I’ve talked with two clients in the past week. Both are parents of teens who are about to start driving. One client has a teen son that’s about to get their learner’s permit while the other has a son who’s about to get their license. Both had two questions related to their car insurance.
The two questions I’m most frequently asked when it comes to teens who are about to get their permit or license is when they should add their teen driver to their car insurance policy and does it make a difference to the insurance rate if their child takes a parent led driver’s training course or an instructor in a driving school?
When to add a teen driver is dependent on the car insurance company and how they approach this. Companies usually falls into one of two approaches:
- Some want the teen driver listed on the policy when they receive their learner’s permit.
- Other companies wait to add the driver when they obtain their driver’s license.
In the first case, listing a teen driver with a permit does not impact the insurance rate, it simply is an acknowledgement there is another “driver” within the household. In this case, the teen with a learner’s permit is listed but not rated. The rate changes only when the teen driver receives their driver’s license whether it’s when they turn 16 or at a later age.
For car insurance companies in the second group, since they do not require a permitted driver be listed, we only add them to the policy when they receive their driver’s license. The rate is adjusted at that time to account for the new driver and the risk they represent.
In both cases, there is no set time between when a driver receives their permit or is awarded their driver’s license. Teen drivers are only rated when they become licensed, not when they turn 16 or some other age. That is up to the parent and the teen, not the insurance company.
Regarding my client’s second question, does the type of driver’s training class make a difference to their future rate? The answer is, no. No insurance company I work with makes a distinction between a parent led or instructor led course. In both cases, the student driver is awarded a certificate upon completion of the course and that’s worth a discount on the car insurance rate. The only question is which class option is best for the emotional and relational health of both the parent and the teen!
Do you have a question or experience you’d like to share? Share them with me on my Facebook, Google +, and LinkedIn pages! I’d love to hear from you!
I reviewed Sheri’s and my home insurance in March. It had gone up again and we’d been with the same company for several years, so it was time. I was very pleased with the rates I found with a couple of my other carriers and decided to call the underwriter to discuss our home since it was built in the mid 1950’s. She told me it would require an interior inspection, in addition to the exterior inspection. I was curious what they’d review and the criteria they’d use to determine whether to write my home insurance or cancel it. What I found out caused me to go to the next option on my list!
The interior inspection would cover several items including whether the electrical, plumbing, and heating and air conditioning systems were up to code and if they’d been updated since the home was built. They would also see if the electrical panel had circuit breakers or fuses and if it is a Federal Pacific panel. We’d replaced the interior and exterior HVAC system in 2016, the water heater in 2009 or 2010 and both were up to code. The one strike against us is we have a Federal Pacific panel and that would cause us to be declined.
I’d been asked by a realtor several years ago about whether a home insurance company would write a policy on a home with a Federal Pacific electrical panel before. Based on my research at the time, the company I was with would and I was not aware of any insurance company that wouldn’t. I’ve not run into any home insurance company since then who will decline a home insurance policy due to the presence of a Federal Pacific electrical panel until a few weeks ago.
Federal Pacific electrical panels were widely installed in millions of homes nationwide from 1950 until 1990. Many people and safety experts believe they are the cause of to 2,000 to 3,000 home fires annually. These fires occur when a circuit becomes overloaded, overheats and fail to “trip” or switch into the off position. A properly working circuit breaker will trip into the off position in no more than two minutes when overloaded. The Federal Pacific circuit breakers weren’t tripping and were believed to cause home fires.
The Consumer Product Safety Commission closed its investigation on Federal Pacific panels in 1983, as they didn’t find a serious risk of danger to consumers based on data at the time. The company, Federal Pacific Electrical Company sold the company’s assets to Challenger Electric which have been subsequently resold several times since then with no one having any ties to the original FPE panel makers.
In most cases, this still isn’t an underwriting question most agents are asking. Most home insurance companies do not specifically exclude coverage for a home with a Federal Pacific electrical panel. I considered having our panel replaced, however the average cost is about $2,000 meaning it will be done either later this year or next year. What do you think? Share your thoughts, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!
A client called me last week to discuss a question about her car insurance. She’s taking a vacation with two friends in May and will head for Europe for a couple of weeks. They’ll travel through Italy, France, head up to Switzerland, and then back to Italy before returning home. They will rent a car for part of the trip and she wanted to know if her car insurance covers a rental car in Europe.
The answers range from absolutely not to absolutely yes.
- Domestic Only: Most car insurance companies provide coverage anywhere in the United States and will extend coverage to rental cars. There are few who don’t so always confirm.
- US & Canada: Many companies will cover your car and a rental car if traveling anywhere in the US and even in Canada.
- US Territories: Some companies extend coverage to US territories such as Puerto Rico, Guam, the US Virgin Islands and American Somoa, however, confirm before you go.
- Mexico: Car insurance if you’re driving across our southern border is limited at best. Many exclude coverage in Mexico while others provide limited coverage which means the first two to five miles. If you’re traveling to Mexico, Central America, or even further south, I recommend buying the local insurance.
- Europe & Asia: A few carriers extend coverage when traveling to Europe or other western countries such as Japan, Australia, etc. Some may have restrictions by country or coverage while others don’t. MetLife extends coverage for both property damage and personal liability. Safeco requires a specific car insurance package to provide property damage coverage and an umbrella policy to cover personal liability.
Regardless of where you’re traveling, confirm with your agent what coverage is provided by your policy and what limitations you may have. Here are a couple of considerations:
- Confirm you have enough property damage coverage in the liability and uninsured motorist limits to pay for a new car especially a high-end car.
- You’ll need to carry both collision and comprehensive deductibles to fully protect you in an accident claim when renting a car. If you don’t carry comprehensive or collision coverage, add it to your policy for the duration of the trip or buy it from the car rental company.
- If you don’t want an international claim to follow you home and impact your rates, buy the car insurance from the rental or travel company.
- If you’re traveling to multiple countries, such as in Europe, confirm if the insurance applies to each country you’re visiting.
In the case of my client, I quoted the coverage she needs to be fully covered while driving a rental car in Europe. The cost is about is about $220 a year. She is then able to compare this with the cost of purchasing rental car insurance through Orbitz to see which provides the better value. Where are you traveling this summer? Share your travel plans, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!
I sat in a meeting with one of our carriers last week and heard an interesting statistic. On average, insurance companies who wrote Texas home policies in 2016 paid $1.30 out in storm related claims last year for every $1.00 of premium they received. That doesn’t include non-storm related claims such as fire, theft, water damage, etc. The issue facing all home insurance companies is how to remain profitable without raising rates astronomically. One method carriers are examining is roof depreciation schedules.
Most home insurance companies will write either a replacement cost policy or an actual cash value policy (see http://wiseinsurancegroup.com/home-insurance-replacement-cost-actual-cash-value/). If the roof needs to be replaced due to hail or wind damage, a replacement cost policy pays the amount it costs to replace the roof with a new one of the same quality less the wind / hail deductible. For example, a $200,000 home with a 1% wind / hail deductible ($2,000) and costs $10,000 to replace, will pay $8,000 to replace the roof with comparable grade shingles.
Actual cash value policies, on the other hand, pay the depreciated value of the roof less the wind / hail deductible. For instance, a 10 year old roof covered in 20 year shingles will be depreciated by at least 50% if it’s in excellent shape. If the cost is still $10,000 to replace the roof as in the above example, the total amount paid for the claim will be $3,000 ($10,000 less 50% depreciation less 1% deductible). The issue with actual cash value policies, aside from the lower claim amount paid, is there’s too much wiggle room when determining the depreciated value.
To reduce the amount of interpretation and provide a better client experience, a couple of companies have implemented or are considering implementing roof depreciation schedules. For instance, a brand-new composition shingle roof may depreciate at a published rate of 2% to 3% per year until it reaches a certain minimum amount, say 25%. Slate, tile, and metal roofs would have their own depreciation schedules. This enables the client to know if they don’t have a hail claim until 10 years from now, the claim amount paid will be some value between 70% and 90% depending on roof material.
Insurance companies believe providing a written depreciation schedule prior to writing a policy enables clients to know the risk up front and make the right decision for themselves. In some cases, home insurance companies may provide a discount for accepting a roof depreciation schedule and charge more for a replacement cost coverage on the roof. Other companies may adopt this approach as their primary offering on all home policies and not offer a replacement cost option at all.
Would you pick this type of coverage or elect to pay more for replacement cost coverage on your roof? Share your thoughts and questions on roof depreciation schedules with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!
I am working with a prospective client on their car insurance. I realized he’d never had a good explanation on car insurance once we began to review the quote together. I suggested we start over so I could explain each coverage and answer his questions. Unfortunately, I’ve found most people have never received a good explanation on car insurance, what it covers, and options worth considering, so I thought I’d write about that in this post.
Liability Coverage: This coverage, also referred to as Bodily Injury Property Damage (or BIPD), pays when you hit another car, person, or object and are at fault. The bodily injury portion is designed to cover an injured person’s medical bills and the property damage is there to repair the other person’s vehicle or whatever you hit. This is the only coverage required on a Texas car insurance policy.
The limits may be expressed in one number or with three numbers. People with one number usually have combined single limit coverage ranging from $100,000 to $500,000. If your limits are expressed with three numbers, then you have split limits which can range from the Texas minimum of 30/60/25 all the way up to 500/500/100. Each number represents thousands with split limits.
Uninsured Motorists: Uninsured / under insured motorist may be referred to as UM / UIM BIPD is optional coverage to protect you if someone with no car insurance or not enough car insurance hits you and it’s their fault. It can be used to cover medical expenses for you and anyone riding in the car with you, as well as to repair your car if it’s damaged. Coverage can be written as either combined single or split limits.
Medical Coverage: There are two types of optional coverage available, medical and Personal Injury Protection or PIP. Both provide medical care ranging from $2,500 to $10,000 or more, and pay on a reimbursement basis. PIP, however, can also be used to cover lost wages or hiring someone to assist with activities you’re unable to do following a car insurance accident. It can also be used by a personal injury attorney in a lawsuit.
Deductibles: Any deductible, is the amount of money the policyholder must first pay before the car insurance policy pays. The two most recognizable deductibles are comprehensive and collision. Collision pays to repair your car after an accident and comprehensive covers hail damage, falling objects such as tree limbs, fire, flood, if it’s stolen, or you hit a deer or other animal.
For you to have either coverage you must have a deductible. If the deductible isn’t listed on your policy, then you do not have that coverage. For instance, a liability only policy will not have collision coverage. Conversely, if you still are leasing or paying a loan on your vehicle, then you’ll need to have collision coverage.
Roadside Assistance: This usually covers several services including towing, changing a flat tire, unlocking a car, or providing a gallon of gas if you’ve run out of fuel. It’s an inexpensive option and worth every penny when you least expect it.
Rental Reimbursement: It’s hard to get to work or anywhere else when your car’s in the shop after an accident. Having this coverage is invaluable and lasts up to 30 days. For anything larger than a sub-compact, you’ll need at least $35 a day in any metropolitan area.
Options: Life is full of options and car insurance companies are constantly coming out with new ones. Some of the more common ones include accident forgiveness, new car replacement, GAP coverage, OEM parts, and more allowing you to tailor your policy to your specific needs.
The prospective client was pleased with our discussion, and for the first time, he felt like an informed consumer. What surprised him most, is that for a few dollars more a month, he could be fully protected rather than carrying inadequate coverage. What questions do you have? Share your questions, comments, and questions with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!
A client called me Monday morning after receiving the estimate to replace his roof from the March hail storm which struck north Texas. Before calling, he’d emailed me a copy of the claim estimate to help guide our conversation. He had a couple of questions about the estimate and payment structure, however, his biggest concern centered on one issue. If his home insurance policy is a replacement cost policy, why does the repair estimate refer to the depreciated value of his roof.
The home insurance policies I write are all replacement cost policies which means the policy is written based on what would it cost to replace your home if it were destroyed, such as by a tornado or fire. The other type of home policy is an actual cash value, or ACV, policy which pays on a depreciated basis. Replacement cost policies pay claims based on what it costs to replace a roof damaged by hail rather than its depreciated cost which is usually much less than the cost of a new roof.
Home insurance claim estimates outline the cost for materials and labor to replace the roof and then a depreciated value will be used based on the age of the roof. The reason the depreciated cost is displayed on a claim estimate is due to how the claim will be paid. Most home insurance companies have gone to dividing the payment into at least two payments. The first or initial payment is made on the depreciated value of the roof in this case which is usually enough money to order shingles and other materials needed to complete repairs for the claim and get the job started. The insurance company will make the second payment for the remaining balance, less the wind / hail deductible once the job is completed.
There are two reasons insurance companies give for making two payments. One is to protect the policyholder from being taken advantage of by a scammer who takes the money and runs. The other to cut down on the incidence of insurance fraud by policyholders. There have been too many instances where a roofing check was cashed and used for a shopping spree, to pay off debt, or something else as opposed to what it was intended for – to replace the homeowners roof.
Both checks will be made payable to the homeowner and their mortgage company, if they still have one. This is a bit of a pain as it may entail sending the endorsed check to a loan servicing branch outside of north Texas and waiting for it to be returned before the homeowner can pay the roofer. The reason insurance companies do this is because mortgage companies are an additional insured, which means they have a financial, thereby insurable, interest in the claim. They want to see the roof replaced just as much as the insurance company does.
Once I explained this to my client, he understood and appreciated he will get the full amount due as the project is completed. He’s not thrilled about having to get the checks endorsed by his mortgage company, but he is confirming with them who can sign and where the can be signed. Do you have a comment, question, or experience you’d like to share? Please share them with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!
A friend of mine sent me an email asking if I’d review her car insurance. After replying I’d be honored to, she asked me a question which comes up once or twice a year. Her question was, “Do I charge for my services?” This question is usually asked by people who’ve never worked with an independent agent before talking with me. Other people, have asked this, as well as, a follow up question, “Will I still be their agent, once I write their policy?” Let’s look at the two categories of insurance agents, how we are alike, how we are different, and the answers to both questions.
Agent Types: There are two types of insurance agents, independent and captured. Independent agents work with several companies such as Travelers, Safeco, Encompass, Progressive, Kemper, and more. We comparison shop among our carriers for the best rate on your home, car, life, or business insurance. Captured, or dedicated agents, work with only one company such as State Farm, Farmers, Allstate, Liberty Mutual and Nationwide, and they write business for just the company they represent.
The lines become blurred in some instances. For example, Farmers has purchased a couple of different companies, Foremost and 21st Century, over the past several years, giving them the ability to consider options from among the family of Farmers companies. Nationwide agents may be able to write “brokered” business policies for businesses outside of what their underwriters are willing to write.
Agent Similarities: Insurance agents, whether independent or captured, are small business owners. We own our agency and work to provide the best insurance option we’re able to present. In addition, we write similar insurance policies such as home, auto, life, and business insurance and then service our clients as needs dictate. Client servicing includes policy changes such as adding a new car or driver, changing coverage, policy reviews, and providing advice.
In most cases, neither group is employed by the company or companies we represent. We earn a commission based on new and renewal business. The commission is usually a small percentage of the annual premium or rate charged on a home or auto policy.
Agent Differences: The biggest difference between us is the number of companies we represent. Independent agents may represent up to a dozen or more different companies providing us with greater flexibility in searching for the best coverage at the best rate. Captured agents do not have this opportunity as they are dedicated to their primary company.
I’m not aware of any agent, either independent or captured, charges a prospective client to review or quote their insurance. This is a part of our service offering to people who are referred to us. If we’re able to provide a better or less expensive solution, we do. If we’re unable, I always recommend the client stay with their current provider and we will review it again in 6 months or a year when the policy renews.
Once a policy is written, I continue to be a client’s insurance agent. As outlined above, part of the work of any agent is to review a person’s policy or policies each year and provide ongoing service. In addition, I believe part of the service I provide is to be a client’s insurance advisor. This means I answer questions, provide guidance, and offer coverage as a client’s needs change.
I have been both a captured agent and an independent agent. I like having options I can consider for each client. It means I operate in their best interest and they like that too! Do you have a question, comment or experience you’d like to share with me? Please do so on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!
I’ve had several conversations with clients and home buyers about roofs and home insurance since the March 26th hail storm which struck north Texas. Hail, ranging in size from golf ball to softball, fell on Justin eastward to McKinney. Thousands of roofs were damaged or destroyed by the hail resulting in the roofing industry spinning into high gear. Let’s examine some of the questions I’ve addressed in the past week pertaining to replacing roofs and its impact on home insurance.
Should it be replaced: The farther east the storm went, the more unsure people became about whether their roof should be replaced. In these cases, I always recommend having two local roofers examine it for hail damage and whether the extent of the hail damage is enough to warrant a claim. The honest ones will tell you the truth.
Shingle life rating: One of my clients, whose roof needs to be replaced, wanted to determine if it makes sense to replace the composition shingles with 50 year instead of 25 year shingles. I’m not aware of any carriers offering a home insurance discount based on a longer shingle life such as installing a 25 year shingle over a 15 year, or a 50 year shingle over one with a shorter lifespan.
A couple of things to keep in mind if you’re replacing your roof include:
- Home insurance companies with a replacement cost policy will only pay to replace shingles with “like” shingles. In other words, if you have 20 year shingles, then the insurance company will pay for a 20 year roof.
- If you elect to go with a better grade of shingle, you’ll pay out of pocket for the difference in cost.
- The longer a shingle’s “life span,” the more expensive the roof.
- Most shingles wear out before their projected life span due to our weather and summer temperatures.
Hail resistant shingles: One of my clients is considering whether to upgrade to a hail resistant shingle. There are typically 4 classes of hail resistant shingles. Most home insurance carriers offer discounts for a class 1 to 4 roof with the highest discount being offered on a class 4 shingle. The discount varies by carrier and ranged from $175 to $300 a year. Based on that savings, it will take several years of hail free weather to cash flow the difference. Even then, softball size hail will damage a class 4 roof.
Complicating the decision process is the shift by many home insurance companies to caring more about the age of the roof than the material it’s made of. This has led me to not recommend a hail resistant roof but lean toward one with a projected life span of 20 to 25 years.
Overlay or replace: To reduce the cost replacing a roof, some people may elect to place new shingles over the existing ones. I don’t recommend anyone do this. Many home insurance companies will not write a policy on an overlay roof for three reasons:
- The added weight may weaken the underlying framing.
- A second layer increases the cost of the next claim due to the added cost of removing two layers of shingles and the increase in fees to dispose of both layers.
- Overlay roofs are less hail resistant than a single layer roof.
Home buyers: I’ve talked with one person buying a home in Little Elm. I recommended they get the roof inspected by two local roofing companies to determine if it suffered enough damage to be replaced. It’s better to confirm that now than when a leak develops after the fact as it will be a claim on the prior company, not yours.
New roof discount: Most home insurance companies offer a discount for new and newer roofs. If you do replace your roof, confirm with your agent the policy is updated to reflect the new roof. You’ll be glad you did!
What do you think? Share your thoughts, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!
I received an email from a friend of mine who’s a commercial underwriter with a local insurance brokerage. All three of their cars were struck by hail from Sunday night’s storm. Two of the three vehicles are total losses and she wanted to know their options so they could make a good financial decision that right for them.
Lots of people in the area from Justin, Denton, Highland Village, Lewisville, Frisco, McKinney and Little Elm will have some major decisions to make if their vehicles are determined to be a total loss from hail damage. I thought it timely to reprise a post I wrote last year after the three hail storms rocked north Texas. Let’s examine what car insurance coverage applies, determining whether to file a claim, and options if your car is totaled.
Hail coverage: The two biggest deductibles on a Texas car insurance policy are referred to as collision and comprehensive. Collision applies to accidents or wrecks, while comprehensive coverage applies to a variety of events including hail damage. If you have comprehensive coverage, then hail damage is covered. Deductibles range anywhere from $100 to over $1,000 depending on what you selected.
Rental reimbursement: Most people do carry rental car reimbursement coverage. This pays for a rental car whenever your car is in the shop for an approved claim. If you don’t have this coverage, then you’ll have to pay out of pocket for the rental car, or beg everyone you know for a ride. Given the probable number of damaged vehicles, body shops will be backed up. This coverage certainly helps if your car’s in the shop for 3 or 4 weeks!
File a claim or not: In cases where there’s minor damage to your vehicle, I suggest getting an estimate at your local body shop and comparing it to your comprehensive deductible. This will help you determine whether filing a claim is worth it. Now if your car was severely damaged, then proceed directly and file a car insurance claim.
Repair Shop Options: Many of my clients wonder where to take their vehicles to have them repaired. Most of the larger body shops (Herb’s Paint and Body, Service King, Caliber, etc.) have direct relationships with most car insurance companies. Progressive has their own concierge shops in the area where you can drop the car off, file a claim, pick up a rental car, and be on your way. If you don’t like any of these options, remember, Texas state law allows you to get your vehicle repaired at the shop of your choice.
What if it’s totaled: I’ve had several clients whose cars were totaled by hail. The decision each of them made was whether to accept the payment for the total loss and give up a perfectly running but dimpled car or keep it. The choice is yours. If you decide to give up the car, then you’ll be able to replace it with a new or new to your car, provided there’s enough money to pay off the loan or lease.
If you determine to keep the car, you’ll be given a lesser amount of money for the damage. Some insurance companies will drop collision, and comprehensive coverage from your policy while others will allow you to maintain this coverage. The reason when this is dropped is to prevent someone to have a vehicle totaled a second time whether by hail or an accident. If you keep the coverage, then any future claim will be paid at a lesser amount unless the car is repaired.
If you have a question, comment, or experience you’d like to share, please share them with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!
Hail season arrived in north Texas early this year with a storm which swept across north Texas from Justin to McKinney. The hail was from softball to golf ball size with the larger hail occurring around the Denton area and becoming smaller as it traveled toward McKinney. Initial estimates will be forthcoming in a few days, but I expect the insurance claims to be significant given the size of the hail and how widespread the storm was. I received several calls, text and email messages from clients affected by Sunday night’s storm. Let’s review what to do in handling an insurance claim after such a storm.
Car Damage: If you live in the area hit by Sunday’s hail and your car was parked outside, then it is easy to determine whether hail damaged it. Hail damage is covered by comprehensive coverage so if you have a comprehensive, or other than collision, deductible repairs will be covered. You’ll need to provide your car insurance policy number and a statement as to what happened when you call a claim department. You’ll be assigned to an adjuster and given a claim number.
Once you have a claim number, take your vehicle to a body shop and obtain an estimate for repairs. You may need to schedule the repair work depending on the volume of cars damaged and parts availability so discuss this with the shop. You’ll also want to talk with the car rental company quickly too as last year there was a shortage of rental cars due to the number of hail related repairs.
Two clients called to discuss steps to file a car insurance claim but mentioned nothing about their roof. If your vehicle was damaged by the hail, there’s a really good chance your roof was damaged too and may warrant filing a home insurance claim at the same time.
Home Damage: The size hail which fell across the area Sunday night was large enough to damage most roofs. Insurance companies responded by sending catastrophe teams to the D/FW area Sunday evening and Monday to help speed the claim response process. You’ll need your home policy number when calling the insurance company to file a claim and they’ll want to get a statement from you at that time.
You may have more than roof damage. Siding, windows, doors, garage doors, fascia, downspouts and gutters, fences, pool equipment, lawn furniture, and storage sheds were damaged in last year’s storms. Have those items reviewed by the adjuster and take pictures for your own documentation. These items should be covered by your home insurance policy.
If you experienced broken shingles or holes punched through the roof’s decking, you may need to cover the roof with a secured tarp to prevent leaks causing further damage to the interior of your home. Rain is in the forecast and this is an excellent preventative measure to take.
In addition to filing a home insurance claim, I have recommended my clients also call a roofer. This should be done once the claim is filed if you experienced large hail or before if you’re not sure the roof is damaged. Talk with at least two local roofers who operate out of a physical office and not a pickup with out of state tags. Ask for a couple of references and then call them to confirm they are reliable and do good work. You’ll be glad you did.
Do you have a question, comment, or experience you’d like to share? Please share them with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!