Archive for January, 2011

Save on Affordable and Reliable Insurance (Auto, Business, Health, Life, January 30th, 2011

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Save on Affordable and Reliable Insurance (Auto, Business, Health, Life, Homeowners, Renters, Group)

These days insurance have been swarming the four corners of the United States. Whether we like it or not, insurance is a need. Why? There is no denying the fact that one disaster can have a devastating effect on a firm, a family and an individual. It can be damage, bankruptcy and death to name a few. What are the factors that we should consider and how can we know the insurance that we need.

CAR/AUTO INSURANCE

One has to consider the purpose of owning it whether for personal use, for public transport use like a private taxi, or use for transportation of goods and industrial materials. Age is also a major consideration. Old vehicles pay a higher premium than new ones. The type and model of the vehicle has a major role also. When buying car/auto insurance online, there are sites that provide automated tools. Theyre using an auto coverage analyzer where you have to answer a few question about your financial standing, automobile condition, etc. From this information it will generate what category of coverage you need.

BUSINESS INSURANCE

There are insurance companies which have policies that combine protection for all major property and liability risks in one package. But you could also go with a separate coverage which is called a business owners policy (BOP). For protection against flood damage, find out if your office is in the flood zone-area. And if so, you must go for a policy that provides coverage against flood. Special Earthquake Insurance Policy or Commercial Property

Earthquake Endorsement can cover you if you live in an earthquake-prone area. However, its policies have different deductibles. Meanwhile, Business Interruption insurance, reimburses you for the lost income during a shutdown only applies to damage covered under this policy. On the other hand, Terrorism Risk Insurance Act 2002 covers loss due to any terrorism only for those businesses that have this coverage. Injuries and deaths due to acts of terrorism are exceptions in workers compensation.

HEALTH INSURANCE

With health insurance, you protect yourself and your family in case you need medical care that could be very expensive. If you have insurance, many of your costs are covered by a third-party payer (insurance company/employer), not by you.

KINDS OF HEALTH INSURANCE

Group Insurance

Most Americans get health insurance through their jobs or are covered because a family member has insurance at work. Group insurance is generally the least expensive kind. In many cases, the employer pays part or all of the cost.

Some employers offer only one health insurance plan. Some employers offer a choice of plans. These are:

a) Fee-for-Service
Insurance companies pay fees for the services provided to the insured people covered by the policy. This type of health insurance offers the most choices of doctors and hospitals. You can choose any doctor you wish and change doctors any time. You can go to any hospital in any part of the country. The insurer only pays for part of your doctor and hospital bills.

b) Health Maintenance Organizations (HMOs)
Health maintenance organizations are prepaid health plans. As an HMO member, you pay a monthly premium. In exchange, the HMO provides comprehensive care for you and your family, including doctors’ visits, hospital stays, emergency care, surgery, lab tests, x-rays, and therapy.

c) Preferred Provider Organizations (PPOs)
The preferred provider organization is a combination of traditional fee-for-service and an HMO. Like an HMO, there are a limited number of doctors and hospitals to choose from. When you use those providers (sometimes called “preferred” providers, other times called “network” providers), most of your medical bills are covered.

Individual Insurance

If your employer does not offer group insurance, or if the insurance offered is very limited, you can buy an individual policy. You can get fee-for-service, HMO, or PPO protection. But you should compare your options and shop carefully because coverage and costs vary from company to company. Individual plans may not offer benefits as broad as those in group plans.

Tips when shopping for individual insurance:

Shop carefully. Policies differ widely in coverage and cost. Contact different insurance companies, or ask your agent to show you policies from several insurers so you can compare them.

Make sure the policy protects you from large medical costs.

Read and understand the policy. Make sure it provides the kind of coverage that’s right for you. You don’t want unpleasant surprises when you’re sick or in the hospital.

Check to see that the policy states: the date that the policy will begin paying (some have a waiting period before coverage begins), and what is covered or excluded from coverage.

Make sure there is a “free look” clause. Most companies give you at least 10 days to look over your policy after you receive it. If you decide it is not for you, you can return it and have your premium refunded.

Beware of single disease insurance policies. There are some polices that offer protection for only one disease, such as cancer. If you already have health insurance, your regular plan probably already provides all the coverage you need. Check to see what protection you have before buying any more insurance.

LIFE INSURANCE

There are two basic types of life insurance: term and permanent. Term insurance is purely life insurance while permanent (aka “cash value” or “whole life”) policies include a savings element.
Benefits of a Term Life Policy:
If you die during the term of your policy your beneficiaries get paid -that’s all there is to it. You aren’t paying anything extra to fund a savings account or cover investment fees. And because the market is so competitive for term insurance, companies have a huge incentive to keep prices low. With relatively little effort you can compare, shop and assure yourself of a good deal. You pay only for what you need when you need it. You typically need life insurance coverage for a specific period of time (until the kids are out of college, for instance).

Benefits of a Permanent Life Insurance Policy:

A permanent plan can give you access to some or all of the premiums that you have been paying for in a way favorable to your taxes. It’s with you until you die. This type of policy coverage is guaranteed for your life with no out of the blue payment increases. A term policy will expire at a certain date, and a renewed policy could have much higher premiums. Maybe the best reason for a permanent policy is to make sure your estate and investments don’t get eaten up by the government. A permanent policy can provide peace of mind that your family and loved ones will be taken care of for the future.
Remember, the decision to buy a permanent or a term life insurance policy will depend on your situation, your age, your financial well-being, and other factors. If you are a young family with some investments to protect but not financially stable a term life policy might be a good idea to protect those investments and your family. However, if you are financially stable with considerable investments, it may be a better decision in the long run to purchase a permanent plan.

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Travel Insurance Insurance For The Over 65’s January 25th, 2011

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According to a survey published by Mintel, one in three pets needs an unexpected visit to the vet each year. This means that you are more likely to claim on your pet insurance than on a home & contents policy or even your car insurance.

The word unexpected is important here. If you are looking for pet insurance to provide cover for routine treatments such as vaccinations or worming, forget it policies that do that are as rare as hens’ teeth! And you won’t find cover for elective treatments, such as neutering, either. This means that the most common reasons for visiting the vet are uninsurable.

But don’t forget it’s those unexpected visits that tend to be the expensive ones! Developments in animal care mean that more conditions can be effectively treated and costs of emergency care can be horrendous. A cat that argues with a car could cost 700, even more, to treat. After all, a series of X-rays could cost 400 and a MRI scan will put you back 1,000. If Buster the Bulldog tore a ligament that too can be treated but the cost? Don’t expect change from 1,500! This is serious money!

Having appreciated that most reasons for a visit to the vet are uninsurable, what do we get for our money?

Well, insurance plans largely fall into three types. The first restricts the value of the claim for each condition or event; the second limits the total annual payout and the third and cheapest option, limits the payout per condition and ceases cover after 12 months of treatment. Most will make a payout if you pet dies. And with all policies you will have to pay an excess on any claim, usually between 50 and 100.

And the cost? That depends on which type of policy you want, the excess you want to pay, the sort of pet you have, its breed, its age and even your post-code (vets charge more in Chelsea). But as a guide, an industry estimate suggests costs between 30 and 200 per year for a cat and between 50 to 500 for Buster.

The best advice is start the insurance when your pet is young. Most pets can be insured after they’re 8 weeks old and you can then maintain the insurance over the course of its life. If your pet is in it’s middle age when you want to start the insurance, say eight or nine for a dog, then it may be difficult to get worthwhile cover. This is because treatments for existing health conditions will be excluded from the cover and in any case, a new policy at that age gets expensive.

So how can you lower the premiums? Sometime insurers will give you a discount if you pet has been identity chipped and quantity discounts do prevail! Discounts are widely available for your second and subsequent insured pet.

Then there’s always the Internet. The Internet is taking an increasing share of the insurance market and no wonder its simple, quick and easy. What’s more it’s probably the cheapest avenue for all your insurance whether it be for your home, your car or pet.

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Reliable Life Insurance Company Which Companies Are The Best? January 24th, 2011

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Reliable Life Insurance Company Which Companies Are The Best?

The life insurance industry is a carefully regulated industry. Every state has its own insurance department to monitor the activity of insurers. You very rarely hear of life insurance companies that dissolve because of financial problems. Insurance companies have to prove financial strength to operate in most states. Insurance commissioners have the authority to approve or deny rate changes. There are consumer guides that are available to help you compare companies. The AM Best Company is the most reliable resource in the industry. You can visit AM Best online and you will find all the information that you need about financial strength and product information.

Life insurance companies distribute their products many different ways. The agent distribution system has been around a long time. The life insurance professional is a valuable resource for people that want an on going relationship with an agent. A lot of folks want the personal service that only an agent can provide. Life insurance can also be purchased through the mail. There are a number of companies that use direct mail as their distribution system.

Insurance companies are also offering life insurance online. This is convenient for most folks that love to use their computer to make purchases. The online purchase can also lead you to an agent. That can give you the best of both worlds. You can begin the process by getting a quote online and finish the purchase with an agent from a company of your choice. The company best for you would be the combination of the financial strength and whether or not you prefer to be serviced by an agent.

There is one more factor when selecting an insurance company. Do you want to purchase insurance from a stock company or a mutual company? Stock companies are owned by the stock holders while the mutual companies are technically owned by the policy holders. Mutual companies pay dividends. Stock companies do not. Compare the rates of a stock company with a mutual company first and then compare the rates of stock companies with stock companies and mutual companies with mutual companies.

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International Travel Insurance Dont Leave Home Without It January 20th, 2011

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Does this sound familiar? Youve saved and saved for that perfect vacation youve always dreamt about. Youre in the travel agents office, youve just purchased your very expensive ticket and shes saying that you should buy some international travel insurance too. You roll your eyes because youre sure all this international travel insurance business is nonsense and shes just trying to get some more of your money. You say no thanks. While on your vacation, you crash your car and get hurt. Guess what? Youve got to foot all the expenses yourself and because you didnt want to get international travel insurance.

For those of you who arent familiar with it, international travel insurance is a must have if you intend to travel out of your own country. Since youre not familiar, right about now youre probably asking what international travel insurance is. Simply put, it is a temporary insurance policy which you buy before you leave on your trip. Typically, coverage lasts the full duration of your trip but, depending on who youre insured with, your international travel insurance can be extended for up to 12 months.

A lot of people couldnt be bothered with the added expense but there is always the small possibility that something can happen. A good international travel insurance policy will provide three things: good coverage at a reasonable price, readily available emergency assistance and efficient claims processing. It should also cover most circumstances. Your international travel insurance isnt adequate if it doesnt cover medical expenses, medical evacuation, travel cancellation and deferment costs, loss of luggage, rental vehicle expenses, death expenses, personal liability and legal expenses.

There is most often a need for international travel health insurance, to cover medical expenses. This can include hospital stays, medication and doctors fees. However, international travel health insurance is a godsend in more critical situations as it also covers ambulance services and emergency-related travel expenses, which is especially important in third world countries where supplies are limited and you may need to be transported to another country.

While you may not think that the cost of such international travel health insurance coverage is justified for a short, weekend trip, if youre going to be hiking through malaria infested forests over those two days, you might want to think again. Use your discretion. Its much better to be prepared for a possible emergency than to fall ill or get injured and not have any international travel health insurance coverage.

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Top 5 Jobs Which Require Life Insurance January 19th, 2011

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Life insurance is an important aspect of everyones lives and is something which everyone will have to face at some point in time throughout their lives. This point may come sooner rather than later for some individuals because of the job they perform on a daily basis.

While some individuals start everyday by putting on their suits and racing to get to the coffee shop for their morning coffee, others are strapping on their work boots and preparing themselves for a day of excruciatingly hard labor. As scary as it may sound, there are many individuals who are willing to put their lives in danger every single day when they get up and go to work.

The following is a list of the top 5 jobs which are considered to be the most dangerous jobs in the world. Individuals who perform these jobs are highly recommended to have a life insurance plan incase (god forbid) anything goes wrong on any given day. These are the 5 occupations which made the list:

1.Police/Detectives Police Officers face life threatening situations almost everyday. They are highly trained to defend themselves and are equipped with protective equipment at all times. Life insurance and disability insurance are crucial for individuals working in the field of policing.

2.Airplane Pilots Believe it or not, airplane pilots require life insurance because they are dealing with such powerful machines which have been known to have mechanical glitches. Airplane pilots are also highly trained in their field to make sure they do their best to fly safely.

3.Construction Workers Construction workers are somewhat unappreciated for the amount of hard work they do everyday. They not only put their lives in danger from all the machinery they are expected to operate, but they also face many factors which will affect their health in the long run. Overexposure to sun, heat and excessive lifting are just a few of these factors.

4.Farm Workers Much like construction workers, farm workers are at high risk of injury or death due to the fact that they are constantly operating heavy machinery. There are hundreds of farm work related deaths a years and thousands of injuries for individuals working in farm fields. Life insurance and disability insurance are important for individuals in this occupation.

5.Fire Fighters It is a known fact that fire fighters put their lives on the line everyday to save the lives of others. Knowing the potential consequences and performing the job anyways indicates that these workers deserve the highest level of respect from others. Individuals who have chosen careers in firefighting are also likely to have a life insurance policy.

Is your job dangerous? Is your life on the line everyday? Maybe not, but there are many other factors other than your occupation which may indicate you need life insurance. Life insurance is a plan which will ensure your loved ones are taken care of incase anything happens to you. Wouldnt you like to know your family would be looked after should this type of situation occur?

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Physician Expense Insurance – covers all your physician related expenses January 14th, 2011

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Physician Expense Insurance – covers all your physician related expenses

Physician Expense Insurance sometimes called the regular medical expense insurance – is a form of health insurance that covers the expenses incurred on the services of a physician other than surgery.

No human has ever lived on the earth without even a bout of illness and a subsequent stay in the hospital. On the other hand, healthcare expenses has always been at the higher end and an extended stay in a hospital due to some ill health is going to set one back by thousands of dollars if not higher. True, one cannot check destiny. The best thing one can do is to remain prepared for any such occurrences. It is where healthcare insurance here physician expense insurance offers one a helping hand. It has been explicitly conceived to take care of all physician related expenses minus surgery.

The physician expense insurance pays for doctors hospital visits or number of visits to a doctors office. The policy reimburses a definite amount per visit and also specifies the number of visits possible for a particular illness or injury.

Most of the physician expense insurance requires the customers to pay a set-amount called the deductibles on the covered expenses before the company starts paying back for the medical costs. If higher the deductible in your policy, the lower will be the premium amounts. But, as the healthcare costs sky rocket by the day, the premium is also bound to climb the upward spiral, both offering no solace for the common man.

As there are many players vying for their share in the physician expense insurance pie, customers may find themselves in a dilemma regarding whom to select from the competing lot. This requires a bit of common sense as well as brain scratching. Every insurance provider will boast that they are the best in the business. But it is the customer who should use his/her discerning senses to pick the right physician expense insurance provider.

Hence, before deciding on the physician expense insurance provider, one should do a bit of research regarding the advantages of a particular player and the physician expense insurance coverage details. Information regarding various schemes and premium can be obtained from the physician expense insurance company website. Also, one can go by reference; sometimes one could get a more practical review from a person who is a current client of the particular physician expense insurance policy.

The amount that a customer may have to shell out to pay the physician expenses depends on the type of physician expense insurance policy he/she has. The more coverage your physician expense insurance policy provides, the less the customer need to pay from his/her pocket. And this has a direct bearing from the screening you have done while selecting your physician expense insurance policy. It is all about being smart and rational.

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Insurance News UK Ex-Smokers Reportedly Paying Too Much For January 10th, 2011

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Insurance News UK Ex-Smokers Reportedly Paying Too Much For Life Insurance.

According to recent life assurance research by Sainsburys Bank, many ex-smokers may be paying too much for their life insurance. They assert that during the past 5 years approximately 6.78 million people have given up smoking, however only a quarter of these people have informed their life insurance company.

Time requirements differ between insurers; however, many companies consider a person to no longer be classed as a smoker after one year following quitting. By contacting their insurance provider former-smokers can get themselves re-classed as a ‘non-smoker’ and potentially saving thousands of pounds over the term of their policy.

According to their estimates, this means that there are up to 2.2 million ex-smokers who could be wasting at least 126.72 million simply by not reviewing their life insurance requirements to show their healthier status and reflect that they are no longer a smoker.

David Picket, the life insurance manager of Sainsburys Bank said, “The health benefits of giving up are well known, and with a packet of cigarettes now costing over 5, the financial savings can also be substantial. However, once youve successfully quit, you could also make a saving in your annual life insurance premiums if you review your requirements.”

Most policies require ex-smokers to have given up permanently and it is possible that even a couple of cigarettes in the pub on a Saturday night can consequently invalidate cover; however there can be big savings available (over 30%) for those who have completely quit. But despite the potential savings that are available, most people do not think to update their life insurance policies and so lose out.

Over the last few years, increases in the level of competition, has lead to large reductions for potential policy holders, with basic term life insurance policies now costing as little as 5 per month for a young and healthy non-smoker.

Life insurance comparison site Moneynet has good news for existing policy holders too, If you have existing Life Insurance Policies which were taken out some time ago it could be worth considering a change. Most Life Companies have considerably reduced their premiums over the last few years to take account of longer life expectancy and the advances in medicine.

The costs of life insurance can vary significantly depending upon age, lifestyle and occupation, as well as between different life insurance providers, as not all providers evaluate the levels of risk to be insured in the same way. The ease with which it is possible to check the difference in insurance premiums between providers through the financial information site The Motley Fool, Moneynet, or countless others which have sprung up in recent years, has also lead to increases in public knowledge and competition within the industry further driving down the costs.

While the news seems to be good all round for consumers it must be noted that as with all financial decisions, changing insurance cover can be complex as the number of providers and different products increases and the costs of making the wrong decision could prove serious. It should be noted that levels of cover can vary widely and therefore a professional independent financial advisor should be sought if in any doubt regarding a products suitability.

Disclaimer:

All information contained in this article, is for general information purposes only and should not be construed as advice under the Financial Services Act 1986.

You are strongly advised to take appropriate professional and legal advice before entering into any binding contracts.

Useful resources:

Life insurance comparisons – Moneynet ( http://www.moneynet.co.uk/insurance/index.shtml )
Financial information – The Motley Fool ( http://www.fool.co.uk/insurance/insurance.htm )

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Tips For Choosing Boat Insurance January 8th, 2011

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Unlike home or auto insurance, boat insurance policies can vary widely from one company to the next. So which type of boating insurance is best for you? Try these tips. They come from experts at the nation’s largest recreational boat owners association, BoatU.S.

• Know Thy Insurer-One way to find a good insurer is to ask friends who have had a claim in the past. Insurance companies may be good at taking monthly premiums, but how a company lives up to expectations when something goes wrong is a better indicator.

You can also research potential insurance carriers at www.am best.com/ratings. The ratings are the industry’s benchmark for assessing an insurer’s financial strength; look for an “A” rating (excellent) or better. State insurance regulatory agencies are also a good reference and can be found online.

• Homeowner’s or Separate Policy-Consider buying a separate insurance policy for the boat, rather than adding it to your homeowner’s policy, as the latter often limits certain marine-related risks such as salvage work, wreck removal, pollution or environmental damage. Whatever amount the boat is insured for, it should have a separate but equal amount of funds available for any salvage work. This means that you’re compensated for the loss of your boat and not having to pay additional, out-of-pocket costs to have a wreck removed from a waterway.

• Agreed Value vs. Actual Cash Value-These are the two main choices that boaters face and depreciation is what sets them apart. An “agreed value” policy covers the boat at whatever value you and your insurer agree upon. While it typically costs more up front, there is no depreciation if there is a total loss of the boat (some partial losses may be depreciated). “Actual cash value” policies, on the other hand, cost less up front but factor in depreciation and only pay up to the actual cash value at the time the boat is declared a total or partial loss or property was lost.

• Customize-Bass boaters may need fishing gear and tournament coverage as well as “cruising extensions” if they trailer their boat far from home. You may want “freeze coverage” if you live in a temperate state because, ironically, that’s where most of this kind of damage occurs. A good insurer will tailor your coverage to fit your needs so there will be no surprises.

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Pay as You Go car insurance? January 7th, 2011

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You can pay as you talk with a cell phone plan, so why not pay as you drive auto insurance? It sounds like a good idea; but would pay as you drive auto insurance work for you? The idea behind pay as you drive auto insurance is simple. Basically its this- if you do not drive very much, you will not pay high insurance premiums. Advocates for this type of insurance policy think that there are many merits to this type of program. What if you car pool to work, or take public transit? You are not using your car very much so why are you paying high premiums. With a pay as you drive auto insurance premiums you would be able to quite literally pay as you go.

Another situation where this plan would be of benefit is that of many retirees who have winter homes in temperate climates, the ’snowbirds’ living in Florida or Arizona six months of the year and six months in New York or Toronto for example. Essentially the insurance companies would set an average driving amount for each car type. It could then be broken down into a cents per mile basis. If you wanted to us the pay as you drive auto insurance system you could purchase a set number of miles and you would be covered for insurance during this period.

Pay as you drive auto insurance is an excellent idea for those individuals who do not use their car very much or try to find cost saving methods or environment saving alternatives. Currently this type of program is not yet available, but there are supporters in many states who are hoping to change that soon. Groups including Environmental Defense, the Conservation Law Foundation and even the U.S. Environmental Protection Agency are working to organize a national cooperative that would work with insurance companies to offer deep discounts for low-mileage drivers; halfway a step toward PAYD (Pay As You Drive) insurance.

General Motors and On-Star Offers PAYD Rates. In mid-2004 General Motors Acceptance Corporation (GMAC) Insurance began offering mileage-based discounts to OnStar subscribers located in some states. The OnStar system reports a vehicle’s odometer readings at the beginning and end of the policy term to verify mileage. Motorist who drive less than specified annual mileage can receive insurance premium discounts of up to 40%. PAYD programs are also currently available in Israel, South Africa and Holland. PAYD is gaining momentum, and will be coming to your area soon.

But will it ever arrive in the biggest Car Insurance market, the UK?
There has been a lot of debate and forwarded working concepts but non yet approved. Discussions have been put in place and considerations made but for as far as the UK drivers are concerned, that is as far as it has gone. Perhaps the industry has too much to lose with this new money saving concept so it will be put off for a while, but as pressure and countrys evolve into the new scheme it would be irrational for the UK to stay behind, fingers crossed peps.

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The True Cost Of Underinsuring Your Home Building And Contents January 4th, 2011

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The True Cost Of Underinsuring Your Home Building And Contents

If youve ever been tempted to decrease the sum insured for your home and contents in order to obtain a lower premium, think again. You may end up paying a far higher price than you imagined.

Whenever we take out an insurance policy, we are entering into a contract with the insurer. Whether household, motor vehicle, personal accident or any other type of policy, it is a legally binding contract between the insurer and the insured.

For householders, insurance of home building and contents is vital, not merely for peace of mind but to maintain the lifestyle they are accustomed to if the unthinkable should happen.

There are several aspects to consider when purchasing household insurance.

The insured has a duty to disclose to the insurer anything that they know or could reasonably be expected to know is relevant to the insurers decision to accept the risk and, if so, on what terms. For obvious reasons, this is called the Duty of Disclosure.

Each party to the contract (i.e.: insured and insurer) has an obligation to each other in accordance with the clause of Utmost Good Faith.

Utmost good faith means that in every dealing between insured and insurer, all parties are obliged to act in a totally scrupulous manner that is: in a spirit of Utmost Good Faith. This clause overrides all other clauses in the policy and is the measure by which the majority of insurance disputes are settled.

The sum insured is a major consideration when taking out an insurance policy. It not only affects the cost of the premium but the insurers liability if a claim is made. For home building and contents insurance, the sum insured is, arguably, the most crucial aspect and the importance of getting it right cannot be overstated.

According to The Insurance Council of Australia, approximately 43 per cent of home building and/or contents policyholders are significantly underinsured.

Determining the Sum Insured

For many people, determining exactly how much to insure their home building and contents for is a daunting task. It neednt be, however, with a few guidelines to follow.

Most insurance companies offer replacement cover for household policies or new for old so it is important to insure the building and contents for their full replacement value, not their value after depreciation.

Home building insurance: The sum insured is based on the total cost involved in rebuilding the property to its original or a comparative state. In addition to the actual building expenses, this includes the costs of demolition and removal of debris as well as any associated engineering, architectural and council requirements. Consultation with a professional builder or property valuer is recommended.

Home Contents Insurance: The most effective way of determining the sum insured for contents insurance is to conduct a room-by-room inventory. Simply go into every room, listing the individual items in each. Next to each item, write down how much it would cost to buy that item brand new.

Most insurers provide literature, online information and calculators to assist with determining sums insured.

As previously stated, the sum insured determines the insurers level of liability in the event of a claim. If the property is underinsured, the result can turn an already traumatic event into something more devastating.

Some insurance policies contain an average clause or co-insurance clause. What this means is that in the event of a claim, if a property is found to be significantly underinsured, the liability of the insurer will decrease commensurate with the level of underinsurance.

Lets look at a hypothetical example without the average clause:

A home is gutted as a result of bushfire. There is nothing retrievable. The homeowner had insured the building for $200,000.00 and the contents for $10,000.00. When assessors inspected the ruins and collected all the information about what was lost, it was determined that the actual replacement value of the building was $400,000.00 and for the contents, $20,000.00.

The insurer, however, was only obliged to pay a total amount of $210,000.00, less any excess, and did this. The insured could not rebuild for the amount of the claim payment and had to settle for a much more modest home, fewer household contents and a significantly reduced standard of living.

Lets look at another scenario with the average clause:

During a wild storm a tree falls onto a house, damaging the roof and part of the living room. Again, the building was insured for $200,000.00 and the contents for $10,000.00.

As in the previous example, loss assessors deemed the buildings actual value to be $400,000.00 and that of the contents, $20,000.00. The cost to repair the living room and roof is $30,000.00 and is well within the sum insured. However, the insurer was only obliged to pay an amount commensurate with the level of underinsurance.

The underinsurance level of the building was 50 per cent and so the insurer paid 50 per cent of the repair cost i.e.: $15,000.00. Contents to the value of $8000.00 were also destroyed during the incident, however, the insurance payment, under the average clause, will be just $4000.00.

In total, the insurer paid $19,000.00, less any excess, when repairs to the building and replacement of contents actually cost $38,000.00.

These two examples highlight the importance of placing the correct value on home building and contents insurance policies and how decreasing sums insured to save a few dollars in premium costs is really quite a gamble that could have disastrous effects.

It far better to know that should an unfortunate incident occur, we can recover what is lost.

After all, isnt that what insurance is all about?

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