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April 2010

THE BENEFITS OF LIFE INSURANCE USUALLY OUTWEIGH THE COSTS

By Life and Health

Many people, when thinking of Life insurance, imagine that it is something for the young only. They believe that Life insurance is a tool best used by newlyweds with mortgages, parents of young children, and spouses who are both employed. What does that mean for seniors? Does that mean there is no need for Life insurance in those who are retired? The answer to that question depends on your family’s needs as well as your financial picture upon retirement.

Your Family’s Needs

One of the biggest concerns among retired individuals is whether or not they have enough money set aside to last their entire lives. Since life expectancies are predictable, but an actual lifespan is not, retirees are left with an uncertain bet that the amount of money they saved for retirement is enough. Sometimes, this bet is funded with a Straight Life Annuity or pension that pays out like a Straight Life Annuity. Both of these instruments could impact the surviving spouse’s income if the annuitant or pensioner dies and there is no death benefit. When a surviving spouse stands to lose a portion of his or her income after the death of their spouse, then a Life insurance policy can provide a much needed source of continuing income to replace the lost amount.

Another consideration is whether or not you would like to use death benefit proceeds to create a trust for your grandchildren. Leaving a trust account for their college or adult years can help take some of the financial burden from your children and your grandchildren as it might allow them to avoid student loans and other debt. Funding the trust with Life insurance proceeds takes the funding burden off of your spouse and creates a fixed amount for the trust.

Financial Planning

Life insurance policies are great tools for making charitable donations upon death. If your spouse is not in need of the death benefit proceeds you can set them up either in a charitable trust or by simply naming a charity as your beneficiary. This allows your surviving spouse to see all the good your donation will do, without it impacting his or her financial picture.

Depending on how well-planned your retirement has been you may accumulate some debt in your later years that can be paid off with your Life insurance policy death benefit. Debt as simple as a car loan, small home equity loan, or even a loan for new furniture can cause undue stress to your surviving spouse and a Life insurance death benefit is an easy solution to get rid of it.

Another financial planning consideration is estate taxes. Although Life insurance death benefits are generally not taxable, the rest of your estate could be. Instead of forcing your surviving spouse to liquidate assets or take funds from a retirement account to pay estate taxes or income taxes for the year you pass away, why not buy a Life insurance policy to fulfill that need?

Conclusion

There are so many different ways that a Life insurance policy can improve your surviving spouse and family’s lives, no matter what your age is, that it is an expense everyone should consider. Without knowing what needs the future will bring, and what health complications could impact your ability to get insurance, the time to buy is now.

SHOULD YOU CONSIDER LIFE INSURANCE FOR YOUR CHILDREN?

By Life and Health

Some people are superstitious about insurance. They might be afraid to buy Life insurance for their children, just as some people are fearful to buy it for themselves. Others feel sure that nothing bad could ever happen to their children, so they avoid spending the money to insure a child’s life.

The real truth is that there are reasons beyond the unthinkable to insure a child’s life. A good Life insurance policy, purchased when a child is young, healthy, and far from any negative events, can pay big dividends for the child later. (And, even though we hate to think the worst, how much more awful would it be to have financial stress added to the disaster of losing a child? Peace of mind can make life as a parent much easier, too.)

In fact, most of the reasons to insure your child’s life are really about ensuring that your child can have a long, happy, prosperous life, regardless of what he or she encounters in terms of illness or accident later.

Here are a few of the reasons to consider insuring your child:

  • Permanent Life insurance accumulates cash value, and that value grows tax-deferred. When the child is old enough for college, the cash could help pay for it. Or, it could help the child purchase his or her first home. If the policy was left untouched through those Life transitions, it could even help fund your child’s own retirement!
  • Buying Whole Life or Universal Life insurance now guarantees your children will not be without insurance later, when they are more likely to need it. Later in life, if they should develop an illness or sustain serious injury, it could be cost prohibitive, or even impossible, to obtain coverage.
  • Insuring a child’s life with Whole Life or Universal Life also means that the child’s coverage can continue regardless of military service, health conditions, or taking a college major in skydiving!

When you shop for Life insurance for a child, there’s still more to consider. For instance, you can make sure the plan you buy offers a rider to purchase additional insurance. With that option, at such specified times as marriage or the births of your grandchildren, your child may purchase additional insurance at standard rates, without reapplying. Such a rider generally offers the opportunity to increase coverage on a no-questions-asked basis.

Advances in the science of statistics, too, will more firmly establish the mortality rates of various physical conditions, hobbies, and professions. Your child becoming a member of any of those identified groups would also result in a premium hike, or the inability to purchase insurance at all.

When you purchase Life insurance for your child, your main intent — especially if you are a young parent with limited resources — might be to cover expenses you’d incur if you did lose a child to illness or accident. And that might be enough. But it’s also nice to know that there’s so much more that coverage can do to help ensure your child’s best financial future.

ATTITUDES TOWARD THE EFFECTS OF BECOMING DISABLED DIFFER AMONG PROFESSIONS

By Life and Health

A new study by MassMutual Life Insurance Company suggests that your chosen profession could indicate how you react to the thought of a potential disability. MassMutual commissioned Harris Interactive during September 2006 to conduct a Web survey of 1,023 U.S. career professionals to determine how they would react to a prolonged loss of income due to disability. The insurer requested the survey because they wanted to gauge the reactions of attorneys, accountants, engineers, marketing, advertising and other professional services executives to see if they varied by occupation. The conclusion the researchers drew from their findings is that attitudes differ from profession to profession.

The MassMutual Benefits Barometer Survey: Disability Perceptions, as the study was called, accomplished three objectives. First, it rated the various professionals on their emotional response to long-term disability; second, it displayed common reasons for not owning Disability Income insurance; and third, it identified resources the different occupational groups have to help pay their bills if they are unable to work.

When it comes to emotional response, advertising and marketing professionals are the most anxious about the possibility of becoming disabled. Sixty-six percent of this group said they would feel financially insecure, and 26% answered they would be unprepared emotionally if they became disabled. Forty-one percent responded that they would be worried about being able to work again.

Attorneys and executives in professional services, including information technology and financial services, were less emotional about becoming disabled. Eighty-two percent of the attorneys polled felt they would get well and return to work. However, 70 % said that they would have anxiety toward their future financial situations, while 44% responded that they would feel like a burden to their families. The responses received from executives in professional services were neither overly anxious nor optimistic, as compared to other professionals.

When the responses provided by engineers and accountants were compared with all the career professionals surveyed, this group revealed itself to be the most dispassionate about becoming disabled. A mere 35% of engineers responded that they would feel a lack of financial security and only 27% of accountants would be worried about being able to work again.

When study participants were asked why they didn’t own Disability Income insurance, 44% said they didn’t feel they needed it, 30% said it costs too much, and 27% answered that they’re in good health.

The question concerning financial resources available to draw from in the event of a disability also drew some interesting responses. About 21% of attorneys surveyed reported they could live on half of their salary for “as long as they had to.” This group was the most likely to have a variety of resources such as stocks, bonds, mutual fund investments, home equity loans and loans from family or friends that they could use to keep them financially stable if they became disabled.

Advertising and marketing professionals were the least financially stable of all the professional groups and the least likely to say they would rely on stocks, bonds, mutual fund investments or a home equity loan to tide them over until they could return to work.

TIPS TO LOWER YOUR HOMEOWNER’S INSURANCE PREMIUMS

By Personal Perspective

There are several steps you can take to ensure you are getting the best Homeowners insurance rates possible for the coverage you need:

  • Before purchasing a home, it is wise to learn about its insurance loss history. If there have been past losses, be sure to inspect the home closely to determine if proper repairs were made. The CLUE and A-PLUS databases enable insurers to check the claim history of the property as well as that of the homeowner.
  • Raising your deductible is a great way to reduce your premiums. Higher deductibles on your Homeowners insurance could produce savings of 25% or more.
  • Consider upgrades to your home. Do you need to modernize your heating, plumbing, and electrical systems to reduce the risk of fire and water damage? Are there upgrades you could make that would reduce the risk of damage in windstorms and other natural disasters? You might be able to save on your premiums by adding storm shutters, reinforcing your roof, or buying stronger roofing materials. Older homes can be retrofitted to make them more capable of withstanding earthquakes. If you do make home improvements, be sure to make your insurer aware of the changes.
  • Improve your home security. You typically can get premium discounts of at least 5% for installing a smoke detector, burglar alarm or dead-bolt locks. Some companies will cut your premium by as much as 15% or 20% if you install a sophisticated sprinkler system and a fire and burglar alarm that signals the police, fire department, and other monitoring stations. These systems are not inexpensive and not every system qualifies for a discount. Before you buy such a system, find out what kind your insurer recommends, how much the device would cost, and how much you would save on premiums.
  • Buy your Home and Auto policies from the same insurer. Some companies that sell Homeowners, Auto and Liability coverage will take 5% to 15% off your premium if combine policies with them.
  • Maintain a good credit rating. Most insurers use credit-based insurance scores to determine Homeowners and Auto coverage premiums. All else being equal, a person with a good credit score will pay much less for insurance than someone with a lower score.

SEVERE WEATHER DRIVING REQUIRES EXTRA CAUTION

By Personal Perspective

Severe weather can strike at any time of the year. It is not always possible to avoid driving during dangerous weather conditions. However, being a cautious driver can mean the difference between getting home safely and standing along the side of the road waiting for a tow truck.

Snow and Ice

Winter often brings frozen precipitation, in one form or another. Ice and snow cause driving challenges for most of us, but we can all be safer on the road by following a few key driving tips. The first rule of thumb is to take the time to properly de-ice and clean your windows. An extra five minutes defrosting and scraping all your windows will enable you to see others and use defensive driving skills. Once your windows are cleared and you are on the road, keep your speed slow and consistent. In deep snow, travel at a speed fast enough to keep your momentum going but slow enough to maintain control of the vehicle. Road signs usually warn us that bridges freeze before roads. Therefore, slow down before crossing bridges and overpasses and avoid sudden changes in speed or direction.

Use extra care when braking in winter weather conditions. Braking should be slow and deliberate. If you brake too quickly or abruptly, your brakes could lock-up, causing you to lose steering capability. Anti-lock brakes will help to keep you from losing steering control in a quick braking situation. To engage anti-lock brakes, push the pedal to the floor and hold; do not pump the brakes. Ice and snow do not change the application of your anti-lock brakes; push and hold the brake pedal to avoid losing steering control. If these safety tips fail and you find yourself stuck in the snow, straighten your wheels and accelerate slowly. Try to avoid spinning your tires and, if necessary, use sand or cinders for added traction under the drive wheels.

Fog

During foggy conditions, stay to the right side of the road and turn on your low-beam headlights. If you cannot see the edge of the road, it might be safest to pull over. If you make the decision to pull off the road, be sure to pull to the far right, off of the traffic lane, and turn on your hazard lights.

Wind and Rain

Wind and rain present special challenges for drivers. If you have a high-profile vehicle such as a trailer or motor home, consider staying off the roads until the winds die down. The beginning of a rain storm is the most treacherous time to be on the road, as water mixes with road oils and dirt to create a slick surface. Be careful to avoid hydroplaning by slowing down and maintaining traction between your tires and the road surface. Turn on your lights to allow your vehicle to be seen by other drivers and use your defroster and/or air-conditioner to improve visibility.

Severe thunderstorms can result in tornados and hail. In the car, monitor your news radio station. If you see a tornado, the safest place to be is outside of the car. Pull over and find a ditch or other low-lying area where you can lay face down and protect yourself from flying debris. In a hailstorm, pull under an overpass or bridge to seek shelter while on the road. When a hurricane is in the forecast, head inland to high ground well before the storm approaches land.

By exercising caution in severe weather driving conditions, you can save yourself the headache of sliding off the road, having an accident, or suffering even greater damage to yourself and your property.

EVERY DRIVER NEEDS TO EVALUATE THEIR INSURANCE NEEDS

By Personal Perspective

No driver can afford to be without Automobile insurance, but it can be difficult to know how much coverage you really need. These days most states require that all drivers purchase car insurance, and in states where coverage is mandated there is a minimum coverage threshold that must be met. Many drivers assume that this state minimum coverage is enough, but in many cases that level of protection is completely inadequate. It is therefore important for every driver to evaluate their own insurance needs in order to determine the best level of coverage for Liability, Property Damage and other insurance categories.

Why the Minimum

When states pass laws mandating that every driver carry Automobile insurance they need to consider a number of factors, but affordability is often near the top of the list. If the state legislature is going to force people to purchase a product or service they need to make sure that product or service will be affordable. For this reason many states set the bar very low for Auto insurance coverage. This low bar makes policies more affordable, but it also leaves many drivers without the protection they really need.

For that reason it is important to look at your own state’s minimum coverage levels and determine if those levels really provide adequate coverage. If for instance your state requires that you carry only $10,000 in Property Damage insurance, what happens if you total your neighbor’s brand new Porsche 911? If you do not have enough Property Damage insurance in place you could be on the hook for the rest of the damages. The same is true of personal injury. It’s important to take a realistic look at the minimum coverage levels set by your state and determine whether or not they truly are adequate for your needs. The more you have to protect, the more insurance coverage you will need.

The Low Cost of Upgrading

Many drivers assume that upgrading an existing Auto insurance policy from the state mandated minimum coverage levels to something more realistic will be prohibitively expensive, but that is not necessarily the case. In many cases drivers can upgrade from the minimum set by their state to $300,000 worth of coverage or more for only a small increase in their premium levels. Upgrading coverage can be extremely affordable for those considered to be good risks, but even those with a few black marks on their driving records are often surprised at just how affordable that extra coverage can be.

Reviewing your Auto insurance coverage with one of our agents on a regular basis is the best way to make sure you are providing adequate protection for your car, your family, and your personal property. By knowing the legally required coverage levels and adjusting those levels to suit your own needs you can save money on your premium without sacrificing the protection you need.

REVISIT YOUR BUSINESS INSURANCE COVERAGE ANNUALLY

By Business Protection Bulletin

Every business goes through different cycles of profit and loss. This means that your risks and potential exposures are being affected similarly. At the same time, Commercial insurance coverage is also evolving and changing. Nothing in either your business or the insurance industry remains static. This is why you should re-evaluate your insurance coverage at least once a year. A regular insurance audit will help you plug any coverage holes that might impact your bottom-line severely should an unexpected loss occur.

Ask yourself: How much risk are we prepared to accept for our business? Essentially, anything that you are not prepared to take on needs to be covered by suitable insurance coverage. To measure the amount of risk in evaluating the insurance needs of your company, there are a number of key areas you need to examine — in conjunction with one of our knowledgeable insurance agents. The primary areas you should re-evaluate annually are:

General Liability. How much liability protection does your company currently require? The amount of coverage you had purchased previously was probably adequate at the time, but remember: Your business has changed since then and so has your liability exposure. What was suitable for your needs last year might no longer be sufficient if your company has grown and expanded. The larger your growth, the more you become exposed to potential, increased, and significant liability.

Property Insurance. Business property evaluations go up and down as commercial real estate values fluctuate. You could now be paying too little or too much for the necessary coverage. The same applies to your equipment, machinery, and your inventory. Adding or subtracting in these three areas, while factoring in appreciation or depreciation, can affect not only the premiums you pay, but also your overall Property insurance coverage in the event of a significant loss, such as a fire or natural disaster.

Workers Compensation. The premium you pay is largely dependent on the roles of each and every employee — from the shop floor to your managerial staff. If the roles of your personnel have changed relative to how your business has grown, shrunk, or evolved, then you need to re-evaluate these changes relative to the premium rate you pay for each worker. The premium cost changes and/or differences can be substantial.

Business Interruption Insurance. You might have enough insurance to get your business re-built and your equipment replaced in the event of a disaster, but did you also factor in your business operating expenses? Many companies neglect that part of the equation and fail to develop a disaster recovery plan. Even if your company has a plan, what about the vendors that are key to the survival of your business? Your own business might be fine, but in some other part of the state or country, a key manufacturer or supplier could get nailed. Did you know that you could extend your coverage to cover this circumstance, too?

Insurance Protection of Executives. The size of your company doesn’t matter. If you have employees, you can face claims for sexual harassment or wrongful dismissal. You might not have considered the need to purchase Employment Practices Liability insurance before, but if your company has grown, that expansion has increased your risk to potential claims. Similarly, if you sponsor a 401(k) plan for your employees, and its performance has not met expectations or an employee feels the investment was mismanaged, do you have adequate Directors & Officers Liability to handle such claims?

Summary. To safeguard your business from potential risk, an annual insurance audit is a must. You might discover that changes in your business might have exposed you to new risks. Likewise, insurance premiums are a significant expense, and you might find that you are paying too much or covering exposures that are no longer relevant.

DOES YOUR EMPLOYMENT PRACTICES LIABILITY INSURANCE COVER THIRD PARTIES?

By Business Protection Bulletin

The purpose of third-party coverage in an Employment Practices Liability (EPLI) policy is to protect an organization and its employees from accusations of wrongful acts committed against customers, clients, vendors, and suppliers. Some EPLI policies also cover wrongful acts committed by third parties against the insured’s employees.

Harassment and all forms of discrimination are covered under wrongful acts. Discrimination claims include discriminatory practices against a person based on their race, religion, age, sex, national origin, disability, pregnancy or sexual orientation. Harassment involves unwanted sexual advances or requests for sexual favors. Both verbal and physical conduct, as well as other forms of harassment that create a hostile or offensive work environment, are covered. Some policies also cover accusations of mental anguish, emotional distress, humiliation and assault.

If your organization has a lot of interaction with the public, it is especially vulnerable to third-party claims like those described above. In some cases, EPLI carriers might not provide third-party coverage to firms with a high potential for claims. What they might offer instead is limited coverage, such as covering accusations of discrimination, but not harassment claims.

To protect your organization from third-party claims, you need to go beyond just purchasing coverage. You must implement policies and procedures that address discrimination and harassment issues, both from the standpoint of an employee’s actions and the actions of third parties. EPLI insurers are increasingly requiring employers to implement these practices before they will issue a policy.

Having policies in place will offer little help to stop third-party claims if employees aren’t adequately trained. New employee orientation programs should include a presentation outlining the organization’s harassment/discrimination policies. The training must also include how to report and handle a third-party claim. However, hearing the information once is not enough to insure compliance. Employees must be retrained periodically through departmental meetings. To maintain the effectiveness of departmental training sessions, be sure that supervisors are provided with copies of all policy updates and procedural changes.

One important caveat to keep in mind is that most EPLI policies don’t provide third-party coverage for accusations involving the violation of the Americans with Disabilities Act (ADA). Nevertheless, you should review your EPLI policy’s definition of a claim to determine the policy’s interpretation. Many policies define a claim as a “demand for monetary damages.” This definition can present a problem in an ADA claim, because many of these claims are asking for reasonable accommodations, not monetary awards. That’s why it is important to ensure that your policy’s definition of a claim includes claims for non-monetary damages. A policy with this expanded definition will cover defense costs and indemnity connected with an ADA claim, but will not provide the funds to bring your organization into compliance with the provisions of the law.

PROTECT YOUR COMPANY WITH BUSINESS INTERRUPTION COVERAGE

By Business Protection Bulletin

Business Interruption insurance is like Disability insurance for a business. Disability insurance covers some of a person’s lost income when they’e sick and unable to work. Business Interruption insurance covers a business’s lost income when a fire, explosion, or some other peril causes it to shut down temporarily. A shutdown after a disaster might have more severe consequences for a business than the damage to the property itself. Therefore, it is vital that business owners know whether they need to update their coverage.

There are two reasons why reviewing Business Interruption coverage regularly is important:

  1. Economic conditions can change. When the economy is down, it is likely that a business’s sales will either drop or flatten. Continuing expenses, such as utilities, mortgage payments, and payments on other loans, may not necessarily decrease; in fact, some may increase, particularly if there is a spike in energy prices. Conversely, a rapidly growing economy or one with high inflation may quickly drive anticipated sales much higher than what the owners expected when they bought the insurance.
  2. Regardless of the overall economy, businesses change. They introduce new products or services, expand into new markets, acquire new properties or other businesses, and invest in technologies that increase their productivity. All of these changes affect expected income and may change a business’s coverage needs.

When reviewing Business Interruption coverage, there are several factors to consider:

  • Is the market for the business’s services expanding or shrinking? Cell phones, at one time seen as a luxury, over time came to be seen as a virtual necessity; millions of buyers entered the market. This increased sales for retailers and service providers.
  • Has the business launched new products or services? In the year 2000, Apple, Inc. was solely a computer manufacturer. The next year, it introduced the iPod; later in the decade, it introduced the iPhone. These two products now account for a large share of the company’s sales.
  • If the business has coverage for income from dependent properties, how have those properties changed? For example, the business might depend on one major supplier for parts. If that supplier used to have two warehouses but has closed one of them, a fire that shuts down the remaining warehouse will have a significant impact on the business’s income.
  • Are competitors entering or leaving the market? A business that has increased competition will be under pressure to resume operations as quickly as possible to discourage customers from permanently going elsewhere. The business will want to pay whatever is necessary to minimize the shut down.
  • Has the business’s peak season changed? Suppose a company that provides payroll and benefits administration services decides to start offering tax preparation services to its clients. Much of the tax work and its associated revenue occur during the first quarter of the year. A loss that shuts down the business in March will have a much larger impact than it would have before the firm got into the tax business.
  • Have building codes changed in the business’s location? State and local governments are increasingly adopting “green” building codes that require environmentally-friendly construction materials and practices. Meeting these standards might lengthen the rebuilding period and lead to a longer suspension of business.
  • What is happening to the business’s costs? If labor or material costs are rising and the business must raise prices to cover the increases, sales volume could decrease and affect the amount of Business Interruption coverage needed.

Taking the time to review coverage and the firm’s financial statements with our professional insurance agents will pay dividends after a loss. Proper Business Interruption coverage could make the difference between a business re-opening, or closing forever after disaster strikes.

TIME IS OF THE ESSENCE WHEN IT COMES TO REPORTING CLAIMS

By Construction Insurance Bulletin

Jacqueline Butler did not receive a promotion from the Texas law firm where she worked, and she suspected that her race had something to do with it. In July 2001, she filed complaints with the Texas human rights commission and the federal Equal Employment Opportunity Commission. The EEOC notified the employer, who responded a month later. The following spring, the EEOC informed Butler that she had the right to sue the employer, which she promptly did. In turn, the employer made a claim with the company that provided its Employment Practices Liability insurance. Four weeks later, the insurance company denied the claim; the employer had no choice but to pay for its own legal defense and any potential settlement. In 2006, the employer sued the insurance company for the costs of its defense, but a federal court in 2007 upheld the claim denial.

Why did the employer’s insurance not pay for a discrimination claim? Because the employer took too long to submit it.

A typical policy requires the insured to give the insurer notice of any claims made against it as soon as practicable. In the Texas case, the policy went further — it required written notice to the insurer as soon as practicable and in no event later than sixty (60) days after such Claim was first made. The insurer maintained that Butler made her claim in July 2001, when she filed complaints with authorities. As evidence, it cited the policy’s definition of a claim as any judicial, administrative or other proceeding against any Insured for any Employment Practices Wrongful Act. Since the complaints filed with the authorities initiated administrative proceedings, the insurer held that they also constituted a claim. In the insurer’s opinion, the policy did not provide coverage if the employer did not give notice within 60 days of when Butler filed the complaints.

The employer argued that, since it notified the insurer within 60 days of receiving notice of the lawsuit, it had complied with the policy’s conditions. However, the court agreed with the insurer.

Insurance companies do not include this language in their policies simply to get out of having to pay claims. The sooner they know about events that might involve coverage, the better they can investigate and prepare legal defense. As time elapses, witnesses’ memories become less reliable, or witnesses might move away, and memos, e-mails, and other types of evidence might become hard to find. Also, a claimant who has been kept waiting for a length of time might become angry and unwilling to negotiate a settlement. Therefore, even without a firm 60-day deadline, an insurance company might deny coverage when the insured fails to give prompt notice of a claim.

Courts have not developed a standard for what is “prompt” notice, but they normally consider three questions: How long was the delay? What are the reasons for the delay? How does the delay affect the insurer’s ability to handle the claim? Sometimes, a court will excuse a late notice if it decides the insured had a reasonable basis for believing it was not liable for any harm. However, in a situation where an employee has filed complaints with authorities, the court might not agree that such a belief was reasonable.

The safest course for employers is to notify their insurance companies or agents as soon as they become aware of any type of employee complaints to outside authorities. Even if the employer believes the charges to be groundless, it should put the company on notice. Our professional insurance agents can advise you on what the policy requires it to do when a charge is made. The best time to have that discussion is before something happens.