Your Holiday Wish List: Is Your Gift Properly Insured?

christmas gifts.jpg

With Halloween still fresh in many people’s minds, I’m sure a few parents can remember their child’s face when, after getting all dressed up and braving the rainy weather, the lady that answered the customary “trick or treat” next door reached into a big bag of candy and deposited one butterscotch Werther’s into their child’s candy pail.  As much as I appreciate a Werther’s, it’s often disappointing to a child who, in this day and age, is expecting a fun size Snickers bar at a minimum.  This is how some people feel when they realize after a loss that every homeowner’s policy has limits for certain items, such as jewelry and firearms.  Getting paid $1,000 by the insurance company for a ring worth $5,000 can feel a lot like getting a Werther’s when you were expecting a Snickers (it’s actually much worse – but don’t try to explain that to a 5 year old).

With Black Friday deals and Christmas right around the corner, it’s important to understand how your homeowner’s policy covers two of the most popular gifts for Michiganders – jewelry and firearms.  In general, a standard homeowner’s policy covers these items for fire, explosion, vandalism, theft, and other perils listed in the policy.  However, it does not provide coverage for “OOPS!” actions such as dropping your firearm in the lake, losing earrings on the beach, or dropping a ring down the drain.  Additionally, in instances where the homeowner’s policy does cover the loss, there are policy provisions that limit the amount of coverage if the loss is by theft, which is the most common loss for jewelry and firearms.  The coverage limits for stolen jewelry and firearms are generally between $1,000 and $2,000 depending on the item and the insurance company.  On top of coverage limitations, the deductible on your homeowner’s policy applies before the insurance company pays any portion of the loss.

So is that lady sitting in first class rolling the dice with her three carat diamond ring?  Maybe… but probably not.  Jewelry and firearms can be specifically insured on a homeowner’s policy (referred to as “scheduled”) based on the value of the item.  This eliminates the homeowner’s policy limitation for how much the insurance company will pay for the item in the event of theft.  It also broadens coverage to include the “OOPS!” scenarios mentioned above.  Additionally, the homeowner’s policy deductible does not apply, so the insurance company pays for the full value of the item.

All that coverage must come at a cost, right?  Yes, but the coverage is actually quite affordable - especially when facing the risk of losing a $5,000 ring while skiing at Boyne or watching a $3,000 gun sink to the bottom of Higgins Lake.

So ladies, when making your Christmas list, go ahead and ask for that special piece of jewelry you’ve always wanted…just be sure to call us to add it to your homeowners policy.  And gentlemen, don’t forget that firearms can be specifically “scheduled” on your policy as well.

If you have any questions about this coverage or you make any substantial purchases over the holidays, please let us know.  Otherwise, enjoy the holidays and may you and your family stay safe, happy, and healthy.

This article was written by Derek Boer.  Please send comments or questions to Derek at derek.boer@boerinsurance.com. 

What Does "No Fault" Actually Mean?

cop-writing-ticket.gif

You were in a car accident a few weeks ago and the police determined it was your fault.  You reported the accident to your insurance agent and your insurance company has already paid to repair your car.  Just when you thought you had put the accident behind you, you receive a letter from the other driver’s insurance company.  Your heart sinks as you read their request for your insurance information.  You’re confused because, in the back of your mind, you’re cautiously confident that Michigan is a “no-fault” state for auto insurance.  But what does “no-fault” actually mean in Michigan?  And what recourse does the other driver have when you caused the accident?

Let’s keep it simple.  In Michigan, a driver cannot sue you for damage you caused to their vehicle, with a couple of minor exceptions (discussed below).  Each driver is responsible for insuring their vehicle on their own policy for physical damage (commonly referred to as comprehensive and collision coverages), whether caused by themselves or other drivers, if they choose to do so.  Therefore, regardless of whether another driver side swipes us at an intersection or we steer ourselves into a guard rail, we rely on our own insurance policy to pay for the damage to our vehicle.  Irrespective of who was at-fault in the accident, each driver goes back to their own insurance policy to claim the damage to their vehicle (hence the phrase “no-fault”).

There is, however, an exception to the no-fault rule.  The exception is referred to as “mini-tort,” which allows a driver to sue the at-fault driver for damage to their vehicle that is not covered by their own collision insurance.  The amount that can be recovered in this way is limited to $1,000.  This is generally used to reimburse the not at-fault driver for the collision deductible they paid on their own policy or to help cover their out-of-pocket costs to repair their vehicle if they didn’t carry collision coverage. 

Looking back to our opening example, the “love letter” you received from the other driver’s insurance company is generally seeking to recover the collision deductible that the other (not at-fault) driver paid on their insurance policy.  So did this accident just become up to $1,000 more expensive for you?  Probably not.  Most insurance policies include an optional coverage called “mini-tort liability,” which will cover your liability to the other driver for their out-of-pocket costs due to damage you caused to their vehicle.  Without this coverage, you would be paying your own deductible and the not at-fault driver’s deductible under the mini-tort exception to the no-fault rule.  Simple, right?  Please call us if you have any questions - we'd be happy to explain how this coverage applies on your policy.   

This article was written by Brian Boer.  Please send comments or questions to Brian at brian.boer@boerinsurance.com. 

Where Do You Hunt?

where do you hunt.jpg

This fall many of us will head to our favorite spot in search of the perfect deer or waterfowl hunt.  Some Michiganders are fortunate enough to own land with great hunting, whereas others race for a spot on public land or lease land from a local farmer or other landowner. 

Before you head to your favorite hunting location this fall, ask yourself this question: Do I own or lease the land that I hunt on?  If you answered yes to either, be sure to tell us about it so we can extend your personal liability coverage to that land.  This will provide lawsuit protection for you if someone is hurt on the property you own or lease, whether it be from falling out of a tree stand, stepping into a hole, or a firearm accident.  

The coverage extension generally costs $20 to $30/year, which is well worth it.  If you hunt only on public land, no action is needed as your personal liability coverage will follow you without any specific coverage endorsement.

Have a safe and successful hunting season! 

This article was written by Brian Boer.  Email questions or comments to Brian at brian.boer@boerinsurance.com.

Why Do I Need Insurance If I Don't Have Claims?

Risk-Management.jpg

If you’re like most people, you probably don’t get a warm feeling inside when paying your insurance premiums.  It’s common to grumble a little and write the check because you “have to.”  But insurance is a valuable financial tool that is much more than a requirement or obligation.  Insurance allows us to live our lives with a degree of certainty and security by protecting the things we’ve worked so hard to earn.

Think of it in these terms: 

There are three options for managing the financial risk in our lives – (1) avoid it, (2) retain it, or (3) transfer it.  Avoiding it is nearly impossible because avoiding risk means not owning a house, car, or anything else that could potentially cause a financial loss.  Retaining it usually doesn’t make sense because most of us can’t afford to rebuild our house if it goes up in flames or pay a lawsuit for injury we cause to someone else.  That leaves us the option of transferring risk, which is exactly what an insurance policy does. 

To insure our financial position, we transfer the risk of sudden and unexpected large losses to our insurance company and, in turn, accept small predictable losses in the form of premium payments.  The instant we purchase an insurance policy, our financial position with regard to the assets specified in the policy is fixed for the term of the policy.  Regardless of whether we have ten losses or none, we remain in the same financial position because we’ve transferred our risk of loss to the insurance company.  The peace of mind provided by a solid insurance plan allows us to live our lives without being paralyzed by the constant fear of a financially devastating loss. 

On the other hand, the insurance company does the exact opposite.  They have accepted the risk of infrequent large losses in exchange for guaranteed small premiums.  Their gain from the premium payments is fixed, but their risk in regard to the assets being insured is nearly unlimited.  This is why insurance companies are as thorough as possible when evaluating insurance applications.  The risk of financial loss associated with our lifting shingles, faulty electrical systems, and distracted driving is no longer ours – it is the insurance company’s.

The question of whether or not to insure our largest purchases is hardly a question at all.  Not many people can afford (nor would many choose) to be susceptible to an unexpected loss to their $30,000 car or their $200,000 house.  Paying insurance premiums might ruin our day but losses of that magnitude will ruin our year and possibly our life.  Therefore, even though we might never have a claim on our car or house, having insurance affords us the peace of mind needed to lead a secure life and have a predictable financial future. 

We’ve selected the insurance companies we represent based on their broad coverage offerings, strong financial condition, and excellent claim paying reputations.  So, next time you pay your insurance premium, try to find that warm feeling inside knowing you’ve transferred much of your risk of devastating financial loss to a quality insurance company.  Then, enjoy a peaceful night’s sleep!

This article was written by Derek Boer.  Please send comments or questions to Derek at derek.boer@boerinsurance.com.

When Is Cheap Insurance Like a Hole in One?

Hole-In-One1.png

On a September evening in 2015, my wife and I played the back nine at Thousand Oaks Golf Course.  I was having a good round - one stroke over par going into the 15th hole, a 150 yard par three.  I hit a 7 iron off the tee and said to my wife “this could be the one, honey”, which  I’ve  made a habit of saying every time I hit a decent tee shot on a par 3 for about the past year, figuring I’m due to ace one.  I’ve been playing golf for over 40 years and have never had a hole in one.  Sure enough, the ball flew straight at the pin, hit the green 8 inches to the right of the hole, took a short hop left, and clank… in the hole!

I was pretty excited about my stroke of luck, so I put that ball away for safekeeping after taking a couple of photos with my smartphone.  I thought to myself, this has potential to be my best 9 hole score ever, maybe even a par round, since I’m now one under.  I proceeded to bogey the next hole and double bogey the following two holes for a final score of 40… a good score for me, but a disappointing outcome nevertheless.  I left the course angry and disappointed, having blown a great opportunity to score low, when I should have been elated about my hole in one.

So when is a hole in one like cheap insurance?  My experience reminds me of a guy, let’s call him Bob, who is initially excited about  the savings he found when he shopped his insurance and switched to an insurance company that had a lower price than the company and agent he knew and trusted for many years.  When his home was later hit by lightning and caught on fire, burning the house, the garage, and the vehicles inside it, he found that his new insurance company wasn’t as fond of paying claims as he was accustomed to with his old insurance company, even though the new company’s billion dollar advertising budget made them look pretty good on TV.  In the end, he saved a couple hundred dollars on his insurance premiums, but lost thousands on his new company’s stingy claim settlements.

My excitement over my hole in one and subsequent disappointment and anger over how I finished the round is very similar to Bob’s excitement over saving money buying cheap insurance and subsequent disappointment and anger over losing thousands in a claim settlement.

The price of insurance, like any product or service we buy, is built by adding up the costs of producing it.  By far the largest input to pricing insurance is the cost of paying claims.  This makes up about 75% of the premium for most insurance companies.  If an insurance company can reduce this input by paying claims sparingly, they can offer lower premiums.

There are several ways an insurance company can gain a pricing advantage by reducing their cost of paying claims.  One is to be stingy with paying claims that are covered by the policy… make the policy holder fight for every nickel.  Another way is to write insurance policies that have more exclusions and limitations than average so they don’t have to pay some claims that other insurance companies cover.  These are the “gotcha!” exclusions.  Your last policy may have covered these claims, but the cheaper one doesn’t.  Gotcha!

And here’s the tricky part about “gotcha” clauses… they’re inside the policy.  The actual details of what an insurance company covers are not on the quote; they are within the 20 or 30 pages that make up the policy that you receive after you buy it.  The quote may appear to be similar to what you currently have (so called “apples for apples”) - the limits of liability and deductibles are the same - but the wording within the policy is what really determines which claims are going to be paid and which will be denied.  This is where the rubber meets the road.

An insurance company that combines stingy claim payments with restricted coverage can really gain a pricing advantage, and then spend a billion dollars a year advertising to the world how saving money on insurance  should be everyone’s goal and is so mindless that it can be done while brushing your teeth.  Turn on your TV or look in any direction and you’ll know who these insurance companies are… their names are so prevalent that you even see them in your dreams (a billion dollars will buy a lot of advertising space!).

And, what about the importance of good advice?  Many of the highly advertised insurance companies don’t provide experienced, knowledgeable agents to advise you on selecting coverage and answering your coverage questions.  And getting poor advice can cost you big in the long run.  

So, when is cheap insurance really like a hole in one?  Only immediately after marking a 1 on your score card.  From then on, it’s all double bogeys. 

This article was written by Dave Boer.  Please send questions or comments to Dave at david.boer@boerinsurance.com.

Before Heading to Deer Camp: Three Things to Know

deer.png

Michigan provides some of the best hunting in the country.  Many Michiganders save cherished vacation days for the fall with their sights set on that prized deer on opening weekend.  But before heading to deer camp, make sure you understand how your insurance protects you. 

Hunting Liability:

The personal liability coverage included on your homeowner’s policy covers you for injury to others and property damage caused while hunting – on public land, on a friend’s property, on your residence premises, or on your vacant land, subject to policy provisions.  

So where are you not covered while hunting?  On land you own (other than your “residence premises,” which is typically your primary home) that is either used for farming or has a permanent structure, such as a cabin, shed, garage, or fence on the land.  For this land you’ll either need to extend liability coverage from your residence premises or purchase a separate policy.

Firearms:

Your firearms and other personal property are covered under the “contents” coverage on your homeowner’s policy.  However, some items are only covered up to a specified dollar amount.  In the case of firearms, the typical homeowner’s policy limits coverage to $1,000.  Therefore, your valuable firearms should be “scheduled” on your policy, which means each item is listed on the policy with a description and value.  The annual cost of scheduling firearms is usually about $15 per $1,000 of coverage.  

Scheduling your firearms provides several benefits:

1)  The typical policy limit of $1,000 for firearms doesn’t apply to scheduled items, so your claim settlement will be for an amount up to the limit the firearm is insured for on the policy. 

2)  No deductible applies – you don't pay any portion of the loss out-of-pocket. 

3)  Broader coverage applies.  For example, dropping your gun from a tree and breaking it, or dropping it over the side of a boat, is covered.  These types of losses are generally notcovered unless the firearm is scheduled on the policy.    

Off-Road Vehicles:

Your homeowner’s policy automatically provides liability protection for the use of your quad, Gator, Mule, or other off-road vehicle while used on your residence premises.  It does not cover liability for use of these vehicles away from your residence premises, so you’ll need to add coverage to your policy if you use it away from home.  Also, a homeowner’s policy does not cover these types of vehicles for physical damage to the vehicle, whether at your home or away from home, unless you’ve specifically added coverage to your policy.

If you have any questions about how your insurance applies to your hunting activities please call our office.  We'd be happy to discuss your specific scenario.  Wishing all the hunters a safe and successful season!

This article was written by Brian Boer.  Please send comments or questions to Brian at brian.boer@boerinsurance.com. 

A Furry Liability

My wife, Kristin, and I brought home a liability exposure disguised in a furry yellow coat in 2015.  At only twelve pounds and barely able to walk, he wasn’t able to do any serious damage to a house, another dog, or our friends and neighbors.  However, we knew that as Jarvis grew up he could quickly create a sizable lawsuit should something go wrong.  Often times it’s not even the dog at fault but, when accidents or misunderstandings happen and the neighbor or mailman ends up in the hospital, a finger usually ends up pointed at the dog (and consequently at you).

Most people are surprised to learn that dog bite accidents account for over 1/3 of all homeowner’s insurance liability claims and are even more surprised that the average claim exceeds $30,000.  Therefore, when bringing your new best friend into your home, like Kristin and I recently have, considering your homeowner’s liability coverage is critical.

When determining adequate coverage limits most people tend to focus on coverage for their stuff, like their house, the contents of their apartment, or their jewelry.  However, usually the least expensive but most important coverage on a homeowner’s policy isn’t related to your stuff at all.  Instead, it is the personal liability coverage included in the policy.

Personal liability coverage will pay for your liability (subject to policy terms) resulting from accidents that you become legally responsible for, like hitting someone with a golf ball or someone falling on your icy steps. It will also cover (you guessed it) accidents your dog is responsible for, such as biting a neighborhood kid.  These accidents don’t even have to happen on your property in order to be covered by your homeowner’s insurance policy. 

If you have a dog, or are considering bringing one home, please discuss your personal liability coverage with us to make sure you have adequate coverage limits and that your policy discloses all required information.  Dogs make great companions but, if stuck in the wrong situation, even the best trained dog can cause an accident leading to a lawsuit.  The right insurance can help keep an unfortunate situation from becoming financially devastating.   

This article was written by Brian Boer.  Please send comments or questions to Brian at brian.boer@boerinsurance.com.