov), but can be purchased from the same agent or company representative who provides you with your home or renters insurance. Make sure to purchase flood insurance for the structure of your house, as well as for the contents. Excess Flood Protection, which provides higher limits of coverage than the NFIP in the event of catastrophic loss by flooding, is available from some insurers. Keep in mind that there is a 30-day waiting period before the insurance is valid.

2. Do I have enough insurance to replace all of my possessions?

Most homeowners insurance policies provide coverage for your personal possessions for approximately 50 percent to 70 percent of the amount of insurance you have on the structure of your home. So if you have $100,000 worth of coverage on the structure of your home, you would be covered for $50,000 to $70,000 worth of the contents of your home, depending on the policy.

The best way to determine if this is enough coverage is to conduct a home inventory, which details everything you own and the estimated cost to replace these items if they are stolen or destroyed by a disaster. Keep your home inventory in a safe place if you have physical copies; or store it in the Cloud if you are using a home inventory app.

You can insure your possessions in two ways: by their actual cash value or their replacement cost. Make sure you review with your insurance pofessional which type of coverage is best for your particular situation.

• Actual cash value policy This coverage pays the cost of replacing your belongings minus depreciation.
• Replacement cost policy This coverage reimburses you for the full current cost of replacing your belongings.

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To illustrate the difference between the two types of policies, suppose, for example, a fire destroys a 10-year-old television set in your living room. If you have a replacement cost policy for the contents of your home, the insurance company will pay to replace the TV with a comparable new one. If you have an actual cash value policy, it will pay only a small percentage of the cost of a new TV set because the old TV has been used for 10 years and is now worth a lot less than its original cost. Some replacement cost policies specify that the new item be purchased by the insurance company as they may be able to purchase at a bulk or special rate. The price of replacement cost coverage is about 10 percent more than that of actual cash value.

3. Do I have enough coverage for additional living expenses?

Coverage for additional living expenses pays the extra costs of temporarily living away from your home if you can’t live in it due to an insured disaster such as a hurricane. It covers hotel bills, restaurant meals, transportation and other living expenses incurred while your home is inaccessible or being rebuilt. It is important to note that it covers only those expenses that are over and above your regular living expenses, so it would not cover your mortgage, or regular trips to the grocery store. If you rent out part of your house, this coverage also reimburses you for the rent that you would have collected from your tenant if your home had not been destroyed.

Coverage for additional living expenses differs from company to company. Many policies provide coverage for about 20 percent of the insurance on your house. Some companies will sell you a policy that provides you with an unlimited amount of loss of use coverage, for a limited amount of time.

Make sure you know exactly how much coverage you have for additional living expenses, and whether there is a time limit. If the standard coverage is not adequate, it can generally be increased for an additional premium.

4. Do I have enough insurance to protect my assets?

Although not a key element in disaster planning, it is also important to have adequate liability protection. This covers you against lawsuits for bodily injury or property damage that you or your family members may cause to other people. It also pays for damage caused by pets. Liability insurance pays for both the cost of defending you in court and for any damages a court rules you must pay—up to the limits of your policy. Most homeowners insurance policies provide a minimum of $100,000 worth of liability insurance, but higher amounts are available.

It is important to purchase enough liability insurance to protect your assets. If the standard liability coverage in your homeowners policy is not sufficient, you may need an excess liability, or umbrella, policy, which provides additional coverage over and above what is covered in your home (and auto) insurance policy.

Courtesy of iii.org

Creating and updating an inventory of your personal possessions is one of the best ways to make the most of your homeowners or renters insurance, and makes filing a claim easier and more efficient.

A home inventory is simply a list of your personal possessions along with their estimated financial value. You can create a home inventory in a simple, low-tech manner by writing down everything in a notebook and keeping receipts in a folder. Or you can take advantage of technology and use a digital camera or smart phone or app to make your record.

No matter how you choose to do it, the important thing is to take action. An up-to-date home inventory will:

1. Help you purchase the right amount and type of insurance. Having an accurate list of all your possessions helps you to have a more productive conversation with your insurance professional when making decisions about homeowners or renters insurance coverage. After all, if you don’t know what you have, how can you insure it adequately?
2. Make filing a claim as simple as possible. Most people cannot remember what they had for breakfast much less recall the contents of their attic, kitchen cabinets or downstairs closet after a fire, storm or other catastrophe. Disasters are scary and stressful, which can make trying to list damaged property for a claims form even more challenging. Having your belongings already documented in your home inventory can be a huge relief at times like these.
3. Substantiate financial losses for tax purposes or when applying for financial assistance. Following a catastrophe, the only way to determine whether you qualify for a tax break or disaster assistance is to substantiate your financial losses. A well-organized home inventory can be an extremely useful tool in this process.

Next steps: Use these tips to get started on your home inventory.  

Courtesy of iii.org

There are more than a half-million professionals employed within the U.S. property/casualty insurance market. And, if you ask many of them how they got into the industry, most will call it a lucky break. My such stroke of luck occurred decades ago. I was working for a real estate developer, the housing market took a(nother) crash, so I needed to find work. A survey of the marketplace introduced the tremendous opportunities in the insurance field and brought me a wonderful, rewarding career. I highly recommend it!

The insurance field brings a meaningful job. This is an industry that helps protect people and their finances. Insurance makes things happen. You need it to drive a car, build a home (or rebuild one after a disaster), to leave loved ones financially secure, to borrow money to build a business – and so on. Check out InsureMyPath for insight into the profession and a review of the types of career roles.

For a student considering a college curriculum, there are universities with a risk management and insurance curriculum throughout the U.S. Among them is the insurance program at Florida State University.

What do young professionals think of the insurance field? The view themselves as “secret saviors” because they help people rebuild after disaster. There are a lot of jobs, and room for self-development and advancement. Join us!

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.