AUTO INSURANCE FAQ

Do I need Auto Insurance?
Yes. Your car is likely to be one of the most expensive things you own. Insurance protects your investment and guarantees you a way of coping with the expense of accidents, vandalism or theft. It also secures your financial responsibility to the institution lending you money to buy your vehicle. When you drive, you are responsible for the safety of your passengers, your fellow drivers, other people's property, pedestrians and yourself. Insurance helps ensure your ability to cover the costs of potential damages or injuries.
You are also required to be financially responsible by state laws, which are best satisfied through your insurance coverage. In most states insurance is a prerequisite to registering your car. So if you want to drive your own vehicle, you must be insured

What does Auto Insurance Cover?
• Auto insurance is divided into several different types of coverage:
• Liability covers damage to other people’s property and injuries you may cause while operating an automobile.
• Collision covers damage to your own vehicle in an accident.
• Other than collision covers fire damage to your vehicle, break-ins, vandalism or theft, as well as natural disasters {earthquake, hail, hurricane, flood, etc.—unless the vehicle is overturned, then it is considered a collision).
• Medical payments insurance guarantees emergency and related medical payments, usually in the range of $5,000 to $10,000, for you, your passengers and other parties, regardless of who is at fault. It also covers you and members of your household in any accident involving an automobile, whether you are on foot, in a friend’s car or riding a bicycle, etc.
• Uninsured motorist (UM) and under insured motorist (UIM) coverage protects you and your passengers if injured in an accident with drivers carrying insufficient liability coverage.
• Extra coverages include expenses for towing, labor and temporary replacement vehicles, etc. These are generally defined as add-ons or endorsements to your policy.
Your agent can offer you more information on the limits and types of coverage that will best suit your situation.

Does the type of car I buy affect the cost?
Yes. Factors such as safety and frequency of theft of specific makes and models can play an important role in determining your insurance rate. Some cars are safer than others to drive and some are less apt to be stolen. Choosing one of these will help lower your insurance rate. Your insurance agent can help you estimate your insurance needs and premiums.

How is the price or “Premium” of an Auto Policy determined?
Drivers are grouped according to the level of risk each one poses—i.e., the amount of loss incurred by
• Gender—Men have more accidents on the road than women.
• Age—Drivers under 25 (and, for some insurers, under 30) are considered at higher risk of having an accident.
• Marital Status—Married drivers tend to have fewer accidents than single drivers.
• Personal Driving Record—Years of driving experience, accidents, speeding tickets and drunk-driving offenses are all factors in determining how much of a risk you pose as a motorist.
• How You Use Your Vehicle—If you commute by car during rush hours, you're at greater risk of having an accident than if you only drive for errands and recreation on the weekends. Drivers who use their own vehicles for business also are considered to be at greater risk.
• Type of Vehicle—The value, size, weight, age of your vehicle, even the cost of replacement parts, are essential to determining the price of your insurance. Larger, heavier vehicles are considered at lower risk than smaller, lighter ones. Plus, more expensive cars are costlier to have repaired than economy models.
The cost of your insurance policy is based on the average cost of covering actual losses, spread out over your particular "rating group" as a whole. Of course, you may never have an accident or have your car stolen, and therefore will never need to be compensated. But others in your category may not be so lucky. Your premium will help to pay for their losses, just as their premiums would help to pay for yours.
For example, if you are a 23-year-old man and you park your new sports car on a downtown street in a large city, you will likely pay more for insurance than a 37-year-old woman who parks her four-wheel-drive in the suburbs, simply because, based on average losses, you have a greater chance of having an accident or being the victim of auto theft.

Does where I live affect the price?
Where you live (or, more precisely, where your car is “garaged” or kept) has a bearing on your chances of having an accident or becoming a victim of theft or vandalism. That's why a vehicle owner in Boston or Los Angeles pays a higher rate than the owner of an identical vehicle in Fargo, North Dakota. Other factors affecting regional insurance rates include time and efficiency of police response and law enforcement officials, local road and traffic conditions and the quality of local medical services. Insurers even factor in the litigation rates in a given area, that is, how many lawsuits are filed, go to trial, and are settled out of court and for how much.

Why are rates different for different cars?
Vehicles are also grouped into categories according to their likelihood of being damaged, vandalized or
stolen. Insurers generally consider the size and type of vehicle, as well as the value and the cost of
repairs (which can vary greatly, even on vehicles that cost roughly the same). Thus, a new station wagon is expected to hold up better in an accident than a sports car or a subcompact.
Putting insurance aside, safety is key when buying an automobile. Your life depends on it! Some cars are considered safer than others because of their performance record in safety tests and real accidents.
That's why you should research insurance coverage before you buy your car. It helps you to understand the actual cost and indicates those vehicles with good safety records. Your insurer will ultimately reward you for putting safety first.

Do all States require Insurance?
No. Some states, like New Hampshire, while not mandating auto insurance, have "financial responsibility laws" that require all drivers to be able to pay for any damage or injury they may cause. However, carrying liability insurance is still the best way for you to meet your state's financial responsibility requirements. UM and UIM policies are offered by law in all states, including no-fault states. In fact, some states require all motorists to carry this coverage to gain protection from inadequate insurance coverage of other drivers.

What happens when I have an accident with an “Uninsured” driver?
First, you call the police to the scene to be sure all pertinent information is properly recorded. Your nerves
will be shaken right after an accident, so it helps to have a calm and knowledgeable person walking
you through the necessary details. Then, contact your insurance agency immediately and ask about filing a claim. If you followed all the recommended guidelines when you bought your policy, you should be covered within the limitations of that policy. Remember, your insurance policy is designed to protect you.
If the cost of your damages or injuries exceed the amount your policy will pay out, it may be time to take legal action against the other party. Even if you have no-fault insurance, sometimes the only way to be compensated is to place blame and responsibility where it belongs.

Is there any way my Policy can be cancelled?
Technically, in most states your insurer can cancel your policy only if:
• you fail to pay your premium;
• you lose your driver's license;
• you are guilty of material misrepresentation during the application process (i.e., you fail to notify your insurer of a recorded violation such as a drunk-driving offense); or
• you fail to report a substantial change of risk, such as buying a high-powered sports car to replace a family sedan.
However, your insurer can choose not to renew your policy for a variety of reasons.
Do you have a bad driving record? Have you received a lot of speeding tickets? Have you ever been caught driving drunk? Not only are these scenarios considered unsafe and illegal, they are justifiable cause for your insurer to label you a bad risk and refuse to renew your policy. (Some insurers may feel compelled to cancel policies after only one accident.)
Where do you live? Has the neighborhood changed in the last few years? Have the accident or crime rates risen noticeably? As regions are reassessed periodically, their status could change and you could suddenly find yourself living in a high-risk area where your insurer's rates may not be adequate to cover losses.

What do I do if my Policy is cancelled or not renewed?
Even "good" drivers can be dropped by their carrier. Reasons range from a "drinking while driving"
violation or other serious violations (that make you a high risk) to situations outside your control, such
as when insurers in your state are suffering severe business losses. Overall rises in claims or losses can cause insurers to become highly selective in determining whom they can afford to insure. If you are licensed to drive, by law, you are eligible for insurance. However, your options for new coverage may be limited. Each state has created and regulates a market of last resort for those who cannot otherwise obtain coverage. These groups have various names, depending on the state you live in, such as “assigned risk” plans or the “residual market.” Spence and Mathews will know more about the particulars in your state.
Regardless of the reason you were dropped, you need to act immediately to get policy. Under no circumstance should you drive your vehicle without insurance. Call Spence and Mathews to help you find new coverage. If you do find yourself in the residual market, the price may be higher but it may be your only alternative in maintaining your freedom to drive.

What can I do to prevent my Policy from canceling?
The most obvious way to maintain your low-risk status is to keep a clean driving record. If you've been
in an accident, consider taking a defensive driving course. Even those of us who have been driving for
years rarely know the simple tricks to preventing accidents through defensive driving. Also, look into purchasing special safety and security features for your car, such as anti-lock brakes and an alarm system. Your Trusted Choice SM insurance agent can give you further tips on how to convince your insurer you're a safe driver.

Can I do anything to reduce my rates?
Insurers often discount their rates for good drivers and those who take of safety and security
precautions. Depending on the insurer, you can often lower your rates from 5 to 35 percent.
Sometimes the investment you make in your vehicle is worth the discount, and sometimes it's simply worth some peace of mind. For example, the purchase of anti-lock brakes merits a discount from nearly every insurer, but the discount probably will not pay for the brakes during the normal life of your vehicle.
Insurers generally offer discounts for:
• Safety Features—Anti-lock brakes, air bags and passive restraint systems (i.e., automatic seat belts).
• Defensive Driving—Clean violation record, driver's education courses for teenagers and defensive driving or accident prevention courses for adults (insurance discounts for the latter are required in some states).
• Security Systems—Alarms, electronic locks and disabling devices.
• Changing Driving Habits—Commuting by public transit, using a company vehicle for work-related travel and car-pooling.
• Formal Agreements Not to Drink and Drive—The availability of a discount for signing such an agreement varies among insurers and states.
• Buying Home Owners and Auto Policies from the Same Company—If you own a home and an automobile and you are insured by two different companies, check into the cost of carrying both policies by one insurer. Spence and Mathews can give you guidance as to which insurers offer discounts.
You can also lower your insurance rates by requesting higher deductibles (the amount of money you pay before you make a claim). Increasing your deductibles on collision and comprehensive coverage from $100 to $250, or even $500, will bring your rates down. Moreover, you may not need collision and comprehensive coverage if you drive an older car. Ask Spence and Mathews which discounts are available to you.

Does adding drivers to my Policy affect my rate?
The more people you allow to drive your vehicle on a regular basis, the greater the chances of your
vehicle being in an accident. Teenagers are especially expensive to insure because they are the least
experienced drivers.

A driver's education course can help ease the burden of insurance costs since it teaches your teenager defensive driving techniques. If your child's high school does not offer driver's education, try to find one offered by another school or a private firm in the area. After all, the cost of driver's education could be cheaper than the extra cost of your insurance. (Many insurers offer "good student" discounts as well.)
An adult's driving experience can also affect your rates significantly. Don't assume that every adult you know has been driving since age 16 or is a competent driver with a clean record. Again, taking a defensive driving course is a good way for adults to prove they are responsible drivers, thus lowering their risk and their insurance rates. (This is a great solution for new couples who are jointly insured but unmatched in their driving skills or experience.)

Do I need to buy rental car insurance when I rent a car?
If you have fully insured your own vehicle, including collision and comprehensive coverage, and rent a vehicle for pleasure only (while on vacation, for example), you probably do not need to buy extra insurance from the rental company. In fact, in most states your basic rental fee by law will include liability coverage for damage or injury to others. But different rules apply when you rent a car for business purposes, so check with Spence and Mathews for details. If you do not have your own insurance, be aware that many car rental liability policies cover you only at the state's required minimum. Also, you should buy the collision and comprehensive coverage offered by the rental company for your own protection. Plus, do not buy a collision damage waiver (CDW) from the rental company assuming it is insurance. A CDW simply releases you from financial responsibility if you damage the vehicle you are renting, provided you comply with the terms of the rental contract. But those terms can vary considerably, and CDWs are not state-regulated, which means they are technically not insurance. It's always a good idea to review your policy before renting a vehicle and, if necessary, contact Spence and Mathews for clarification.

If I let someone use my car, is that person covered? Am I covered?
Yes. Liability and coverage for physical damage (i.e., comprehensive and collision) always follow your
car. So, if a friend borrows your car and has an accident, you're still protected against the cost of damages or injuries. Plus, if the driver of your car is insured, his/her policy will also be available to cover the cost of damages and injuries. The same rules apply when you borrow someone else's vehicle. Your own insurance follows you no matter whose car you are driving. But the vehicle owner's policy is the key coverage if you have an accident.

Are “Acts of God” covered?
Comprehensive insurance, which covers you for fire and theft, generally covers you against damage by
flood, earthquake, hail and other natural perils, except when your car is overturned (which is technically
considered a collision). If you have special concerns about the safety of your vehicle in the face of
Mother Nature's wrath, contact Spence and Mathews for information on catastrophic coverage.

HOMEOWNER/RENTERS

What is “Homeowners Insurance” and do I need it for my home?
For most people, their home is the single most valuable possession and largest investment. Homeowners insurance protects your investment as well as you, your family and your household possessions. If you were to suddenly lose your home due to fire or a tornado, or have the contents damaged or stolen, you probably could not afford to replace everything all at once. If somebody sued you for an injury or damage caused by you or your property, the cost of defending against that lawsuit could be very expensive regardless of the outcome. All of these situations are covered by the homeowners package policy. And while it may be unpleasant to think about fire, theft, and other uncertainties of life, let's face it, that’s reality. Yet another reason you need to carry homeowners insurance is that mortgage lenders require it. No mortgage company will lend the large amounts of money needed to finance homes at today's prices without requiring an insurance policy to protect that investment.

What does Homeowner Insurance Cover?
" Exact" coverage is hard to define because there are different policies. However, about 80 percent of homeowners policies are based on a standard form, which we described in this guide. All homeowners policies cover two important areas: property and liability. Remember that you have to have protection against the proverbial thief in the night and the person who slips on your sidewalk by day. What this means in insurance terms is that your homeowners policy has two basic components. It covers your structures and possessions—property insurance—and it furnishes protection against personal liability. Personal liability, as its name implies, means you are legally obligated to pay money to another person for actions caused by you, your family, or your property. That liability extends to medical payments to others for injuries caused by you or your family.

What kind of Perils does a Homeowner Policy protect against?
Remember that policies vary but homeowners insurance usually covers damage to both structures and personal property caused by:
* Fire or lightning
* Windstorm or hail
* Explosions
* Riot or civil commotion
* Aircraft
* Vehicles
* Smoke
* Theft or vandalism (sometimes called malicious mischief)
* Falling objects
* Weight of ice, snow or sleet
* Freezing of a plumbing, heating, air conditioning or other such household system
In fact, your coverage is most likely even more comprehensive than the above list. Many homeowners policies cover damage by "just about everything," unless the coverage is specifically excluded. In these cases, it is even more important to understand what is not covered.

Am I protected against flood, earthquakes and other catastrophies?
Most catastrophes are covered; for example, wind damage from hurricanes and tornadoes come under the windstorm peril listed in the previous question and so are included. Flood and earthquake damage, however, are not covered by a standard policy. Be careful not to be lulled into a false sense of geographic security. Flood and earthquake activity is more widespread than many people realize. For example, almost 90 percent of the U.S. population lives in seismically active areas. Since 1900, earthquakes have caused damage in all 50 states. And if your home is located in a flood-prone area, you are 26 times more likely to suffer a flood loss than a loss from fire. You may want to check with Spence and Mathews about special catastrophic policies for normally excluded conditions like floods and earthquakes. Of course, the cost of such extra coverage may reflect the high risk involved. If you live along a shoreline, for example, expect to pay a higher premium for flood coverage than someone living on a mountaintop would pay.

Are there any exclusions in a Homeowner Policy?
There may be other exclusions spelled out in your policy such as neglect, intentional loss, “earth movement,” general power failure and even damage caused by war. If you neglect to take care of your property (e.g., a leaky roof), you may not be covered. Obviously, if you intend to lose an object or damage your property, there is no coverage.

One other exclusion that can be costly is the Ordinance or Law exclusion. Building codes established by governmental bodies that drive up the cost of rebuilding or repairing after a loss occurs may not be covered by your insurance policy. Thus, if you discover when replacing damaged property that current law demands higher grade or more expensive materials than the original ones being replaced, the new materials may not be covered for the full price.

For example, if the current building code in your area requires a higher grade of electrical wiring and after a fire you are replacing all the wiring in your home, your policy may cover only the cost of replacing the older wiring. The difference in cost between the old wiring and the new wiring required by ordinance or law is your responsibility.

Even if you live in a fairly new home, laws and building codes are constantly being updated. Coverage to include ordinance or law requirements can be added to your homeowners policy with an endorsement—an addition that could save you money in the long run.

So, my detached garage and hi-fi stereo would both be covered under Homeowner Policy?
Yes, they are both your property so they are both covered. The value of the real property—your home, garage, shed and other structures—is generally based on the value of the main structure, the house itself. Thus, if the house were insured for $75,000, the shed, detached garage and other auxiliary structures would be covered for 10 percent or $7,500 worth of damages. Additional property protection features may include living expenses should your home not be habitable for a period of time.

Your personal property is also covered by a homeowners insurance policy. Personal property includes the contents of your home and personal belongings used, owned, worn, or carried by you or members of your household—basically, everything and the kitchen sink! This coverage is also based on the house coverage, and there are limits on the losses that can be claimed. Higher limits can be purchased for both real and personal property.

Who decides how much my home and personal property is worth?
State laws may dictate how losses are to be figured, which means the same insurance company may use one method in one state and a different method in another. The common methods are: Actual Cash Value—The replacement cost of the item minus depreciation. For example, a new television set may cost $500. If your 7-year-old TV set gets damaged in a fire, it might have depreciated 50 percent. Therefore, you would be paid $250 for that set. Replacement Coverage—The cost of replacing an item without deducting for depreciation. So today's cost for a TV set with features similar to the 7-year-old one damaged by fire would determine the amount of compensation. If it still costs $500 today, that would be the replacement coverage.
Replacement value should not be confused with market value. The market value is what your house, for example, would actually sell for and is generally more than the replacement cost. This is because replacement value does not include the land, which almost always does not need to be replaced.

Check your policy. If you prefer replacement coverage and do not already have it, this coverage can be added to your policy. Typically, the difference in premiums is 10 to 15 percent to upgrade from actual cash value coverage to replacement coverage. However, it is well worth it to protect your investment in your possessions. Spence and Mathews can advise you of the costs involved.

How much will I get for my personal property if it gets damaged?
Remember that homeowners insurance is designed to cover general personal possessions, not valuable collections like antiques, jewelry or original art. Insurance companies deliberately limit their coverage of expensive possessions so that household premiums are more affordable to everyone. After all, if they had to cover museum-level art collectors under standard homeowners policies, we would all end up paying higher premiums to cover those expensive items.
Your policy lists the specific monetary limits for personal property under what is called "Special Limits." Those limits usually are:
* $200 for money, bank notes, gold and silver (other than goldware and silverware), platinum, coins, and medals.
* $1,000 on securities, accounts, deeds, evidences of debt, letters of credit, notes (other than bank notes), manuscripts, passports, tickets, and stamps.
* $1,000 on watercraft, including their trailers, furnishings, equipment and outboard motors.
* $1,000 on trailers not used for watercraft.
* $1,000 for loss by theft of jewelry, watches, furs, precious and semiprecious stones.
* $2,000 for loss by theft of firearms.
* $2,500 for loss by theft of silverware, silver-plated ware, goldware, gold-plated ware and pewterware.
* $2,500 on property on the resident premises, used for business, and $250 on this property damaged or lost away from the premises.

If these limits seem low to you (maybe that engagement ring is worth much more than $2,500), you may wish to talk to Spence and Mathews about additional coverage for specific items.

Does my Policy cover my personal property when I go on vacation?
Yes, perhaps in this case the term "homeowners" is misleading because this is a package of insurance coverage that extends to all your possessions no matter where they are. If you take a round-the-world vacation and lose a valuable item, as long as the loss is by a covered event or peril, the location does not matter.

The liability component also extends well beyond the boundaries of your home. Should you be found legally at fault for injury or loss to another individual, whether you unfortunately caused a tumble down Mt. Washington or a fall in Lake Winnepesauki, that is personal liability which again is addressed in your homeowners policy. As in the property section of your homeowners policy, there are limits and exclusions to personal liability. Your business activities, for example, are not covered under a homeowners policy. You are also not covered for injuries or damage you purposely cause. So if a fight with a neighbor turns physical and you end up bopping him on the nose, your homeowners insurance will not cover the injury or any resulting suit. Your policy lists specific exclusions and limits

I have a tenant in my basement. Is he covered?
No. Your property and the structure (the basement) are covered by your policy as is your personal liability. However, the tenants' possessions and liability are not covered by your policy. Therefore, they may wish to purchase their own renters insurance. Whether you are a lessor or a renter, you should check with Spence and Mathews to make sure you have the right coverage.

My Mother-in-Law lives in an apartment over the garage. Is she covered under the Homeowners Policy?
As a member of the family, she is probably covered under your homeowners policy. So too is your child away at college covered for personal liability or theft or damage to his or her property even in the dormitory or college apartment. However, you should check with Spence and Mathews to be sure of the extent of coverage.

What about our vacation home in Vermont?
Insurance companies can operate in more than one state so the company that carries your primary residence may issue a policy for your vacation home. Personal liability is covered in the first homeowners policy so the second policy need cover only property. This type of policy is called a "dwelling policy."
If you rent out your second home for all or part of the year, your homeowners policy may need to be endorsed (added to) to cover the increased liability exposure. The renter's property is not covered under your dwelling policy. Should damage occur while someone is renting your property, they will need to check with their own agent about their coverage

I work out of my home. Is my inventory and business property covered?
Yes, but within certain limits. Both are covered as personal property used for business purposes. However, like all personal property, there are monetary limits on reimbursement. Whether your home business is your primary occupation or a hobby that nets you a few hundred dollars a year, it is still a business and you should treat it as such. If you've invested quite a bit in equipment (woodworking tools, for example) and sell the occasional decoy, you should consider whether the personal property limits are sufficient.
Also, keep in mind that the personal liability protection in your homeowners policy does not extend to business liability. Check with Spence and Mathews concerning your business insurance needs

What do I do if I suffer a catastrophe and lose everthing?
If most of us suddenly found ourselves without anything due to some catastrophe, we would be hard pressed to know all that we had lost. When was the last time you counted the number of shoes you own or CDs, not to mention furniture, dishes, drapes, or audio and video equipment? The list goes on and on. How much is it all worth and where would you start if you had to replace it? Now is the time to make a list of major household items and possessions. Just remember that, where possible, it is wise to list the serial number, date and cost of purchase, and even include the receipt if you can. Another easy way to inventory your home is to use a video camera or take pictures of your home and its contents. As you take the video, you can also talk about the items and their date and cost of purchase. Whichever method you choose, have a copy made and ask a friend or family member to hold on to it. Or store your copy in a safe deposit box. That way if the worst happens and your home is destroyed, the inventory list will be safe at another location.

Why does the insurance company want to know how close a hydrant is to my house and how far away from the fire station we are?
The insurance company has to weigh many factors in determining a premium to charge for your policy. One factor is access to water (hence the question about the location of the nearest fire hydrant) as well as the dependability and nearness of your local fire company and police. Rural homes more than five miles from a water supply are more at risk for severe damage from fire and lightning. Therefore, they can be more expensive to insure and rural homeowners may even have difficulty obtaining insurance. Other factors are, of course, the age and construction of your house. Generally, brick and stone homes are cheaper to insure than ones constructed of wood. The number and dollar amount of lawsuits in your state can also influence your premiums. Residents in states that experience a large number of lawsuits or of verdicts in excess of $1 million may face higher premiums to cover the cost of those suits

Is there anything I can do to lower my premiums?
Because your premium is based partly on the level of risk the insurance company must take, there are things you can do to lower your premium. Installing deadbolt locks (to discourage theft), fire extinguishers, smoke alarms, and burglar and fire alarms that alert your local police and fire stations can often save you up to 15 percent on your premium. Check with Spence and Mathews before purchasing any of these items to see if your insurance carrier has specific requirements to qualify for the discount. Many insurers also offer discounts if you insure both your home and automobile with the same company. Another way to save may be to increase the deductible on your homeowners policy. If your deductible is $100, it means that you agree to pay this amount first, and your insurance company will pay for damages that exceed this deductible.

By increasing your deductible from $100 to $250, or even $500, this decreases the insurance company's risk, which may mean a savings in your premium. Also, it pays to shop around for insurance coverage just like anything else. Of course, you may want to keep in mind that the extent of coverage also determines the premium cost so the cheapest policy is not necessarily the best. Spence and Mathews can help you evaluate the different policies and companies to find the one most suitable for you.

What do I do if my property is damaged or stolen?
Contact Spence and Mathews as soon as possible. If there is damage to your home or possessions, make "emergency" repairs to protect yourself and your property from further damage, then call Spence and Mathews. For example, if some of the windows in your home have been blown out by wind, you may board them up to prevent additional damage. In fact, your policy covers the cost of these emergency measures. However, before setting about to make permanent repairs, call Spence and Mathews. The insurance company has the right to inspect the property in its damaged condition. They may want to send a claims adjuster or instruct you to get an estimate from an independent contractor. If you have property stolen, notify the police immediately and call Spence and Mathews.

What if I am sued or found liable for someone else’s injury or property damage?
Liability covers bodily injury and property damage to others due to your negligence. The coverage applies to non-auto accidents that occur either at your residence or off the premises. Medical expense payments such as first aid can also be due to the injured party. Should you be sued or suspect that you may be, contact Spence and Mathews immediately.

My homeowners insurance is part of the payment I make to my mortgage company each month. Who decides what insurance to get?
You do. It’s your home and your insurance policy. As a means of protecting its investment, the mortgage company collects a set amount from you each month, puts it in escrow, and then pays your insurance and taxes when they fall due. However, the policy is still yours and you may select the insurance you feel offers the best coverage at the best rates. In fact, if you allow the mortgage company to choose, you might well end up paying more for your homeowners insurance.

I’m a renter. Do I need insurance?
The same rule of thumb applies to renters as to homeowners. If catastrophe struck tomorrow, could you afford to replace everything you own? Or if you were sued, would you have enough money to pay legal fees and possibly settle the suit? If not, chances are you would benefit from the protection that renters insurance brings. Renters insurance offers the same general personal property coverage and liability protection as a homeowners policy. Thus, your camera is insured while you are on vacation, and you are covered if your grandfather clock crashes into the apartment lobby's wall and leaves a gaping hole. In fact, most policies are surprisingly extensive and may include additional living expenses (also called loss-of-use coverage) if you are forced by fire or other damage to live elsewhere.

Isn’t the property in my apartment covered under my landlord’s policy?
No, the landlord's insurance covers damage to the building and the landlord's property, not your personal property or liability. Plus, you may be liable for damage to the building if it is your fault. If you go out and leave the stove on and an ensuing fire causes extensive damage to the entire building, you may be held liable to the landlord.

How are the premiums for renters insurance determined?
Renters insurance is surprisingly inexpensive. That's because you are not insuring a building. Like all property/casualty policies, the value of your property to be insured and other risk factors are weighed by the insurance company to determine your premium. Spence and Mathews can help you find the best combination of coverage and cost

I live with three roommates. Do we each need our own renters policy?
Check with Spence and Mathews. Usually, it is best if all roommates are on the same policy although it is possible for each to purchase his or her own coverage. If you do need to "go it alone," you alone receive the security of renters coverage

I own a Condo. Would I need a different policy?
Condo owners insurance covers the same general areas as homeowners in the important areas of personal property and liability. In addition, condo owners insurance provides coverage for some situations specific to condominium unit owners. Usually, the condominium association buys insurance to cover the property (building and structures) and liability coverage for the general association. If you own a condominium unit, you may be responsible for covering from the "walls in" on your unit, that is, for your personal property and the interior of your unit (whatever area is excluded from the condo association's policy) as well as for your personal liability. Sometimes, condo owners are assessed by their condo association for losses "outside the walls" that were not completely covered by the association's policy.

For example, if the clubhouse is destroyed and the condo association did not have it insured, you could be assessed for a "share" amount needed to replace it. If you wish, check with Spence and Mathews about adding such "loss assessment coverage" to your condo owners policy.

BUSINESS INSURANCE

I’m starting my own business. Do I need Insurance when I open?
Yes, because the chance that you could suffer a loss begins with the first day of business. You can’t get help after the fact. If you suffer a loss and have no insurance or have improper or insufficient coverage, there is very little, if anything, Spence and Mathews can do to help you. You must be prepared for the risks that are inherent in any business and the losses, sometimes catastrophic, that they can cause.
Also, many states and local jurisdictions require that businesses be insured to begin operating. And if you rent space for your business, your landlord probably requires that you be adequately insured as well.

I have very few assets in my business. Do I still need insurance?
Every business has some property. And, when you think about it, your business is your property. Just like your home and your car, your business needs to be protected from loss, damage and liability. In addition, your business is your source of income, so you need protection from the potential loss of that income.
Generally, there are two types of insurance—property and liability. Property insurance covers damage to or loss of the policyholder’s property. And if somebody sued for damages caused by you or your possessions (other than a vehicle covered by your insurance policy), the cost of the suit—both defending it and settling it, if necessary—would be covered by your liability insurance.

Is business insurance the same for all businesses?
It can be. Many small businesses are now insured under package policies that cover the major property and liability exposures as well as loss of income. A common package policy used by many small businesses is called the Businessowners Policy (BOP). Generally, these package policies provide the small business owner more complete coverage at a lower price than separate policies for each type of insurance needed. Spence and Mathews can help you decide which policy or policies are right for your business. Additional coverage for property, liability or perils or conditions otherwise excluded (e.g., flood protection) can be purchased as endorsements to a standard policy or as a separate, second policy called a difference-in-conditions (DIC) policy. Because businesses vary, it is impossible to have a standard policy to cover all contingencies. Also, some businesses, regardless of their size, do not fit the profile of a standard businessowners policy. For example, restaurants, wholesalers and garages have special liability needs that are not met in the standard businessowners policy. Spence and Mathews can advise you of the best policy (or policies) to protect you and your business.

What type of property should I insure?
Your business may not possess all the following types of property, but you can use this list to make sure that you have considered all the property categories and any insurance coverage that may be warranted:
• Buildings and other structures (owned or leased)
• Furniture, equipment and supplies
• Inventory
• Money and securities
• Records of accounts receivable
• Improvements and betterments you made to the premises
• Machinery
• Boilers
• Data processing equipment and media (including computers)
• Valuable papers, books and documents
• Mobile property such as automobiles, trucks and construction equipment
• Satellite dishes
• Signs, fences, and other outdoor property not attached to a building
• Intangible property (good will, trademarks, etc.)
• Leased equipment
To establish the amount of insurance you need on each, Spence and Mathews can help you review the types of property you own and their uses. Some of these items are covered in the basic policies. For others, coverage can be added by an endorsement, or rider. And some, like money and securities, may not be covered by a standard commercial policy and may require a second, separate policy.

What type of property insurance should I buy?
The best thing to do is to take a complete inventory of all your business property, determine all of its value and decide if each is worth insuring. Then check to see that the items on the inventory list are included in the basic business property policy and covered for the correct amount. If not, ask Spence and Mathews about the cost of purchasing additional coverage to meet your needs. You also need to consider your business situation. Are you planning a major expansion? Does your inventory have a decidedly peak season (like a toy store in December)? Or does it fluctuate throughout the year (like a clothing store)? Is your liability limit high enough in light of the new job contract you just signed? Business policies are designed to be added to or subtracted from to meet your needs. Be sure to discuss changes to your business with Spence and Mathews so that he or she can be sure your policy still provides adequate coverage. Some common additional coverages for business property include (although this list is by no means all-inclusive):
Boiler and Machinery Insurance. Even if you do not own a boiler, you may need this coverage. The term “boiler and machinery insurance” is gradually being replaced with terms such as “equipment breakdown” or “mechanical breakdown” coverage. This insurance provides coverage against the sudden and accidental breakdown of boilers, machinery or equipment, including computer systems and telephones/communication systems. Coverage usually includes reimbursement for property damage, expediting expenses (e.g., express transportation charges), and business interruption losses.

Builders Risk Coverage. This covers buildings in the course of construction. Depending on the policy, this coverage can be for either the building’s value at the time of loss or its full value at the time of completion.
Building Ordinance Coverage provides coverage when a community has a building ordinance stating that when a building is damaged to a specified extent (usually 50%), it must be completely demolished and rebuilt in accordance with current building codes rather than repaired. Special attention is required when establishing the amount of insurance.

Business Interruption Insurance covers the loss of earnings as a result of damage or loss of business property. Reimbursement for salaries, taxes, rents, and other expenses plus net profits that would have been earned during the period of interruption can be included.

Commercial Crime Coverages covers money and securities, stock and fixtures against theft, burglary and robbery both on and off the insured premises and from both employees and outsiders.
Debris Removal Coverage covers the cost of removing debris after damage from fire or other covered peril that requires debris removal before reconstruction of the damaged building can begin. This is not part of fire insurance coverage and must be added as an endorsement.

Glass Coverage provides coverage for glass breakage such as store windows and plate glass on office fronts.

Inland Marine Insurance primarily covers property in transit such as from warehouse to warehouse or warehouse to retail store, as well as other people’s property left on your business premises, such as clothes left at a dry cleaning business or an employee’s personal effects left in the company locker room.

Insurance for Loss of Lease Income or Value covers the loss of income when rental property is damaged or destroyed and the loss of value when the owner of the rental property also used some of its space for business. If the tenant of the destroyed or damaged building is forced to rent space elsewhere at a higher cost, this is called loss of lease value.

How much insurance do I need to buy for my property?
There is no one answer to this because each business is different. You can consult with Spence and Mathews on the monetary limits needed to cover your potential for loss. Obviously, a one-person accounting firm will need to purchase less insurance than a store with a substantial inventory. But each will need to make sure that all necessary business property is covered, that the limits of liability are sufficient to protect the owner and the employees and that loss of income is protected. In addition, each business has unique needs and situations that must be handled. If the store happens to be located on a flood-prone area, the owner should invest in flood insurance. The accountant may wish to purchase reconstruction-of-accounts-receivable insurance to cover the loss of accounting records. The costs of reconstructing those records, money borrowed because of delayed payments due to the records being lost, and lost payments from those clients whose records cannot be reconstructed are all covered. Liability protection also will vary from business to business. A retail business is more at risk for potential suits than a business that is not open to the public. Also, in some states, courts tend to respond more positively to lawsuits, increasing both the likelihood of successful lawsuits and the amount of damages awarded. In today's lawsuit-conscious society, higher liability limits are extremely important and relatively inexpensive. Spence and Mathews can help you decide how much coverage is needed for your particular business.

Who decides the value of my business property?
Property insurance can be purchased on the basis of the property’s actual value, on its replacement cost, or on an agreed amount. The differences among the three are:|

Actual Cash Value - The replacement cost of the item minus depreciation. For example, a new desk may cost $500. If your 7-year-old desk gets damaged in a fire, it might have depreciated 50%. Therefore, insurance would pay you $250.

Replacement Coverage - This coverage pays the cost of replacing an item without deducting for depreciation. So today’s cost for a desk of a size and construction similar to the 7-year-old one damaged by fire would determine the amount of compensation. If it costs $500 today, that would be the replacement coverage.

Agreed Amount - Art objects, antiques and other unique items are usually insured at an amount agreed upon when the policy is being written. An appraiser values the goods to be insured and the business owner and the insurer agree upon an amount that the insurer will pay if the goods are destroyed due to a covered peril.

Check your policy. If you prefer replacement coverage and do not already have it, this coverage can be added to your policy. Inflation-guard coverage, which automatically increases your insurance amount a certain percentage, protects against rising construction costs. Spence and Mathews can advise you of the costs involved.

What kinds of losses does business insurance cover?
Basic property insurance policies generally cover losses caused by fire or lightning and the cost of removing property to protect it from further damage (e.g., removing inventory or equipment from a damaged building so it won't be stolen). “Extended perils,” including windstorm, hail, explosion, riot and civil commotion, and damage caused by aircraft, automobiles or vandalism, are usually covered in a standard policy. Other important perils, often not covered and considered “optional” in almost all standard policies, include earthquake and flood damage, building collapse, and glass breakage. Property insurance can be written as either “named peril” policies or so-called “all risk” policies.

A named peril policy provides coverage for those perils specifically named in the policy. An all risk policy covers loss by any perils not specifically excluded in the policy. The term “all risk” does not mean that all perils will be covered and, to avoid confusion, is often replaced with the term “special form” or “special causes of loss” coverage. Check with Spence and Mathews on the perils covered by your policy. If you wish, additional coverage can be added.

What if someone sues my business?
No business can afford to be unprepared for a lawsuit. Liability insurance protects your business assets when the business is sued for something the business did (or failed to do) that contributed to injury or property damage to someone else. Liability coverage extends not only to paying damages but also to the attorneys’ fees and other costs involved in defending against the lawsuit—whether valid or not.
The standard businessowners policy provides liability coverage, as does a separate policy known as a commercial general liability (CGL) insurance policy. Generally, commercial liability insurance, whether purchased in a separate policy or as part of a standard businessowners policy, will cover bodily injury, property damage, personal injury or advertising injury. The medical expenses of a person or persons (other than employees) injured at the business or as a direct result of the operations of the business are also covered. Usually excluded from both types of liability insurance policies are suits by customers against a business for nonperformance of a contract and by employees charging wrongful termination or racial or gender discrimination or harassment. Check with Spence and Mathews about the best liability protection covering all types of situations that may arise in your business.

I use cars and trucks in my business. Does insurance on those work the same way as on my personal cars?
Yes, but in addition to covering the vehicles you own for liability, medical payments, uninsured motorist coverage, comprehensive and collision, it also covers you when you rent a car and when your employees are operating their personal cars for your business. Be sure to review your auto exposures with Spence and Mathews.

I keep one car strictly for business. Do I need a separate policy?
Yes. Whether you have one vehicle or several, you will need a business automobile policy. Such a policy covers any motor vehicle used in your business including cars, vans, trucks and trailers pulled by trucks, and offers coverage if they are damaged or stolen. It also covers liability if the business vehicle is in an accident and the driver is at fault. This policy is not for truckers or commercial garages. They have special liabilities and must secure special policies that deal with their different needs. Businesses that have a fleet of vehicles will of course have different needs than a business with one or two, and their policies will reflect these differences.

I have employees. Do I need to protect them in case they get hurt while working for me?
Yes, and in most states there are legal requirements that must be met, and for which you may be responsible. State laws vary, but most states require that you carry some form of workers compensation insurance. This protects the employee and also offers you, the business owner, and a degree of immunity from lawsuit by an injured employee.

I’m about to sign a lease for my business. Does my insurance agent need to review the lease?
Whether the business lease is for a building or for equipment, your Trusted ChoiceSM agent needs to know the terms of the least to determine who is responsible for insuring the leased items—you or the lessor. For leased buildings or building space, there are other factors to be considered, such as who is responsible for plate glass coverage and whether your landlord requires tenants to carry minimum amounts of liability insurance, and the extent of a hold harmless agreement. These and other situations covered in the lease affect the amount and kinds of insurance you need.

I have gasoline stored on my premises for my business. Do I need special insurance?
Yes, if your business transports, stores or uses toxic materials, you are required by law to have a special environmental liability policy. If these materials should be discharged accidentally into the water or leak onto the ground due to a covered peril like fire, the cost of extracting the pollutant from the business premises is covered up to the dollar amount set forth in the property section of your policy.

I have a dry cleaning business. What happens if my customer’s clothes get damaged from a fire while stored in my building?
The standard businessowners policy contains coverage for loss due to fire, including coverage for property of others the insured business was repairing, storing, or otherwise servicing earn money. The coverage only applies, however, if the business is legally liable. Thus, if lightning causes the fire, the business is not responsible because lightning is out of the control of the business owner. There are other policies, called Bailee’s policies, which provide even broader coverage for your customers’ possessions. A Bailee’s policy is often useful to help maintain good customer relations.

I manufacture clothes. If they are damaged in the process of shipping, does the shipping company reimburse me or do I file a claim?
Shipping companies often carry insurance to cover their losses. However, the shipping company’s insurance may be too low or you may have difficulty collecting on a claim after signing for the shipment. Therefore, “property in transit” insurance is available to cover your property being transported by truck, rail, ship or other means of shipment. Also, the firm you hire to transport goods and the contract you sign with them may affect your need for coverage. Make sure you check with your Trusted ChoiceSM agent.

I work out of my home. Does my homeowners policy cover my business?
Yes, but on a very limited basis. Loss of business property is usually reimbursed up to $2,500 in the house and up to $250 for business property damaged or lost away from the premises. Even if your business is a sideline such as a craft studio, these limits may be too low to cover all the equipment and materials you have accumulated. It’s also important to know that no business liability coverage is included in a standard homeowners policy. Spence and Mathews can help you ascertain what, if any, additional coverage you need. This additional coverage may be added to your homeowners policy or found in a separate commercial policy.

I’ve heard about “Co-Insurance”. What is that?
Most business policies include a “coinsurance” clause stipulating what percentage of the total value of your property must be insured to be fully reimbursed for a loss, even a partial one. (Most losses are partial.) If you insure for less than that amount, your insurance company may impose a “coinsurance penalty” on your claim. Here's how coinsurance works:

Let’s say you have a building insured that you believe would cost $100,000 to replace and a coinsurance penalty in your policy of 80 percent. You insure the building for $80,000, thinking you have fulfilled the coinsurance clause. A fire loss causes $60,000 worth of damage, so you submit a claim. Your insurance company subsequently determines that the replacement cost of the building is actually $150,000. To determine how much to pay on the claim, the insurer divides the amount of insurance you purchased ($80,000) by the amount you should have purchased (80% of $150,000 or $120,000). The result (two-thirds of $60,000 is $40,000) is the amount of your claim the insurer will pay.

Thus, even for a partial loss within the monetary limits of your policy, you will receive only two-thirds of the amount claimed. If the building had been insured for at least $120,000, the insurer would have reimbursed you for the full amount of the loss.

You should check with Spence and Mathews to make sure you have adequate coverage. Adding an endorsement to the policy that automatically increases policy limits to keep pace with inflation is a good idea.

I’m a retailer. Do I have any liability when I sell a product?
As long as you do not alter the products you receive from manufacturers for resale, you have only a secondary liability. The product manufacturer is the first liable party. General liability insurance usually covers this secondary liability, but you should check with Spence and Mathews to be sure your business is adequately covered. Recognize, too, that your liability policy will pay defense costs, whether or not a judgment is rendered against you.

What can I do to save money on my insurance premiums?
Remember that all insurance premiums are based on the risks involved. The insurance company evaluates the situation to determine the risks—or potential for losses—and bases its rates on the results. Therefore, deliberate steps you take to lower your risks not only can help safeguard your business but also may make you eligible for lower insurance rates. Consider these steps:
• Maintain adequate lighting throughout your business premises.
• Keep electrical wiring, stairways, carpeting, flooring, elevators, and escalators in good repair.
• Install a sprinkler system, smoke and fire alarms, and adequate security devices.
• Keep only a small amount of cash in the cash register.
• Keep good records of inventory, accounts receivable, equipment purchases and the like. Consider keeping a second set of records off-site, such as with your accountant, or at home.
• Make sure your employees have good driving records.
• Make sure your employees know how to lift properly and use all necessary safety equipment, such as goggles, gloves and respirators.
• Consider using the services of a risk manager. Such an outside consultant can advise you of any safety or environmental regulations you may have overlooked or not been aware of and talk to your employees about safety practices.
• You may also wish to raise your deductible where appropriate to lower your insurance premiums. How high to raise the deductible should be governed by how much you can afford to pay out of pocket. Be careful not to raise it so high that you cannot cover it should a loss occur.
• Finally, make sure Spence and Mathews is familiar with your business and the risks inherent in it. He or she should be able to advise you on risk management techniques and their benefits to both you and the insurer.

When “shopping” for an agent, what should I look for?
Agents are there to help you. At the most basic level, any agent should be able to answer all of your questions about insurance, provide you with a thorough assessment of your insurance needs and offer you a choice of insurance products to meet those needs. Also, any insurance agency should provide you with prompt, quality service in the case of a claim. Just as important is the level of professional confidence and personal comfort you feel with the agent. Many people stick with the same insurance agent for decades, even generations. It helps to find an agent you can get to know and trust. An important, but sometimes overlooked factor to keep in mind is that there are two kinds of insurance agents: those who represent only one insurance company and those who represent more than one insurance company. Agents offering through their agencies only the policies of one insurance company often are referred to as “captive agents,” because the company they represent does not allow them to offer their customers competitive alternatives.

By contrast, agents offering through their agencies the policies of more than one insurance company are called “independent agents,” because they can shop around for their customers for the best insurance values among a variety of competing companies. A nationwide survey showed that Americans prefer to work with independent insurance agents by a 2-to-1 margin over captive agents.