Homeowners Insurance – Did You Make Any Of These Three Mistakes When You Purchased Yours?

If you purchased a home and got a mortgage with it, then chances are you have had experience buying homeowners insurance.   For the first time home buyer out there, buying homeowners insurance is just one of many distractions in the process that have to be checked off before the loan can close.  That kind of scenario makes a homeowner pretty vulnerable to focusing much more on the cost of the policy rather than the protection it provides.  Now if several years later you find the fire engines are racing toward your home while you stand in the driveway watching it burn, then you may suddenly find yourself wondering what you left off or ignored when you bought your policy.   Here’s a list of some of the most common mistakes that homeowners make when buying home insurance.

The most common mistake that I see is not purchasing enough insurance.  I know;  you are buying a home and in the process you start to feel like you are being nickelled and dimed all the way through.  But your insurance policy is one item where you should focus on protection first and price second.  It’s true that for the majority of homeowners, the insurance policy turns out to be nothing but a promise.  You are purchasing peace of mind and financial stability after a disaster but there is nothing tangible to take home and enjoy after you write the big check to the insurance company.   This is why I don’t blame folks for zeroing in on price as the primary factor in the purchasing decision.  But this is where you really need to take a bit of care and insure your home for full value.  It will be too late to call and ask for an increase as the sirens are wailing through your neighborhood.

 The problem of underinsurance is often exacerbated by the fact that you should be focusing on and insuring for the replacement value of your home.   You will have to build it back after all, and this can often exceed the price you just paid for the home.  For some people that is a difficult concept to understand.    Your agent should help walk you through the process of determining the replacement value of your home so that you can insure it for full value.  This won’t leave you with as much of a queasy feeling as those sirens are getting closer.

Homeowners also often make the mistake of failing to check to see if their home is in a flood zone area.  Flood losses are not covered by your homeowners insurance policy.    Could you easily absorb the costs of repairing flood damage that is equal to 1/3 of your home’s value?   Luckily, if you have a mortgage, then the bank will often catch this and require you to purchase a flood insurance policy.  I’ve also seen several cases where a bank wanted to require a flood insurance policy somewhat unnecessarily when the flood zone only crossed a small portion of a lower corner of the homeowner’s back yard.  If this happens to you, your agent can be very helpful in speaking with the bank to attempt to waive the flood insurance requirement.

The third most common mistake that homeowners make when purchasing their home insurance is failing to insure valuable items separately.     If you own valuable items like jewelry, paintings, musical instruments, guns or silverware, or other collectibles or fragile items, then you should consider adding coverage for these items under a separate endorsement.  Doing so can result in better protection since insurance coverage for these items may be severely limited under your homeowners policy.  If these things are important to you, take a few extra minutes and make your agent aware of them and discuss the best way to protect them.  Some homeowners policies will allow you to add a blanket endorsement for a low limit of coverage for these types of items.  This is a simple, quick and inexpensive way to protect these items if your collections are not extensive.

Clinard Insurance Group is located in Winston Salem, NC, and we insure thousands of homes all across the state.  We will take as much time as you need to listen to your story and to help you fashion a homeowners insurance policy that best suits your needs and your budget.   If you would like help with your homeowners insurance or your  auto insurance, your life insurance or even your business insurance, please call us, toll free, at 877-687-7557.

Here Are The Types Of Workplace Injuries That Cost Employers The Most Money – Is Your Business Vulnerable?

When a worker becomes sick or injured on the job, the ways that this event can impact the bottom line of that business are many and varied.   Of course there are the cost associated with the down time your business may experience while that worker is at home recovering, but there is also the possibility of lost revenue due to lost business that you can’t engage in if you need that employee to get the work done.  And don’t forget that workers compensation insurance policies are experience rated so that means that your past losses will affect the rates that you pay in the future.  OSHA tells us that injuries and illnesses cause increased absenteeism, decreased productivity and reduced morale among the non-injured workers.   All of the effects can be expensive to a small business owner.   But among all of the types of workplace injuries, some in particular are more costly than others.   If your business model leaves you vulnerable to losses of these types, then this is a wakeup call for you to take protective action to prevent  these most expensive types of losses from happening to your company.

There are 5 types of injuries that currently account for 72% of all the direct workers comp costs for employers in the U.S.  These types of accidents  cause losses totaling over $35.7 billion dollars each year.  They are, overexertion, fall to the same level, fall to a lower level, bodily reaction, and struck by an object.  Take just a moment and think about each of these types of accidents, one at a time to determine if your business is vulnerable to that kind of loss anywhere in your work processes.    Once you have done this, think even more carefully about ways in which you could establish changed procedures or different workflow strategies that might help prevent that type of accident.

This is a big job and requires some out of the box thinking to imagine what might go wrong to lead to a loss of any of these types.  The good news is that there is professional help available to you to accomplish this.  Some insurance companies sell only workers compensation insurance policies and often those insurance companies offer a rich and inexpensive buffet of services and programs to help you evaluate and prevent injuries to your employees.  According to the U.S. Department of Labor,   employers can save $4 to $6 for every $1 spent on safety and health programs.  Also, workplaces with successful safety and health management systems are usually able to reduce injury and illness costs by 20% to 40%.  If you consider that overall lost productivity just from lost productivity due to injuries and illnesses in the U.S. costing companies an estimated $60 billion per year, you can readily see that taking a moment to consider loss prevention for your business could have an enormous effect on your bottom line.

I advise that you check in with yourself on these most costly types of injury causes, then check in with your workers compensation insurance company to see what they can offer you to help you prevent them.  If you find that your insurance company is not particularly helpful, or if they don’t have a rich offering of tools and knowledge to help you prevent more injuries, then I suggest you start looking for another workers compensation insurance company.

At Clinard Insurance Group, located in Winston Salem, NC,  we represent a number of workers compensation insurance companies who specialize in this type of coverage only.  They have ways to help you reduce and prevent injuries in the first place, and they also have tools and knowledge to reduce the overall costs of injuries once they occur. If your business is located in North Carolina, South Carolina, Georgia, Tennessee or Virginia, then give us a call, toll free at 877-687-7557 and put us to work for you today to lower your workers compensation costs, both now and in the future.

The Consent To Rate Letter – Additional Confusion For The Consumer

You may have come across one of my previous blog articles decrying the confusion caused by the North Carolina insurance industry’s consent to rate letter.  If you missed them, click here, or here to read a few.   All of these articles though will lead to one very important point for you to remember:  If you receive a consent to rate letter from your insurance company, do not blindly sign and return it.  This is because doing to just gives them carte blanche to charge you insurance rates that are likely to be far higher than you will need to pay for your home or car insurance policy.   This article will focus on just one more feature of this letter that has caused confusion among consumers and left them facing higher rates than they ever expected to have to pay.

I want to start though with a quick background lesson on why North Carolina has a consent to rate form as a part of its insurance system.  Here in North Carolina, the rates for homeowners insurance and auto insurance as well as many other types of insurance policies, are heavily regulated.   Generally speaking, rates are approved or not by the NC Insurance Department as the maximum rates that can be charged for various types of insurance policies.  The insurance companies then file their rates as deviations, or discounts below the maximum rates.  Very few people will pay the maximum allowable rates for their homeowners insurance or their car insurance.  Occassionally though, an insurance company may feel that they would need to charge a specific client more than the maximum allowable rate because that client is perceived to carry a higher risk of loss for the insurance company.  In order to charge rates above the maximum allowed rate, they must have the client’s permission in writing.  And in cases where that client understands that their risk is higher and also has nowhere else to go to obtain insurance, then this is a good arrangement.    Unfortunately the consent to rate letter, once a rare occurrence is now a work around for many insurance companies to get higher rates out of their customers than the Insurance Department would allow.  This has happened in North Carolina in particular because the rates that are allowed have come to seem inadequate by many insurance companies after all of the money they lost to storms in 2011.  Many now use a consent to rate letter on huge swaths of their books of business just to circumvent the rate making process.    This should make it clear that signing a consent to rate letter without checking around for a better rate is almost always going to mean that you will be left paying far more for your insurance policy than you would otherwise have to pay.

Now that we are seeing such widespread use of the consent to rate form in NC, I felt that it was appropriate to let you in on another aspect of this letter that has misled some insurance consumers.   I am talking about the estimated maximum premium that is shown in the letter.  If you receive a consent to rate letter to sign, you will probably see that there is a mention of the estimated rate that you will be expected to pay if you sign the letter.  While this price might appear to be an accurate estimate, often it is far from the total that you will be paying if you sign the letter.  This is because many insurance companies will simply print the new, higher, base rate on the letter.  But the  base rate does not include the additional costs of endorsements to your policy that help to make your policy unique to your needs.  Perhaps you added towing coverage to your auto insurance policy or you have added guaranteed replacement cost coverage for your dwelling to your homeowners insurance policy.  When the consent to rate letter shows a new price for your policy that doesn’t include these other endorsements and the charges that go along with them then you might find that the bill you receive after you sign the letter is quite a bit higher than the estimate shown on the consent to rate form.  This has led to many cases of double sticker shock, once when you read the letter for the first time and yet another shock when you actually receive your updated, consent to rate renewal policy with rates higher than those estimated on the original letter.

The consent to rate letter is a work around procedure caused by the regulations that North Carolina requires for the insurance rating making process.  It can be confusing and downright misleading.  If you receive a consent to rate letter from your insurance company, I would advise that you call your insurance agent right away and try and understand why you are receiving this letter and what other options you may have for your insurance policy.  If you don’t get an answer that suits you, please call us and we will help you find a better solution.

At Clinard Insurance Group, we have many options available to our policyholders as well as to others who are faced with a consent to rate letter decision.  We still have options for writing homeowners insurance in NC without the auto insurance to support it.  Please feel free to call us, toll free, at 877-687-7557 and we will work to help you explore options that don’t include signing over a consent to rate letter to your insurance company. 

Dealers Insurance – Not A Place You Expect To Get A Return On Your Investment Of Over 10%

I’m willing to bet that most car dealers out there don’t think of their insurance policy as an investment.  And the few that do probably don’t think that as an investment, their garage insurance policy will generate an investment return unless they have a loss.  But because insurance companies are always looking for ways to determine which of their clients will have losses and which will not, sometimes this search generates changes that can offer the dealer some very nice choices.  Such is the case with the paid in full discount. 

Dealers insurance is really not very different from other kinds of insurance policies when it comes to risk selection by the insurance companies.  Everyone understands that if the insurance company can tell in advance which dealers will have losses and which will not, then they will make a lot more money.   The search for just the right metric to help them determine this is a bit of a Holy Grail type search.  Now insurance companies have relied heavily on many different factors to choose which auto dealers to accept as clients and which ones to walk away from.  Some of these factors seem obvious to the lay person.  Some of the more obvious ones are the driving records of the dealers, the past loss history of the dealers or the general condition of the dealership location itself.  Others factors are less clear, like running a credit check on the dealer or refusing to insure dealers who have a buy here, pay here service on site.  But if the insurance companies have one thing going for them, it is past data.  If they can come up with a way to back check a new idea against past experience, then they will often assume that they can project this behavior and risk assessment into the future.  The paid in full discount idea was probably something that simply jumped into someone’s head one day.  They then simply had to compare the loss histories for dealers who paid in full for their garage policy against those that paid monthly or on some other schedule.  They must have found that the pay in full group had fewer losses and so this new idea was born.

Auto Owners Insurance Company, an insurance carrier who insures many dealers across many states must have made this discovery recently.  Once they knew that dealers who paid in full had fewer losses than those who used payment plans, they simply needed a way to add an incentive to these pay in full accounts so that they could attract more of them over time.  What they came up with, I think, is very generous, though it may just reflect the difference in loss histories between these two groups.   Auto Owners now allows a 10% discount to all dealers who pay in full on their garage liability and dealers blanket insurance policies. 

Now if you are a dealer and you purchase your insurance from Auto Owners, consider the math on what this means.  Saving 10% on the cost of your dealer policies by simply paying in full is like receiving a 10% return on your investment money. If you had to borrow the money from the bank to pay for your garage insurance, I doubt you would have to pay anywhere near 10% interest.    But actually the math tells us that it is even better than that.  Assume for a moment that the cost of your garage insurance policy is $1000 and you only have to pay $900 for the policy if you pay in full, then that is a quick 10% return.  But if you compare this to paying 10 monthly payments of $100 each then the return is much greater than 10%.  This is because each month that you pay off the balance, you have less and less left to invest somewhere else to obtain some return.  So in the long run a 10% discount might generate as much as 12% or more return, depending on how many payments you have and how quickly you pay off your garage policy.

Over time, this generous discount will probably go away.  That’s because although it is designed to attract the better risk dealers who usually pay in full, the incentive will now attract some of the monthly pay plan dealers as well since it is so generous.  Once that starts to happen, the risk assessment piece of the puzzle becomes less clear and over time the pay in full group’s loss history will more nearly reflect that of the monthly pay plan group.  So my advice would be to take advantage of this discount while it is still around.

Clinard Insurance Group, located in lovely Winston Salem, NC actively insures more than 300 used car dealers, all across North Carolina, South Carolina, Tennessee, Virginia and Georgia.  We would love to help you save money on your dealers insurance policies, so please call us, toll free, at 877-687-7557 or visit us on the web at www.TheAutoDealersHelper.com.   

Don’t Let An Auto Accident Turn Into An Identity Theft Loss

While auto accidents are a common occurrence all over the country on any given day, a recent NAIC study found that very few people know what steps they should take after an accident occurs and what information they should or shouldn’t share with the other parties to the accident.  The problem is that right after an accident happens; most people are so upset that they are not paying much attention to protecting their identity.  This momentary confusion provides a great opportunity for an identity thief to make his mark.

The National Association of Insurance Commissioners study recently discovered that most consumers are unsure about what they should do after an accident and which information they should record and what they should share about themselves.  There was also a lot of confusion about when and whether to call the police after an accident.  Here’s a short list of some of the most common misperceptions that this study revealed:

·         Nearly 30% of drivers believe that they are required to share their personal phone numbers.  This is not always necessary and calling the police will help you sort out exactly what you need to share with the other party.

·         25% of consumers would share their home address.  This of course gives identity thieves one more place to go to sort through garbage or mail to find out more about you to give them an edge in stealing from you.
·         Nearly 20% believe that the only time you need to call the police is if someone was injured in the accident.  The truth is that if the accident occurs on public property, the police would like to be called in every instance.  If you are not at fault, then calling the police is probably going to be to your advantage and quite often the police report is very helpful in facilitating your auto insurance claims process.
·         Nearly 40% felt that they should share their driver’s license with the other driver.  One in six would let the other driver photograph their license to save time.  But, since some retailers use driver’s license information to verify identity over the phone, this could be risky behavior.

T    The NAIC does have a downloadablechecklist on their website of the information you should obtain if you are involved in an auto accident.  Below is a list of the information that you should get and write down somewhere or record directly into your phone after you have been involved in an automobile accident:

1.       The date, time and location of the accident.
2.       The weather or road conditions if there are conditions that are not typical.
3.       A description of the accident itself, add direction of travel and estimated speed of each vehicle involved.
4.       Describe any and all injuries and include information about emergency response, either police or medical.
5.       Describe damages and take photos or video with your phone where possible.  You should photograph the license plates of the vehicles involved, the damages to all vehicles involved, the damage to your vehicle, and any damage to any other property or objects at the scene.  Also take photographs of landmarks and street signs to help identify the location.

At Clinard Insurance Group we insure several thousand families all across North Carolina.  We generally advise our clients to call us first before reporting their claim directly to the insurance company.  This is true for all types of claims from auto insurance and homeowners insurance claims, to business insurance or workers compensation insurance claims.  We may be able to better advise you the implications of your decision to either turn in the claim or not turn it in.  After that, you can make the choice based on this additional information.  We also provide a free phone app that will help you gather the information that you need after an accident.  You can find links to that app at www.ClinardInsurance.com or you may search for Clinard Insurance in the Android marketplace or the Apple app store.

Will Falling Bond Yields Mean Higher Insurance Rates For You?

It may at first seem a little disjointed.  How could volatility and falling yields in the bond market have any effect at all on your insurance rates?  I mean weather yeah, bad driving record yeah, but falling bond yields?  The answer lies in the way that insurance companies make a profit.  And in times of intense completion,  most of their profit comes from investment income as opposed to underwriting income.  The intense completion for your auto insurance dollars is on display on your television every day and probably in your junk email folder as well.  And this competition on pricing has put a lot of pressure on investment income.    The options in that arena these days may leave many insurance companies with no choice but to raise rates.

One very important metric that every insurance company follows very closely is called the loss ratio.  This metric has several different iterations. The easiest to understand is called the pure loss ratio.  This is simply a measure of all premiums taken in, divided by all losses paid out.  Of even more importance is a metric called the combined ratio which is all premiums taken in, divided by the sum of losses paid out plus all other expenses.  When the combined loss ratio goes over 100%, then the insurance company has lost money on their underwriting operations.  When this happens, they will need to find their profit in the income that they generate by investing your premiums until they need them to pay for losses.

Intense competition in the insurance marketplace has driven down rates steadily for many years and the combined loss ratio of many insurance companies is now up over the dreaded 100% level.  To protect themselves their choices are to cut expenses, increase investment income or increase the rates that they charge for the various insurance products that they sell.  As a rule,  insurance companies invest in very stable and safe government bonds.  But the volatility of the government bond market, along with dreadfully low yields has driven some insurance companies to invest more in corporate bonds.  The problem with this strategy is that it exposes the insurance company to debt risk if and when interest rates rise.  If we see more corporate defaults, then the insurance companies that have invested in corporate paper will suffer losses and will have to raise their rates even further.

With high quality corporate bond now yielding below a 2% return, corporate debt is no longer a viable option for helping to reduce the combined loss ratio to produce a profit for the insurance company.  This leaves insurance companies faced with the choice between reducing expenses or investing in riskier investments to chase higher yields.  If they reject these choices then they are left with one remaining option, raising rates.  When yields ran at 6% for grade A corporate bonds, then the insurance companies that took a chance on this type of debt had 4 additional points to play with on their combined loss ratio.  At 2% the margin is getting pretty thin.  Add in the risk of default by the corporations that issue these bonds and you can see the dilemma that may lead more and more insurance companies to raise their rates.  It is easy to see that while falling interest rates may be helpful to you from a mortgage or car loan standpoint, they can have a counter effect on your car insurance rates and your home insurance rates.

At Clinard Insurance Group, we insure thousands of families all across North Carolina with their auto insurance, their home insurance and life insurance as well as their business insurance needs.  If you would like to ask questions or receive help in any of these areas, I hope you will call us, toll free, at 877-687-7557.

New Workers Compensation Experience Modification Formula Increases Incentives For Getting Injured Employees Back To Work.

Starting with policy year 2013, the work comp experience modification formula will change.  The old formula has gotten long in the tooth and these changes are designed to give more weight to any given employer’s actual workers compensation experience than the old formula is able to better reflect any given company’s actual loss experience.  But for most people, the mod formula is confusing and complicated and grasping this change will be best understood once they receive their new, recalculated mod.  So while we won’t get into a lot of details about the math in this article, we will talk about the impact of getting your people back to work more quickly and how this one act can affect the final experience mod factors across different industries. 

Here is a simplistic answer to what is changing in the experience modification formula.  Your mod formula is the tool that the insurance industry uses  which attempts to compare your actual loss results with those that would be expected based on your payrolls for each class code on your workers compensation insurance policy.  Primary losses, one side of this formula, are currently capped at $5000, regardless of how much more than that is actually paid out.  This is called the split point and this is what is changing.  Beginning next year this cap will increase and by 2015 will be more than $15,000.  After that it will change to reflect the inflation rate.   For many employers with claims over $5,000, the primary impact of this change will be to push bigger numbers to this side of the formula.  While the mod changes should be nearly neutral over the entire universe of workers compensation policies, some companies will see big increases while others may see decreases.  So how vulnerable is your company and while we are at it, your industry to the potential for large experience modification factor increases?

Step one to control your mod factor is to control the existence of any losses in the first place.  This means prevention is your number one cure.   But the focus of this article is to look at things that you can do once you’ve had an accident to help reduce the negative impact of that loss on your mod.   When I look at the formula, and how it is calculated, it becomes increasingly obvious that you should try and get all injured employees back to work before the disability waiting period (7 days in NC) runs out.  This is because the mod formula applies a 70% discount to all medical costs for claims that have no disability component.  Once your injured employee starts drawing disability, then the discount goes away and all of the medical costs are now dumped into your mod formula.  You can see why it is so important for you to find a workers compensation insurance company that has the loss control and back to work programs that can help prevent you from owning a claim that has gotten deep into the disability coverage of your policy.

Because all industries are different and have different types of claims, the impact of an effective back to work program varies a bit by industry.   Summit Insurance recently released a study of several industries and the anticipated impact of the mods for businesses in those industries depending on whether or not they were able to access an effective return to work program.  Here’s a sample of some of their results.  If you are in the automotive repair business then an effective back to work program could reduce your mod on your garage workers compensation insurance policy under the new formula rules by 6 points.  That would be a savings of $600 per year on a $10,000 policy for every claim that you have.  Landscapers workers compensation insurance policies will average a 3 point reduction as do electricians workers compensation insurance policies and workers compensation insurance policies for HVAC contractors.  Plumbers are likely to see a 4 point reduction and restaurants with workers compensation insurance policies could enjoy a 6 point mod reduction per claim for choosing a workers compensation carrier with an effective back to work program in place.

These numbers reveal once again that choosing a workers compensation specialty company with their associated loss control and back to work programs can save you a substantial amount of money in the long run by helping you keep your experience modification factor lower.  Generally I advise people to place as many of their policies with the same insurance company for the best treatment and lowest rates.  But workers compensation is another animal.  Here your rates will reflect your past losses through your experience modification factor and so you will have to live a long time with your mistakes.  For that reason, every business should treat their workers compensation insurance a bit differently and make sure that they choose and agent and a company that have experience in this area.   I would suggest that you to take some time to read the loss control and claims costs control features on the web site for the company that provides you with your workers compensation insurance policy.  Take advantage of what they offer and implement where you can to prevent losses and to get your injured employees back on the job as soon as possible.  If you need any help at all with your workers compensation insurance, please call us, Clinard Insurance Group,  toll free, at 877-687-7557.