Personal Insurance Tips

Insuring Adult Children

Blood may be thicker than water, but it is thinner than insurance contracts. An adult son or daughter may think that, when a loss happens, coverage is available from mom or dad’s homeowners or auto policy. It usually isn’t and finding this out after a loss makes matters much worse. Policies are typically clear. A relative is covered, but only if the relative is a full-time resident of the named insured’s household. Even if the nonresident child lives next door, a parents’ policy is not going to spread its coverage to take care of an adult child’s belongings.

Insurance contracts are meant to handle sources of loss that can be easily identified. Person A’s cars or home is protected by Person A’s auto or homeowner policy. Imagine if that weren’t the case.

Example: The Rabbitfield’s home and cars have been insured by Plausible Fire & Casualty for 20 years. In the last five years, the Rabbitfield’s children have grown and started their own households. Per the Plausible home and auto policies, the insurance premiums and two policies that covered the original family’s two cars and one home, now cover the original home and cars PLUS the following:

Son Jimmy Rabbitfield’s apartment and car
Daughter Chana Rabbitfield’s home and two cars
Other son Perry’s home, seasonal home and two cars
Other daughter Bonnie’s apartment and car.

Besides covering all of the property, the Rabbitfield parents’ policies ALSO cover everyone’s personal legal liability.

While it might be a bargain for insurance consumers if a single auto or homeowner policy could be stretched this far, it’s not likely that the insurance industry could survive such flexibility.

Being Independently Insured

Understandably, insurance is not always a priority for adult children who are now on their own. In the beginning, there’s often a phase where the kids commute between “home base” and their new apartment or home and their property is at both locations. The new grown-ups typically have few possessions, especially possessions of high value, and this adds to the likelihood that insurance is overlooked or seen as unnecessary. However, even when possessions are few, EVERYONE has a legal responsibility to handle the damage they accidentally cause to other people and/or other people’s property. When a child reaches adulthood, they’ve also reached the point where they need to get their own insurance.

If an adult child asks you for insurance advice, give them the name of an insurance professional you trust to help them get the exact protection they need.

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Credit Based Scoring And Insurance

Insurance companies use different sources of information about a person that supplements an application. For auto coverage, motor vehicle reports are ordered. For home coverage, physical inspections may be needed. Another tool that is widely used for underwriting is credit-based scoring. While once controversial, this method has gained public acceptance. Its origin lies in the commercial use of credit histories.

Banks and other lenders have long used credit history in their lending process. A discovery then occurred which prompted a new use. For some reason, certain elements of a person’s credit history are predictive of whether that person is likely to suffer insurance claims. A credit-based score is developed from information such as amount of debt, number of credit cards held, pattern of payments, defaults, etc. Credit-based scores are used to help decide the acceptability of applicants. They may also help a company choose to modify the premium charged to existing clients.

Insurers, after battles with regulators and consumers regarding the use of such information, routinely use credit-based scoring. It is hailed as an aide to improve their pricing and profitability. However, there is a reluctance to provide details on how scores are developed. Companies have claimed that the information is considered confidential. Insurers fear that revealing details on credit-based scores would result in losing valuable information to competitors. While a handful of states have banned the use of credit-based scoring, most others have approved its use (along with guidelines for its use).

If you have been affected by a credit-based score, you’re entitled to know. You can also get information on how to be sure that your credit history is accurate. An insurance professional is a good source to help you with questions on how your credit may be affecting your insurability.

Identity Theft – Part 1

Part 1 is a brief explanation of ID Theft and its consequences. Please see Part 2 for information on preventing ID theft loss.

ID theft is a form of fraud that has been around for as long as there have been dishonest people. It is a high-profile problem because technology has created many more opportunities for this crime. Credit cards, funds transfer cards; ATMs, debit cards, smart cards, wireless payments, slipshod business practices and the Internet have all combined to make identity theft a major problem for individuals and businesses.

ID theft describes any dishonest and unauthorized use of private information. In the past, the term rightfully described forgery or passing oneself off as another person to trick someone out of money and/or property. Today, it refers to an unauthorized party who secures goods, services, or other financial benefits by the fraudulent use of another person’s confidential information.

The favorite piece of information is a social security number. This information has routinely been used for gaining access to other private information such as driver’s history, credit information, bank accounts, loan information, credit cards, occupational history, military records, mortgage information, and investment accounts and so on. Having this critical bit of information can allow a criminal to use another party’s accounts, secure loans, and charge a host of goods or services; the list is only limited by the criminal’s resources and imagination.

A complication of ID Theft is that it is a by-product of modern commercial life. Lenders, retailers, supermarkets, gas stations, airlines, travel clubs and everyone else have elevated cashless payments into the premiere way to do business, either live or electronically. This “ease” comes at great cost. As naïve as it sounds, business still operates on the assumption that everyone is honest. Few businesses have adequate safeguards to protect the information they collect on customers. Many businesses commonly mail out or electronically transit communications and solicitations that include private account information. It is common for electronic transactions to be transmitted through wireless networks and thieves are now able to intercept such data. Further, since businesses are often embarrassed that information has been stolen or compromised by hackers, many businesses keep such invasions secret or substantially delay reporting incidents to authorities and to their customers.

In light of business practices and attitudes, it’s basically up to the individual consumer to guard against ID theft. Though, in recent years, business best practices and government regulations are ramping up security activities. See Part 2 for tips on guarding against it.

Identity Theft – Part 2

Part 2 is a brief explanation of what can be done to prevent ID Theft. Please see Part 1 for an explanation of what is meant by ID Theft.

Unfortunately, even as instances of ID theft grow, insurance is not a particularly important anti-ID theft tool. The type of loss is not something that an auto, home or similar insurance policy may be adequately adapted to handle. While homeowner policies do typically protect against credit card loss, coverage is usually just for the amount that falls below the minimum liability imposed by federal law (currently $50 per card). The serious harm suffered by ID theft victims are the costs associated with clearing up the aftermath, such as correcting one’s credit history and straightening out various accounts and records. This effort routinely takes months and hundreds to thousands of dollars in legal fees.

More insurers offer coverage for ID theft. Typically, the coverage reimburses legal fees or paying costs related to dealing with third parties to correct records. The most effective protection is for individuals to prevent becoming ID theft victims. Following are some suggestions:

· Keep your account information and Social Security Number (SSN) safe. One idea: keep home records in a locked file.

· Keep details about your various account numbers in a safe place so you can rapidly take care of stolen or lost cards.

· Be very careful with on-line transactions. Is the Website you use secure?

· Find out the privacy guidelines and safeguards of the businesses and parties you deal with.

· Make sure that you verify that websites for online transactions are legitimate

· Use password protection on smart phones and never leave such devices unattended

· Challenge those who request an SSN. Why is that information needed? Can some other information be used as an alternative?

· Think about buying and using a paper shredder. Many information thieves steal mail by going through garbage.

· Write companies who send unsolicited charge cards and request removal from their mail list.

· Check bank and business records thoroughly for irregularities. Track down the reason for any unusual transactions or entries.

· Ask stores that use credit cards if they transmit the information with a wireless network. If yes, ask what safeguards they use to prevent airwave theft.

· If you ever have a charge card transaction involving an imprinter that uses a carbon set for copies, ask for the carbon or watch the clerk destroy the carbon before it’s thrown away.

· Collect mail from mailboxes quickly and don’t put outgoing mail in your own mailbox. These practices give thieves fewer opportunities to fish for checks and private information.

Remember that these are just a few suggestions. Taking steps to minimize the chance of ID theft is a lot of work. That is a major reason that ID theft will continue to be a problem to individuals and businesses.

A Safer Prom

High school proms are early chances to participate in a formal event. It is also considered a chance to act as a full-fledged adult. The event involves arranging a complete evening of dining, dancing and socialization. However, just as much time should be devoted to making the event as safe as possible.

It is almost inevitable that a prom will involve serious exposure to alcohol or other intoxicants. The evening also involves many young, inexperienced drivers who are excited about making their way to pre and post prom activities. Sadly, these factors have combined to make prom season dangerous.Serious traffic accidents often become the main feature of what should be a night of joy.

Prom-goers and their parents need to create a strategy to help make prom night both memorable and safe. Here are some tips:

Parents should get all activity details, including dinner and pre and post prom events
Confirm the night’s events with school officials and other parents
Consider arranging a safe, group post-prom activity where participants can be supervised
Clearly lay out your expectations to your son or daughter about acceptable behavior regarding their evening
Discuss all details about transportation, whether they are drivers or passengers
Be sure that communications are set up. If the child does not have a cell phone available, find out the numbers where he or she can be reached during different phases of the evening
If practical, consider arranging for a third party to handle transportation (limo or taxi service)
Consider an amnesty arrangement. In other words, let your child know that they can contact a parent for emergency transportation should something go wrong and, for that evening, they’ll be no lectures or punishments

Help your son or daughter make prom night a bright memory rather than a tragedy. Plan on making safety and fun everyone’s priority.

Personal Injury

Unlike accidental events that result in a person suffering a serious injury (called bodily injury) or property that is damaged or destroyed (called property damage), personal injury usually involves one person’s alleged interference with another person’s legal rights. It also applies to incidents that harm another person’s reputation.

Personal Injury commonly includes acts such as the following:

False arrest, detention or imprisonment

Example: A homeowner suspects that her teen daughter’s friend has stolen jewelry while visiting her home. She locks the teen in her bedroom for an hour until the police arrive and it turns out the teen did nothing wrong.

Malicious prosecution

Example: A gentleman accuses his neighbor of stealing a laptop from his home and files charges with the police. After investigating the matter, the police discover that the lap top owner had sold the property and made the accusation because the neighbors had been feuding over an unrelated matter.

Wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy

Example: A boarder comes home from work and finds his room’s door padlocked. The homeowner/landlord did it after the boarder, for the third night in a row, played his CD system too loudly. The boarder is forced to leave the premises that same night.

Oral or written publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services

Example: A homeowner is the president of a parent and school organization. She also publishes articles for the organization on her personal website, but is widely followed by members in the parent and school organization. After an argument with another organization officer, the president recounts the incident on her site and includes some crude insults and false items about that person.

Oral or written publication of material that violates a person’s right of privacy

Example: A woman is visiting a friend. During the visit, she overhears her friend’s conversation with her doctor. The next day, the person reveals to others that the friend, a young, single female, is having medical problems due to an unexpected pregnancy.

All such acts are examples of incidents that could result in lawsuits. However, they are also the sort of events that are excluded from coverage by the typical homeowners policy. The major reason for their exclusion is that they are deliberate acts rather than being accidental. One way to secure coverage for personal injury losses is to purchase personal umbrella coverage. It may be worthwhile to discuss your possible need for personal injury coverage with an insurance professional.

HOLD HARMLESS AGREEMENTS

The quality of our lives is highly affected by how we choose to spend our time. Any activity involves a chance that a loss could occur:

A pick-up basketball game could result in a broken ankle when attempting a sweet move on the floor
A tennis match could include your collision with a partner’s backhand swing
A hike through a forest path may end with a stumble down an incline and a broken leg
A twirl on the dance floor could include tripping on a chair and falling, ending up with a back injury
A game of catch comes to a halt with a ball sailing over a glove and through a neighbor’s window
A canoe rental could end up with a drowning

The key is to be aware of risks and to take steps to minimize them. One method that tries to decrease the likelihood of being sued involves hold harmless agreements.

Hold harmless agreements are typically in writing and involve one party agreeing not to take legal action (sue) against another party. In exchange for this promise, the other party agrees to permit the first party to engage in a given activity.

These agreements can come in many forms. They can be separate contracts or, often, they are statements added to other contracts. They are also called different names, such as disclaimers or waivers. Schools use them in permission slips for student trips or activities, including team or individual sports. Youth sports leagues use them, vendors who rent recreational equipment use them, and plenty of businesses make such agreements part of their operations.

There are a number of issues to keep in mind with such agreements including:

Are they necessary
Are they enforceable (state laws often control this issue)
Are they valid (if not worded properly, they may be useless or may have unintended consequences)
Are they fair (this depends on the level and nature of risk involved)
Are they part of a business or strictly a non-business transaction

In some cases, it may make a lot of sense to use a valid hold harmless agreement. In others, giving up the right to sue or pursue compensation in case of a loss may be too valuable and the better choice may be to, rather, give up participation in a hazardous venture. Be aware that it may not be valid to hold another party harmless on behalf of a child. Some states hold that a child’s right is separate from a parent’s and a parent may not legally waive that right.

Having fun and staying active involves risks and it’s important to be aware of which ones you’re assuming when you pursue those activities. Be careful with the agreements you make.

Subrogation

An insurance policy, no matter what is being covered, is a contract between the insurance company and the person or organization that wants protection. When a policy involves liability coverage, the contract, essentially, means that the insurance company will handle losses (injuries to other people and/or loss or damage to property that belongs to others). However, eligible losses are restricted to those that are the policyholder’s legal responsibility. There are many times that a loss is settled under a liability policy; but someone else may actually be responsible. Consider an example:

Jon and Jenny are new to a neighborhood, so a few months after moving in, they throw a huge party and invite all of their neighbors. One of the activities is volleyball and they set up a net and space to play in their backyard.

The neighbors know each other well and they are quite competitive. During one game, an accident happens. Glen is injured while trying to block a ball at the net. The injury is very serious and Glen ends up paralyzed. He sues Jon and Jenny for his substantial medical costs and Jon and Jenny’s insurance company settles the loss.

Later, it is discovered that Paul, who was on the opposing volleyball team, had grabbed and pulled Glen when they were battling at the net, causing Glen to lose his balance and fall. Jon and Jenny’s insurance company learns of this and they sue Paul to recoup the money they paid for the loss.

The effort to recover payment made by Jon and Jenny’s insurance company illustrates “subrogation”. It is a legal right that allows the insurance company to take over a right held by their policyholder. Once an insurance company claims this right, it can pursue recovery from another person (including other entities such as partnerships or corporations) who is actually responsible for a loss.

Subrogation is an important process. When it is used, it helps to keep everyone’s insurance costs down and it also makes sure that liability insurance policies work as intended – by making sure that those parties who cause losses are held accountable.

Social Media Liability-Part 1

Your chances of suffering a loss is increasingly affected by your use of the Internet and, particularly, social media. Increasing your awareness of social media liability loss exposures may help you to minimize or avoid them.

Social Media Liability refers to claims for libel, slander, harassment, invasions of privacy, violations of intellectual property rights, and even improper employment practices resulting from the use of social media sites, including Facebook, InstaGram, Twitter, YouTube, blogs, etc. Some coverage exists for business as well as for personal exposures to such losses.

Most business insurance policies include personal and advertising injury coverage that provides some protection for libel, slander, and derogatory remarks as well as invasion of privacy. Some homeowners and renters policies also provide personal and advertising injury. Standard business forms may contain language that provides limited coverage because they refer to material published on the Internet or to electronic communications. Coverage may also exist because protection for suits involving libel and slander may make reference to defending against and, if needed, covering claims due to incidents of publishing or broadcasting information in any manner.

Individuals who blog or who maintain watchdog Web sites (consumer sites that monitor specific companies or products), may be susceptible to claims of defamation or invasion of privacy. Casual users of social network sites may inadvertently post comments about a current or former lover that are defamatory, especially after a divorce or messy breakup.

Businesses’ networking-related exposures are typically related to business activities. Businesses may, for example, misattribute the ownership of a Web site to a lower level employee in order to shield the business. That employee may sue for false invasion of privacy, especially if the Web site contains sordid or proprietary material. Business managers may also announce firings or disclose personal information about their employees that may create lawsuits. Personal networking-related exposures run the gamut of claims, including accusing individuals of crimes, infidelity, failure to pay child support, disclosure of personal or financial information, posting of pictures or videos in compromising positions, etc.

See Social Media – Part 2 for more information on claims and protection.

Social Media Liability-Part 2

See part 1 which discusses the meaning of social media liability.

Social media liability claims can be complicated and expensive since they may involve historical postings. In these instances, defense costs may include electronic discovery or subpoenaing information from any applicable social networking sites. Expenses could expand if a party filing a lawsuit demands information beyond a post to one particular site to include posts made on all the social networking sites where a defendant holds an account.

Depending on the nature of the claim, the insured may be faced with multiple lawsuits in multiple jurisdictions including outside the United States. Defense costs may reflect extensive jurisdictional and venue disputes that have to be handled (and paid for) even before determining if that claim is eligible for coverage.

Another issue is the problem of handling intentional (deliberate) acts. They are routinely excluded by most insurance policies. An insurance company may choose to deny either legally defending and/or responding to a lawsuit because, in its opinion, the policyholder had full knowledge that published information was false or that an act was an invasion of privacy.

Social media liability is not a common term so insurance policies generally refer to the traditional terms of “personal and advertising injury” and extending this traditional coverage to social media and the Internet. Social media makes it easier to libel, slander or invade a person’s privacy.

Off-the-cuff comments that used to be made at the water cooler or in the privacy of one’s home are now published nationwide or internationally. The result? Damages sought by a claim can be more substantial because there are more people aware of the comments as compared to traditional situation.

You must be aware of the legal potential in using social media and the claims that can result if defamatory comments are made about family members, friends, exes, etc. There is no immunity from lawsuits simply because such comments are commonly posted on sites such as Facebook or Twitter.

Considering what is at stake, especially for businesses, umbrella coverage is definitely recommended as an additional source of protection. Umbrella coverage is also recommended for prolific social media users and bloggers. Although avoiding high-risk behavior is a simpler and more effective way to eliminate problems, it is unlikely that individuals will avoid social media or blogging altogether. A more realistic expectation may be that a person may inadvertently engage in behavior that creates a claim. Individuals should evaluate the risk potential and realize that coverage for social media liability may become a necessary part of everyday life, similar to auto insurance or home insurance.

Guaranty Funds – Part 1

Each state has a guaranty fund. Their purpose is to minimize the loss to their citizen policyholders when an insurance company becomes financially impaired or insolvent. Various studies reveal that the following are among the most common reasons for insurance company failure:

Fraud (including falsified reports, concealing or altering key information, etc.)
Uncontrolled (rapid) expansion
Improper assignment of underwriting authority
Inadequate pricing
Lack of management expertise (especially with new or different lines of business)
Improper reserving
Insider activity
Inadequate or improper Reinsurance Agreements/Reinsurer Failure

Guaranty funds are, typically, mandated by various state laws and they usually focus on helping persons who are considered to be the most vulnerable to insurance carrier instability (such as auto, homeowners and small-sized commercial business).

Guaranty Funds collect assessments from participating insurers (all other insurers operating in a given state) whenever a need for funds is created by an insurer’s serious, financial impairment. The collected funds are used to handle claims suffered by policyholders of a failed insurer as well as pay the creditors and other parties owed money by the failed company. The fund is reimbursed by taking over and liquidating assets that are held by the insolvent insurer.

A state fund is usually called upon to handle payments once that state’s insurance commissioner formally declares that a given insurer is insolvent. Once that declaration is made, the state takes over operations and management of the company.

Please see part two of this article which discusses monitoring insurance companies.

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Guaranty Funds – Part 2

Most state insurance regulators have a process for monitoring the insurance companies that operate in their state. They require regular financial reporting and use a variety of tools to determine a given insurer’s financial state. If done properly, a vulnerable company should be identified and steps be taken to address the situation. Typically, a well-established set of financial tests are available to assist in evaluating an insurer.

However, regulator efforts in recent years have been undergoing significant change. States have long used benchmarks for measuring an insurer’s status that consist of minimal levels of financial requirements. The problem is that, realistically, the low levels of required capital and surplus bear no resemblance to the actual level of funds insurers need to meet their financial obligations. One unintended result of this traditional approach was that it encouraged companies to engage in practices that might threaten their solvency. So an alternative to the traditional monitoring approach was needed. Fortunately, there is an increasingly used method that more accurately measures an insurer’s vulnerability to failing to maintain adequate resources. It is called the risk-based capital concept (RBC).

Under RBC, regulators consider the business type and mix that a given insurer writes. Property-based business is characterized by predictable losses, so acquiring more business may be fine. However, the situation is different for casualty business which involves unpredictable loss activity, so less business should be held in order to meet possible obligations. While the use of RBC does not guarantee that every dangerous situation will be identified, it does substantially increase the effectiveness of monitoring insurance company solvency.

Sometimes an alternative to the use of guaranty funds is used, called a run off. Under a run off, a company is kept in active operation, but it no longer processes new business or renewals. The goal is to dispose of business in an orderly fashion, without triggering guaranty funds reimbursements or assessments. Run offs are being used more often in handling impaired insurers.

Camera Insurance-Part 1

Typically a person who owns a significant amount of photography equipment may depend upon their HO policy to provide protection. However, this is a poor alternative. Unless the coverage has been modified, an HO policy only provides a modest amount of coverage (around $1,000) and no protection applies if the equipment is used for a business reason. The best coverage option may be a camera floater policy.

The Camera Floater insures photography equipment against loss or destruction. Camera Floater insurance indemnifies the insured for loss or damage to scheduled property for all risk of physical loss. The policy applies to property of the insured or property of others in the custody or control of the insured while that property is located anywhere in the world.

Coverage extends to cameras, projection machines and accessories, lighting equipment, carrying/storage cases, motion picture equipment, sound, recording and playback accessories, home video cameras, playback recorders, and similar property (binoculars, telescopes, microscopes) etc.

The policy may not be used to cover: television cameras and equipment; coin or token operated devices; cameras or other camera property for the benefit of dealers or manufacturers; aerial cameras or radar cameras. The Camera Floater does not insure against loss or damage caused by wear and tear, gradual deterioration, insects, vermin, and inherent vice.

As is the case with other types of insurance policies, a loss creates obligations for both the insurer and the insured. The property owner must quickly report claims involving scheduled cameras. When a loss is reported and substantiated, the insurance company then has a given amount of time to reimburse the loss.

While floater coverage is a good way to protect such property, there are still many instances that don’t qualify for coverage such as business activity involving the following:

coverage for high-valued, specialty equipment
liability for injury to others during photography activities
loss of commercial income
disability protection
work-related employee injuries
coverage for lost or destroyed film
coverage for property in photographer’s care or control

For information on other aspects of camera insurance, please see part two.

Camera Insurance-Part 2

An insurance company has to take great care when offering coverage for camera property. Key questions to ask include the following:

How is the equipment used? – Normal, personal use is expected; so persons involved with pursuing dangerous photos (tornado chasers), persons seeking fame by being amateur news-hounds or by securing footage of disasters. A much more common concern is whether the use is professional; which represents a higher chance of loss than is handled by personal, camera coverage.

What is the type of equipment? – Again, equipment that is used for regular purpose is desired. Persons who own equipment that may represent unusual use would not qualify for coverage.

What is the value of the equipment? – Persons who own many thousands of dollars of equipment that is new and state-of-the-art may be a warning flag. It may indicate a professional photographer who needs to buy commercial insurance. A part-time or free-lance professional photographer should not be written under a personal camera floater policy.

What is the extent of the equipment – An unusually high amount of processing equipment and materials indicates a professional situation. Even you are an avid amateur an insurance company may shy away from, or seek much more information before offering coverage. They may want to know if there is a separate darkroom. Where is it located? Are processing chemicals stored safely? Is the equipment operated safely?

Any loss information must be shared in detail with the insurance company. Another consideration is how a person handles their camera equipment. An insurance company will treat an owner who keeps much of his equipment in full display in his home and garage, and one who installs a central alarm system and keeps all of his equipment in a room dedicated to his hobby.

A Camera Floater policy may not be written to cover:

Television cameras and equipment,
Coin or token operated devices,
Cameras or related property for the benefit of dealers or manufacturers,
Aerial cameras or radar cameras.

The important thing is to go over your situation with an insurance professional.

Fair Vs. Unfair Discrimination

Discrimination is regularly practiced by insurance companies and it’s quite necessary. Before going further, let’s make an important distinction. Insurance companies must practice fair discrimination. Discrimination refers to making choices and the practice makes sense as long as the choices are not unfair.

Unfair Discrimination

Unfair discrimination takes place whenever a choice revolves around a distinction that is irrelevant to offering insurance coverage. An example of this is to deny coverage based upon an arbitrary difference such as race or religion.

Fair Discrimination

Insurers are constantly involved in discriminating. They continuously evaluate situations to see if they are in a position to offer insurance coverage. Companies note differences and make choices among their insurance applicants. This process is important because insurance programs are designed using justifiable distinctions regarding the type of persons, property and situations they wish to cover.

Market Selection and Pricing

When an insurance company does business, it has to make decisions about the market it wants to serve. For example, in the car market, does it wish to insure only regular cars and drivers with pristine records or expensive sports cars and drivers with a few blemishes? In the homeowner’s market, does the company wish to target higher-value homes, such as those with a value over $300,000 or might it decide to exclusively write mobile homes?

Once their market niche is selected, a company has to create matching prices. What components must a company consider? Well, an insurer must charge premiums that reflect the:

dollar amount of losses paid to all parties filing valid claims
company’s costs to investigate and settle claims
insurer’s operating expenses (including compensation to employees and agents)
premiums charged by their competitors
the legal requirements of applicable state insurance regulators

Underwriting

Underwriting comes after market selection and pricing. A company has to create and follow rules for selecting and keeping the type of business that matches its premiums. Through underwriting, an insurer must properly select (fairly discriminate) among persons and kinds of property that fit its insurance program. If a company doesn’t apply their selection standards consistently, it will eventually lose the ability to do business. An easy way to determine a company’s selection practices is to look at their applications. If the information is important for underwriting, it should show up on the application. This is true no matter the type of insurance or market targeted by the insurer.

Discriminating Conclusion

Remember, the decisions made by an insurer in writing and renewing coverage must validly affect their market and prices. When the decisions are not based on these factors, then unfair discrimination takes place.

Are You Liable For Summer Fun?

Ready, Set, Summer!

Summer generally arrives with a huge surge in recreational activity. School ends and parents start searching for leisure and recreational activities for themselves and their children. The activities range from elaborate vacations or summer-long camps to simply buying play and sports equipment (or getting it out of storage) and renewing park and pool passes.

Summer Fun’s Dark Side

One thing to be aware of is that the simplest activities can go wrong. Using sports equipment such as tennis racquets, baseballs, baseball bats, Frisbees, lawn darts, or horseshoes has the potential to harm others. Danger accompanies the use of skateboards, bikes, mopeds, go-karts, and radio-controlled cars, helicopters and planes. A larger concern involves inviting friends over to use your driveway, play equipment or swimming pool. Potential liability comes from either you having fun at the expense of other persons or their property or failing to take precautions that persons you’ve invited to your residence (or other places) are safe to enjoy themselves.

How to Preserve Your Fun

The easiest way to prepare for your summer liability is to ask the questions:

What can I do to keep other persons safe from my activities?
Am I prepared to be responsible for people I hurt or property I damage?
How do I make my home and yard safe for fun-seeking visitors?
Am I keeping my guests to various events safe?

While accidents happen, many can be prevented by making sure that you and your children enjoy your activities responsibly. Operating bikes safely and in low traffic areas reduces the chance that others will be hurt. The proper use of games and equipment also make the likelihood of having someone injured more remote. In other words, it’s important that your family uses sports and game equipment safely and appropriately. Adult supervision is critical for potentially dangerous activities such as the use of motorized recreational equipment, trampolines, and swimming pools (including small wading pools). It’s also important to make certain that guests you invite for camping or hiking trips are watched after carefully. In many instances, you are responsible for the safety of your guests when you invite them to enjoy outdoor activities, particularly boating or other activities involving water-related equipment.

Home Inspection

Another way to reduce the chance of others being hurt is to do an inspection of your home and yard. Do you have an adequate fence (with secure or self-locking gate) to protect young children from a pool when you’re not around? Is your playground equipment well-maintained and strong enough to support the weight of the children using it? Is your yard and driveway free of tripping hazards? Are dangerous items such as tools, chemicals and lawn equipment kept out of reach of children? If you can answer “no” to any of these questions, you’re inviting trouble.

Insurance Plays a Role

When accidents happen, they may be followed by medical expenses and, more seriously, lawsuits. You must be protected against such financial consequences. Don’t assume you have coverage, especially when an activity involves motorized or powered equipment. You may have to add coverage to your homeowner policy or even buy special coverage for mini-bikes, mopeds, boats, all-terrain vehicles, etc.

So, make safety a part of getting ready for summer fun. It’s also smart to include a visit or call to your insurance professional to make sure you have the right coverage to support a fun summer.