5548 William Flynn Highway, #1

Gibsonia, PA 15044

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Information About Insurance: Needs & Options


Understanding your insurance options can be daunting. Pasquinelli Agency offers detailed information about the three major areas for which we can be of service. Please click on each tab to learn more about how insurance can assist you in times of need.


Glossary of Terms

This is a list of terms designed to assist you while shopping or learning about insurance. It is not meant to be all inclusive, but should help with your understanding of the most common terms.



A - B - C - D - E - F - G - H - I - J - K - L - M

N - O - P - Q - R - S - T - U - V - W - X - Y - Z


Accidental Death and Dismemberment (AD&D) Rider: A supplement to many life insurance policies that provides an additional cash benefit to the insured or his/her beneficiaries if an accident causes either the death of the insured or causes the insured to lose any two limbs or the sight in both eyes.

Actual Cash Value: The value of property based on the cost of repairing or replacing it with property of the same kind and quality. Typically, actual cash value equals the current replacement cost minus depreciation (age, condition, length of time in use, and obsolescence).

Adjuster: A person who investigates and settles losses for an insurance carrier.

Agent: In insurance, the person authorized to represent the insurer in negotiating, servicing, or effecting insurance policies.

Annual Out-of-Pocket Maximum: A dollar amount set by the plan which puts a cap on the amount of money the insured must pay out of his or her own pocket for covered expenses over the course of a calendar year.

Annuity: A contract that provides for a series of periodic payments to be made or received at regular intervals.

Applicant: The party applying for an insurance policy.

Application: A printed form developed by an insurer that includes questions about the prospective insured and the desired insurance coverage and limits.

Assigned Risk: A risk insured through a pool of insurers and assigned to a specific insurer. These risks are generally considered undesirable by underwriters, but due to state law or otherwise, they must be insured.

Auto Collision Coverage: Optional auto insurance which pays for damage to your car caused by collision with another car or object, or by rolling the car over. Frequently required if you have a car loan.

Auto Comprehensive Physical Damage Coverage: Optional auto insurance which pays for damage to your auto caused by things other than collision or rolling the car over, such as fire, theft, vandalism, flood or hail. Frequently required if you have a car loan.

Automatic Premium Loan: A provision in some life insurance policies that authorizes a policy loan using the cash value accumulated by the insurance policy to pay for past due premiums at the end of the grace period. This prevents a lapse of coverage.


Beneficiary: Any person, persons, or other entity designated to receive the policy benefits upon the death of the policyholder.

Binder: A written or oral contract issued temporarily to place insurance in force when it is not possible to issue a new policy or endorse the existing policy immediately. A binder is subject to the premium and all the terms of the policy to be issued.

Binding Receipt: A premium receipt acknowledging temporary insurance coverage immediately until the insurance company rejects the application or approves it and issues a policy.

Broker: A marketing specialist who represents insurance organizations and who deals with either agents or companies in arranging for the coverage required by the customer.

Buy-Sell Agreement: Agreement that a deceased business owner's interest will be sold and purchased at a predetermined price or at a price according to a predetermined formula.


Calendar Year Deductible: The amount of health care expenses that the insured person must pay before insurance payments for covered eligible expenses.

Cancellation: The discontinuance of an insurance policy before its normal expiration date, either by the insured or the company.

Case Management: A utilization management technique that addresses the medical necessity of care as well as alternative treatments or solutions, especially when the patient is likely to require very expensive treatment.

Cash Value (cash surrender value): The cash amount payable to a life insurance policyowner in the event of termination or cancellation of the policy before its maturity or the insured event.

Certificate of Insurance: A statement of coverage issued to an individual insured under a group insurance contract, outlining the insurance benefits and principal provisions applicable to the member.

Claim: A person's request for payment from an insurer for a loss covered by the insurance policy.

COBRA (Consolidated Omnibus Budget Reconciliation Act): COBRA requires organizations with twenty or more employees to offer the continuation of group health benefits (Medical, Dental, Vision, and Medical Reimbursement Account) to employees (and covered dependents) upon experiencing a "Qualifying Event."

Employers are required to provide initial COBRA notification to covered employees and dependents, a letter detailing an individual's rights upon experiencing a "qualifying event," and an explanation of the conversion privilege. The legislation defines the following six situations as "Qualifying Events" that require COBRA continuation:

  • Termination of Employment
  • Reduction of Work Hours
  • Employee's Death
  • Employee's Divorce (or legal separation in some states)
  • Medicare Entitlement
  • Change in "Dependent" Status

Coinsurance Provision: A specified percentage of the cost of treatment the insured is required to pay for all covered medical expenses remaining after the policy's deductible has been met.

Collision Insurance: Protection against loss resulting from any damage to the policyholder's car caused by collision with another vehicle or object, or by upset of the insured car, whether it was the insured's fault or not.

Commission: The amount of money, usually a percentage of the premiums that is paid to an insurance agent for selling an insurance policy.

Comprehensive Auto Insurance: Protection against loss resulting from damage to the insured auto, other than loss by collision or upset.

Compulsory Auto Liability Insurance: Insurance laws in some states required motorists to carry at least certain minimum auto coverages. This is called "compulsory" insurance.

Conditions: The part of your insurance policy that states the obligations of the person insured and those of the insurance company.

Contingent Beneficiary: In a life insurance policy, the person designated to receive the policy benefits if the primary beneficiary dies before the insured.

Contract: A legally enforceable agreement between two or more parties.

Conversion Privilege: The right to convert or change insurance coverage from an individual term insurance policy to an individual whole life insurance policy.

Convertible Term Life Insurance: A type of term life insurance that offers the policyowner the option to exchange the term policy for a form of permanent insurance.

Copay: The fee you pay for certain medical services or for each prescription. For example, you may pay $20 for an office visit or $10 to fill a prescription and the health plan covers the balance of the charges. (1) A fee that many insurance plans require an insured to pay for certain medical services (such as a physician's office visit). (2) An amount that the insured must pay toward the cost of each prescription under a prescription drug plan.

Creditable Coverage: The pre-existing condition exclusion is reduced one month for every month that a person had coverage in a previous qualifying plan as long as the gap in coverage between the previous plan and the new plan is 63 days or less.


Declination: The insurer's refusal to insure an individual after careful evaluation of the application for insurance and any other pertinent factors.

Deductibles: The portion of the loss that the policyholder agrees to pay out of pocket, before the insurance company pays the amount they are obligated to cover. For example, if the covered claim is $1000 and your deductible is $250, you pay $250 and yOur Agency will pay $750. Deductibles help to keep insurance rates reasonable. Raising the amount of the deductible lowers the cost of insurance.

Dependent: A person for whom the insured has some legal obligation to. For most plans, it is the insured's spouse and/or children. Some plans also allow non-traditional spousal relationships (significant other, life-partner, etc.) to be considered a dependent with some additional certifying paperwork.

Depreciation: Reduction in the value of property due to age and use.

Double Indemnity: A provision in a life insurance policy, subject to specified conditions and exclusions, under the terms of which double the face amount of the policy is payable if the death of the insured is the result of an accident. In general, the conditions are that the insured's death occurs prior to a specified age and results from bodily injury effected solely through external, violent and accidental means independently and exclusively of all other causes, within 60 or 90 days after such injury.


Emergency Room Visit: A visit to a hospital for treatment of an accidental injury or for emergency medical care. To qualify as an emergency, the symptoms must be sudden, severe and require immediate medical attention. Some states judge emergencies by the "prudent layperson" law, meaning that the health plan must cover a trip to the emergency room "if a prudent layperson, acting reasonably, would have believed that an emergency medical condition existed." Keep in mind that some plans won't cover a trip to the emergency room if the symptoms appeared more than 24 hours earlier.

Endorsement: Attachment or addendum to an insurance policy; an endorsement changes the contract's original terms.

Exclusions and Limitations: Conditions, situations and services not covered by the health plan.

Extended Term Life Insurance: A nonforfeiture benefit under which the net cash value of the policy is used to purchase term insurance for the amount of coverage available under the original policy.


Face Amount: The amount stated in the life insurance policy as the death benefit.

Floater: Additional coverage for items not otherwise included in the basic policy (such as jewelry or antiques).


Grace Period: The specified length of time, after a Life or Health premium payment is due in which the insured may make the payment and keep the policy in force. (Usually 30 days.)

Group Health Insurance: An insurance plan designed for a group, such as employees of a single employer. Insurance is provided to them under a single policy.

Guaranteed Renewable Policy: A health insurance policy that the insurer is required to renew -- as long as premiums are paid -- at least until the insured attains the age limit specified in the policy, or the policy is cancelled by the insured. The insurer may increase the premium rate for any class of guaranteed renewable policies.

Guaranty Association: Established by each state to support insurers and protect consumers in the case of insurer insolvency, guaranty associations are funded by insurers through assessments.


HIPPA - Health Insurance Portability and Accountability Act of 1996: Under this federal law (known as HIPAA), group health plans cannot deny coverage based solely on an individual's health status. This law also gives employees who change or lose their jobs better access to health coverage, guarantees renewability and availability to certain employees and limits exclusions for pre-existing conditions. For example, under this law, group health plans must credit any employee the amount of time that they spent on any health plan prior to the new plan, which is known as "prior credible coverage." A pre-existing condition will be covered without a waiting period when an employee joins a new group plan if the employee has been insured for the previous 12 months with credible health insurance, with no lapse in coverage of 63 days or more. This means that if an employee has been insured for 12 months or more, the employee will be able to go from one job to another and his or her pre-existing coverage will remain intact -- without additional waiting periods. However, if an employee has a pre-existing condition and was not covered previously for 12 months before joining a new plan, the longest the employee will have to wait for their pre-existing coverage to be covered is 12 months.

HMO (Health Maintenance Organization): A health care financing and delivery system that provides comprehensive health care for subscribing members in a particular geographic area using managed care techniques. Most HMOs require that you only utilize physicians within their network, often going so far as to require you to choose a primary care physician who directs most courses of your treatment.


Indemnification: Compensation to the victim of a loss, in whole or in part, by payment, repair, or replacement. Indemnity. Legal principle that specifies an insured should not collect more than the actual cash value of a loss but should be restored to approximately the same financial position as existed before the loss.

Insolvent: Having insufficient financial resources (assets) to meet financial obligations (liabilities).

Insurable Risk: The conditions that make a risk insurable are (a) the peril insured against must produce a definite loss not under the control of the insured, (b) there must be a large number of homogeneous exposures subject to the same perils, (c) the loss must be calculable and the cost of insuring it must be economically feasible, (d) the peril must be unlikely to affect all insureds simultaneously, and (e) the loss produced by a risk must be definite and have a potential to be financially serious.

Incontestable Clause: A life insurance policy wording that provides a time limit (e.g., two years) on the insurer's right to dispute a policy's validity based on material misstatements in the application.

Insurable Interest: Any interest a person has in property that is the subject of insurance, so that damage to this property would cause the insured a financial loss.

Insurance Company: An organization that has been chartered by a governmental entity to transact the business of insurance.

Insured: A person or organization covered by an insurance policy, including the "named insured" and any other parties for whom protection is provided under the policy terms.

Insurer: The party to the insurance contract who promises to pay losses or benefits. Also, any corporation engaged primarily in the business of furnishing insurance to the public.

Irrevocable Beneficiary: A named beneficiary whose rights to life insurance policy proceeds cannot be canceled or changed by the policyowner unless the beneficiary consents.



Key Employee: Insurance protection of a business against financial loss caused by the death or disablement of a vital member of the company, usually individuals possessing special managerial or technical skill or expertise. Also called key executive insurance.


Lapse: Termination of a policy due to nonpayment of premiums.

Liability: A legal obligation to compensate a person harmed by one's acts or omissions.

Liability Coverage: Insurance that provides compensation for a harm or wrong to a third party for which an insured is legally obligated to pay.

Life Insurance: Insurance that pays a specified sum of money to designated beneficiaries if the insured person dies during the policy term.

Lifetime Maximum: The maximum amount of money a plan will pay towards healthcare services over the course of the insured's lifetime.

Loss: The happening of the event for which insurance pays.

Loss Expense - Allocated: Handling expenses, such as legal or independent adjuster fees, paid by an insurance company in settling a claim which can be definitely charged to that particular claim.

Loss Expense - Unallocated: Salaries and other expenses incurred in connection with the operation of a claim department of an insurance carrier which cannot be charged to individual claims.


Medical Payments Coverage: Medical and funeral expense coverage for bodily injuries sustained from or while occupying an insured vehicle, regardless of the insured's negligence.

Misrepresentation: Act of making, issuing, circulating or causing to be issued or circulated an estimate, an illustration, a circular or a statement of any kind that does not represent the correct policy terms, dividends or share of surplus or the name or title for any policy or class of policies that does not in fact reflect its true nature.


Negligence: Failure to use a generally acceptable level of care and caution.

Network: A group of doctors, hospitals and other health-care providers contracting with a health plan, usually to provide care at special rates and to handle paperwork with the health plan.

No-fault Insurance: A system of compensation enacted by law in many states under which indemnification is made by the insured's own insurance company regardless of who is at fault. Details of this system vary significantly from state to state.

Non-Formulary Drugs: Non-formulary drugs often require a higher copayment. Non-formulary drugs are those that have not yet been reviewed or have been denied formulary status, typically because they offer no extra benefit over the drugs already on a plan's formulary list.


Offer and Acceptance: The offer may be made by the applicant by signing the application, paying the first premium and, if necessary, submitting to physical examination. Policy issuance, as applied for, constitutes acceptance by the company. Or the offer may be made by the company when no premium payment is submitted with the application. Premium payment on the offered policy then constitutes acceptance by the applicant.

Out-of-Network: Health care services received outside the HMO, POS or PPO network.

Out-of-Pocket Expense: Any medical care costs not covered by insurance, which must be paid by the insured.


Paid-up Policy: An in-force life insurance policy for which no further premium payments are required.

Peril: The cause of loss or damage.

Personal Injury Protection: First-party no-fault coverage in which an insurer pays, within the specified limits, the wage loss, medical, hospital and funeral expenses of the insured.

Physical Damage: Damage to or loss of the automobile resulting from collision, fire, theft or other perils.

Permanent Insurance: A general term for ordinary life and whole life insurance policies that remain in effect as long as their premiums are paid.

Personal Property Insurance: Protects against the loss of, or damage to property other than real property (real estate) caused by specific perils.

Point-of-Service Plan: An HMO (see Health Maintenance Organization) plan that also incorporates an indemnity plan option allowing members to obtain medical care from providers outside of the HMO network at a reduced benefit and at greater out-of-pocket expense.

Policy: The written forms that make up the insurance contract between an insured and insurer. A policy includes the terms and conditions of the coverage, the perils insured or excluded, etc.

Policy Declarations: The part of the insurance contract that lists basic underwriting information, including the insured's name, address and description of insured locations as well as policy limits.

Policy Limits: The maximum amount an insured may collect or for which an insured is protected, under the terms of the policy.

Policy Loan: A loan from a life insurer to the owner of a policy that has a cash value.

Policyholder: The person who buys insurance.

Policyowner: An individual with an ownership interest in an insurance policy.

Policy Period: The amount of time an insurance contract or policy lasts.

PPO (Preferred Provider Organization): An organization where providers are under contract to an insurance company or health plan to provide care at a discounted or negotiated rate. Typically, you can see any doctor in the PPO network without requiring special approval, and you usually do not need to choose a primary care physician. Most PPOs will also allow you to seek care outside of the PPO network; however, the benefits are usually reduced and the insured has a greater out-of-pocket expense.

Pre-Existing Condition: (1) According to most individual health insurance policies, an injury that occurred or a sickness that first appeared or manifested itself before the policy was issued and that was not disclosed on the application for insurance. (2) According to most group health insurance policies, a condition (excluding pregnancy) for which an individual received medical care during the three months to six month immediately prior to the enrollment of his coverage.

Pre-Existing Conditions Provision: A health insurance policy provision stating that benefits will not be paid for any illness and/or condition that existed prior to one becoming an insured under the particular health plan in question, until the insured has been covered under the policy for a specified period.

Preferred Risk: A risk whose physical condition, occupation, mode of living and other characteristics indicate a prospect for longevity superior to that of the average longevity of unimpaired lives of the same age.

Premium: The price for insurance coverage as described in the insurance policy for a specific period of time.

Primary Beneficiary: The person designated as the first to receive the proceeds of a life insurance policy upon the death of the insured.

Primary Care Physician (PCP): A general or family practitioner who serves as the insured's personal physician and first contact with a managed care system. The PCP will usually direct the course of your treatment and/or refer you to other doctors and/or specialists in the network.

Policyholder: The person who buys insurance.

Probationary Period: The length of time that a new group member must wait before becoming eligible to enroll in a group insurance plan.

Proof of Loss: A sworn statement that usually must be furnished by the insured to an insurer before any loss under a policy may be paid.

Property Damage Coverage: An agreement by an insurance carrier to protect an insured against legal liability for damage by an insured automobile to the property of another.

Protection Amount: The face amount of a life insurance policy, or amount of money that will be paid to a beneficiary upon the death of an insured. This amount will be reduced by the amount of any outstanding policy loan.



Rate: The pricing factor upon which the insurance buyer's premium is based.

Rated Policy: Sometimes called an "extra-risk" policy, an insurance policy issued at a higher-than-standard premium rate to cover the extra risk where, for example, an insured has had a DUI (Driving Under the Influence) or other traffic violations.

Rebating: Giving any valuable consideration, usually all or part of the commission, to the prospect or insured as an inducement to buy or renew. Insurance rebating is prohibited by law.

Reimbursement: The payment of an amount of money by an insurance policy for a covered loss.

Reinstatement: The process by which a life insurance company puts back in force a policy that has lapsed or has been canceled for nonpayment of premium.

Replacement Cost Coverage: In the event of a covered loss, you may be reimbursed for the cost you incur to replace many of your damaged contents with similar property, brand new. The total amount you'd be reimbursed is subject to the terms and conditions of your particular policy, including applicable deductible and coverage limits.

Renewable Term Life Insurance: A renewable life policy permits the owner of the policy to automatically renew the policy beyond its original term by acceptance of a premium for a new policy term without evidence of insurability.

Revocable Beneficiary: A life insurance policy whose designation as beneficiary can be revoked or changed by the policyowner at any time prior to the insured's death.

Rider: An addition to an insurance policy that becomes a part of the contract.

Risk: The possibility or chance of loss or injury.


Salvage: Recovery made by an insurance company by the sale of property which has been taken over from the insured as a part of loss settlement.

Settlement: An agreement between a claimant or beneficiary to an insurance policy and the insurance company regarding the amount and method of a claim or benefit payment.

Standard Industrial Classification (SIC): The Standard Industrial Classification (SIC) system is a series of number codes that attempts to classify all business establishments by the types of products or services they make available. Establishments engaged in the same activity, whatever their size or type of ownership, are assigned the same SIC code. These definitions are important for standardization. Insurance companies use SIC codes to determine specific rates for various industries. HealthInsurance.com uses these codes to ensure that you receive the best possible rate for your occupation.

Standard Risk: A person who, according to a company's underwriting standards, is entitled to purchase insurance protection without extra rating or special restrictions.

Standard Risk Rate: The risk category that is composed of proposed insureds who have a likelihood of loss that is not significantly greater than average.

Subrogation: Subrogation refers to an insurance company seeking reimbursement from the person or entity legally responsible for an accident after the insurer has paid out money on behalf of its insured. The general rule is that, after paying your claim, your insurer is “subrogated” to the rights of your policy and can “step into your shoes” to go after or sue the negligent party on your behalf.

Substandard Risk: A risk that cannot meet the normal requirements of an auto insurance policy. Protection is provided in consideration of a waiver, a special policy form, or a higher premium charge. Substandard risks may include those persons who are rated because of poor driving habits.

Stop-Loss Provision: A major medical policy provision under which the insurer will pay 100 percent of the insured's eligible medical expenses after the insured has incurred a specified amount of out-of-pocket expenses in deductible and coinsurance payments.


Term Insurance: Life insurance under which the benefit is payable only if the insured dies during a specified period. If the insured survives beyond that period, coverage ceases. This type of policy does not build up any cash or nonforfeiture values.

Theft Limit (or Inside Policy Limits): The highest amount an insurance company will pay on certain items of personal property. For instance, some policies have a $5,000 limit for computers.If an item would cost more than the limit to replace, you may need to purchase supplementary coverage.


Umbrella Liability Insurance: Umbrella liability insurance is becoming more popular as people are realizing how inexpensive an umbrella policy and umbrella coverage can be. See how umbrella liability protection can be a nice added cushion of insurance on top of your existing policies.

Underwriter: (a) A company that receives the premiums and accepts responsibility for the fulfillment of the policy contract; (b) the company employee who decides whether or not the company should assume a particular risk; (c) the agent who sells the policy.

Underwriting: The process of reviewing applications for coverage. Applications that are accepted are then classified by the underwriter according to the type and degree of risk.

Unilateral: A distinguishing characteristic of a life insurance contract in that it is only the insurance company that pledges anything. The policyowner does not even promise to pay premiums; therefore, it is really a one-sided contract favoring the policyowner.

Uninsured (Underinsured) Motorist Coverage: A form of insurance that pays the policyholder and passengers in his/her car for bodily injury caused by the owner or operator of an uninsured or inadequately insured automobile.

Uninsurable Risk: One not acceptable for insurance due to excessive risk.

Universal Life: Flexible premium, two-part contract containing renewable term insurance and a cash value account that generally earns interest at a higher rate than a traditional policy. The interest rate varies. Premiums are deposited in the cash value accounts after the company deducts its fee and a monthly cost for the term coverage.

Urgent Care: Urgent care is appropriate when a medical urgency arises which necessitates immediate care, but has not reached the level of extreme emergency. Most managed care plans require you to seek urgent care at a participating urgent care facility or hospital.

Usual, Customary and Reasonable Fee: The maximum dollar amount of a covered expense that is considered eligible for reimbursement under a major medical policy.



Waiver: An agreement attached to a policy which exempts from coverage certain disabilities or injuries that otherwise would be covered by the policy.


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Personal Insurance 101


1. Do I Really Need Insurance for My Home?

Insurance for Your Home

Insurance is your protection against the uncertainties of day-to-day living. For most people, their home is their single most valuable possession and their biggest investment.

If you were to suddenly lose your home due to fire or a tornado or have the contents damaged or stolen, like most of us, you probably could not afford to replace everything all at once. And if somebody sued you for an injury or damage caused by you or your property, the cost of defending that suit could run into thousands of dollars in legal fees regardless of the outcome of the suit.

All of these situations are covered by the homeowners insurance policy. While it may be unpleasant to think about fire, theft, and other uncertainties of life, let's face it, they are there and things happen.

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.

2. Homeowners Insurance Coverages

Homeowners Insurance Coverage

The following coverage definitions should help you understand your homeowners insurance policy--but be sure to consult your insurance company representative to assure that you have the right coverage for your needs.

Dwelling Coverage

The dollar amount carried to cover your home and any structures attached directly to it. Ideally, the amount of coverage you carry should equal the cost of rebuilding your home after a total loss.

Other Structures Coverage

Covers other structures set apart from the dwelling on the residence premises, such as a detached garage. This coverage applies up to the limits provided in your policy and can be increased if necessary.

Personal Property Coverage

This coverage provides worldwide coverage for personal property owned or used by the insured.

Loss of Use

This coverage is available when you cannot live in your home due to a covered loss. It pays living expenses, which go over and above your normal living expenses up to the limit provided in your policy.

Liability Coverage

Liability coverage protects you in two ways. First, it provides for your legal defense against a liability claim--whether the claim is legitimate or not. Second, it will pay any court judgments against you up to the policy limit.

Medical Payments

This pays emergency medical bills for anyone injured on your property or any injury caused by a member of your family or a pet, regardless of where it happens. All bills are paid, up to your policy limit, whether or not you're legally responsible.

Homeowners policies have many other optional features available to you depending on your individual needs. These include earthquake and scheduled personal property coverage.

3. Additional Homeowners Insurance Coverages

Additional Living Expenses and Rental Value

When a disaster forces you to live somewhere else while your home is repaired or rebuilt, this coverage pays for your additional living expenses. It also pays for lost income from any area of your home that you regularly rent.

Personal and Legal Liability

If someone is accidentally injured or dies on or off your property, and it is caused by you, a family member or pet, this coverage pays claims against you for legal responsibility. (Does not include auto or business liability.)

Medical Payments

Your policy will cover actual medical expenses for accidental injury to others (except your household residents) caused by you, family members or your pets -- on your premises or elsewhere - regardless of legal liability.

Protection from Household Accidents

You are also covered for:

  • Damage to interior walls caused by rain and snow
  • Scorched countertops, floors and carpets
  • Ink stains or paint spills on floors, walls and carpets
Full Replacement Cost of Your Dwelling

Offered in most states for one dollar, this feature provides the extra coverage you may need to pay the actual cost to replace your home, regardless of its original cost or your policy limits. In some states, this feature costs an additional $5.

Full Replacement Cost of Contents

Pays to replace your damaged or stolen household contents at today's retail prices, regardless of their original cost (up to your policy limits).

Extended Personal Property Coverage

To increase your protection and save you money, we've combined - into one package -- coverage for jewelry, watches, furs, silverware, credit cards and more -- at a fraction of the cost of separate coverages. Special extensions of coverage also expands personal liability protection to lawsuits for libel, slander, wrongful entry, and more.

Valuable Items, Watercraft and Trailers

Special limits are available to cover financial loss of property, such as boats and trailers, jewelry, watches, silver and goldware, furs and guns.

Flood Damage

Although flood damage is not included in any standard homeowners policy, your insurance agent can offer you special flood insurance through one of our highly rated companies.

4. Taking Inventory of Your Home

No one plans to lose their valuables and other belongings in a burglary, a fire or a natural disaster. If one of these unfortunate events destroyed your home, would you be able to report exactly what you lost to the police, to the Internal Revenue Service or to your independent insurance agent?

Start Today

Write down any valuable items with their serial numbers (usually found on the bottom or back of major appliances) along with the method of acquisition (purchased, inherited or received as a gift), date purchased and price or approximate value. Attach receipts, if possible.

Remember to include furniture, appliances, carpeting, jewelry, artwork, toys and the contents of your closets, cabinets and drawers. Contact your independent insurance agent with questions or concerns.

Play It Safe With A Videotape

Videotaping each room of your house can make taking inventories easier. Photographs and a tape recorder can substitute for a video camera.

A complete video inventory should contain verbal descriptions of major assets as well as their value. Remember your garage, attic, basement and the exterior of the house, plus your landscaping and fencing. If possible, make it a family project by having everyone take turns describing the objects in your home.

Store the video or photographs along with this inventory in a safe-deposit box and send a copy to a friend or relative.

Don't Forget Important Documents

Extremely important documents should be photocopied. Keep one copy in your home and the original, where possible, in a safe-deposit box. Important items include, but are not limited to, the following:

  • House - Escrow, title, deed, insurance policy.
  • Personal - Birth certificates, medical history, passports, insurance certificates, credit card numbers, will.
  • Automobile - Certificates of ownership, finance contracts, registrations, insurance policy, driver's licenses.
  • Finance - Account numbers for checking and savings accounts, CDs, stocks, bonds, other significant investments.
  • Tax - Copies of the first two pages of your state and federal returns for the past five years. Complete returns with appropriate receipts and canceled checks should be kept in a separate file box.
A Final Note

Most policies limit the amount of reimbursement for theft of valuable items, such as jewelry, furs, silverware and guns. If you have some particularly valuable items in these categories, you may need to purchase additional coverage called a "floater." These types of policies cover each item individually and are usually quite inexpensive.

This information will only be beneficial if you make use of it now. By inventorying your personal possessions ahead of time, you will save yourself from frustration should disaster strike. Your independent insurance agent can help you determine whether your property is adequately protected.

5. Flood Disaster Tips

Did you know...
  • Floods and flash floods are the most common natural disaster, occurring in all 50 states.
  • Floods cause devastating damage to buildings and personal belongings.
  • One in three flood insurance claims are generated outside areas considered "flood-prone."
  • Homeowners insurance does not cover flood damage.
Before a flood:
  • Make a written, photographic and/or videotaped inventory of household possessions and property, and store it in a safe place (e.g., a relative's home or safe deposit box) with insurance policies, documents and other valuables.
  • Take a first aid class from your local American Red Cross chapter.
  • Assemble a disaster supplies kit that includes a first aid kit, canned food, non-electric can opener; bottled water (emergency managers recommend 3 gallons per person), rubber boots, rubber gloves, battery-powered radio, flashlight and extra batteries.
  • Identify evacuation locations.
During a flood:
  • When a warning is issued, listen to local radio and TV stations for information.
  • When a watch is issued, move furniture and valuables to higher floors of your home.
  • Abandon your car if stalled in rapidly rising waters and climb to higher ground.  Do not drive into any large puddles or into water that seems to be moving rapidly.
After a flood:
  • Call your insurance agent as soon as possible to see if you need to file a claim.
  • Make temporary repairs to prevent further damage.  Keep all receipts.
  • Delay permanent repairs until your insurer approves reimbursement.
  • Get any necessary construction permits from your community.
  • Prepare an inventory of all damaged or destroyed personal property.  Take photos of damaged areas.
  • Save remnants of damaged or destroyed property for your insurance company adjuster.
  • Meet with your adjuster before signing anything with contractors, lawyers or public adjuster.
  • Let your car dry out before trying to start it.
Protecting yourself is easy!

Flood insurance picks up where your homeowners insurance leaves off. It is not expensive, especially when compared with the monthly payments for disaster loans, and it's easy to get - just call your insurance agent.

What to ask your insurance agent?
  • Do I have flood insurance?
  • How much flood insurance should I purchase?
  • How much contents coverage should I purchase?
  • Should I consider a three-year policy to reduce my premiums?
  • Do I qualify for a preferred risk policy?
  • Can I finance my premiums?

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6. Guidelines Before Acquiring Motor Home Insurance

As much as you expend efforts to purchase your dream motor home, it is important to select an appropriate motorhome insurance policy. Legally speaking, you are required to have a certain minimum amount of coverage when you have your motor home registered. However, there are many insurance policies to ensure that your motor home obtains maximum coverage and protection. It is important to choose a policy that incorporates the recreational value of your motor home and does not treat it as another automobile. For that you need to know the basic features and benifits of motor home insurance quote.

The basic features of motorhome insurance are;

  • The insurance policy is purchased and renewed annually.
  • The type, size, and age of motor home, location and driving patterns influence the premium amount paid.
  • Factors such as owner's age, gender, driving record and address where the home is garaged, also influences the premium amount.
  • Out of pocket premium amounts may be reduced by increasing the deductible on your policy.

Look at some benifits of motorhome insurance here.

  • Protection from perils such as collision, fire, and smoke, landslides, hail and windstorms.
  • Coverage for emergency expense including lodging.
  • Coverage for replacing your motor home and the personal belongings.
  • Medical benefits in case you or someone else gets injured in the motor home.
  • Full-time liability coverage.
  • Roadside and towing support.

The insurance company from which you have purchased the policy should be well acquainted with handling motor homes and their accessories. Rates of motor home insurance quotes vary across states. Remember that your motor home insurance quote or policy should be different from any other automobile insurance as your motor home is a home on wheels and can cause damage of a greater magnitude in case of an accident. Ensure that your motorhome insurance policy is inclusive of any roadside assistance or towing facility in the event of a breakdown or accident. Such insurance policies rarely cover damage to personal belongings and possessions in your motor home. If you are a full time user of your motor home, opt for a policy that recognizes and offers commensurate advantage. Your insurance policy must include liability coverage i.e., indemnifying any damage to your vehicle or you. Look for possible discounts in your motorhome insurance policy. An agent will prove be a good aid in your search for a suitable insurance policy.


1. Insuring Sports & Recreation Vehicles

Boats, jet skis, ATVs and recreational vehicles are exciting modes of transportation. They provide a great means of escape on weekends and vacations, but ownership of these comes with some risks.

While all recreational-type vehicles can be protected by the same basic coverages, each one has its own special requirements and restrictions.

Basic Coverages

At a minimum, boats, jet skis, ATVs and recreational vehicles need "liability" and "comprehensive" insurance coverage. Liability protects you if your vehicle injures someone or damages someone else's property, and comprehensive insurance protects your property in case of vandalism, damage or destruction caused by theft or fire. Depending on the age and value of your investment, you may want to purchase collision insurance, which provides coverage for damage you cause to your own property.


The amount you pay for your boat insurance will depend on many factors including the boat's value and the value of your boating equipment, the engine's horsepower and whether it's inboard or outboard, and the length of the boat.

You may purchase additional coverages for such things as such as Fuel and Other Spillage Liability, your boat trailer, medical payments, personal effects and liability to protect you from an uninsured boater. You may be eligible to receive lower rates if you hold a captain's license or have completed safety courses provided by the U.S. Coast Guard Auxiliary or Power Squadron Courses. You may also receive discounts for having safety equipment on board or providing protective storage for your boat during non-use or off-season.

Jet Skis

The price of insuring a jet ski varies depending on its engine power and value. Your insurance costs will typically be higher for a jet ski with more than 500 cc. You also may obtain insurance to protect your trailer or to pay you for medical payments if you're in an accident.

Recreational Vehicles

You may want to purchase an auto insurance policy to cover this type of vehicle. This policy will provide you with liability, medical payments and physical damage coverage for your motorhome and can be endorsed to include coverage for rental to others. Other coverages you may want to consider are:

  • Replacement Cost/Purchase Price - In the event of a total loss, you will receive a new unit equal to the model, class, body type and equipment of your previous one. You will be compensated for the actual purchase price of the vehicle.
  • Personal Effects - Your valuables (clothing, jewelry, etc.) may be covered against most hazards.

Other coverages you may want to discuss with your insurance agent are Towing and Labor or Emergency Expense Allocation insurance. Special rates may apply if you are more than 45 years old and have a good driving record.

A Final Note

All recreational-type vehicles can be protected by the same basic policy. We can provide you with more details about this special insurance and guide you in purchasing the best coverage to maximize your enjoyment and meet the insurance needs for your recreation equipment.

3. Auto Insurance FAQs

Q: Why is auto insurance sometimes referred to as a "packaged policy?" What are the parts of the package?

A. Before the 1950's, if a person wanted to purchase all the coverage that the modern day auto insurance policy provides, he or she would have had to purchase at least four separate policies. Changes in the laws that regulate the sale of insurance now allow the insurance industry to sell policies that combine the separate coverages into one all encompassing policy.

The main advantages of combining the various coverages are lower expenses, and therefore a lower cost to consumers, and the convenience of being able to purchase the property, automobile liability and other coverages in a single policy.

The standard private passenger automobile insurance policy can have up to four different coverages. Only the first coverage is standard - the remaining three coverages are optional.

Part A provides liability coverage that protects the insured from lawsuits arising from either the negligent operation or ownership of a covered automobile. There are two coverages provided in Part A - bodily injury liability (BIL) and property damage liability (PDL).

  1. BIL provides coverage for the bodily injury claims of people you negligently injure in an accident.
  2. PDL provides coverage for any third party property damage claims that the courts determine you are responsible to pay.

Part B provides medical payments to the policyowner and any other passengers in the car when there is an accident.

Part C provides uninsured motorist and underinsured motorist protection for the policyowner.

Both coverages are designed to compensate the injured policyowner when the negligent driver has an insufficient amount of liability insurance under his/her own policy. Typically, Part C covers only bodily injury losses, but property damage losses are included in some states.

Part D covers damages to your car when it is involved in an accident.

Q: I have an older car whose current market value is very low - do I really need to purchase automobile insurance?

A. Most states have enacted compulsory insurance laws that require drivers to have at least some automobile liability insurance, Part A. These laws were enacted to ensure that victims of automobile accidents receive compensation when their losses are caused by the actions of another individual who was negligent.

Except for the minimum liability coverages that you may be required to purchase, many people with older cars decide not to purchase any of the physical damage coverages. It is often the case that the cost of repairing the damages to an older car is greater than its value. In these cases, your insurer will usually just "total" the car and give you a check for the car's market value less the deductible.

Many people forgo the Part D coverages because of the relatively low values of their vehicles.

Q: Suppose I lend my car to a friend, is he/she covered under my automobile insurance policy?

A. Whenever you knowingly loan your car to a friend or an associate, he or she will be covered under your automobile insurance policy. In fact, even if you do not give explicit permission each time a person borrows your car, they are still covered under your auto insurance policy as long they had a reasonable belief that you would have given them permission to drive the car.

Q: What coverage does my automobile insurance policy provide me when I rent a car?

A. The answer to this question is not as easy as it once was. In the not-too-distant past, most automobile insurance policies would extend coverage to rental cars whenever you rented one. This is not quite true anymore.

In most cases, your personal automobile insurance policy will provide coverage only when you are renting a car on vacation. Many insurance companies no longer extend personal automobile insurance coverage when you are traveling on business. The best way to find out what rental car coverage you have under your automobile policy is to contact your agent.

Q: What is the difference between collision physical damage coverage and comprehensive physical damage coverage?

A. Both collision and comprehensive are Part D coverages.

Collision is defined as losses you incur when your automobile collides with another car or object. For example, if you hit a car in a parking lot, the damages to your car will be paid under your collision coverage.

Comprehensive provides coverage for most other direct physical damage losses you could incur. For example, damage to your car from a hailstorm will be covered under your comprehensive coverage.

It is important to know the differences between the collision and comprehensive coverages for a couple of reasons.

  • First, in order to make an informed purchasing decision about these optional coverages, you need to know the difference between them.
  • Second, the deductibles under the collision and comprehensive coverages are often different in amount.
Q: What should I do if I have an accident?

A. The duties you need to perform after you have an accident are prescribed both by state law and by the terms of your contract. Obviously, the first thing you should do is make sure everyone is all right and call an ambulance if one is needed.

Second, for most accidents in most states, the police should be notified.

Third, you should give the other driver(s) involved in the accident your name, address, telephone number, and the name of your insurance company and/or your insurance agent. You also need to get this same information from the other driver(s).

Fourth, at the first opportunity, you should contact your agent or your insurance company to notify them that you have been involved in an accident.

Finally, there are a number of conditions in the insurance contract that you must satisfy in order to receive compensation from your insurer. For example, you need to cooperate with your insurer during any investigation undertaken during the claims settlement process. Failure to complete any of these actions can, and sometimes does, result in non-payment by your insurance company for losses that otherwise would have been covered.

Q: Why does the premium for my automobile insurance go up if I have an accident or if I get a ticket?

A. Actuaries and statisticians who have studied the claiming behavior of people involved in accidents have long known that people who have either had an accident or received a ticket recently are more likely to have another accident in the next couple of years than people whose recent driving record has been incident free.

Insurance companies use this information not to punish people who have had an accident, but to charge them the premium that most accurately reflects their likelihood of having an accident. People who are more likely to have accidents should reasonably be expected to pay higher premiums.

Q: How can I get insurance for my motorcycle?

A. Motorcycle insurance can be obtained by adding a miscellaneous-type vehicle endorsement to your existing auto insurance policy. This endorsement will also provide coverage for mopeds, motor homes, dune buggies and other such vehicles.

Q: What is no-fault insurance?

A. With no-fault insurance, the victims of an car accident are compensated by their own car insurance company, regardless of who caused the accident. This outcome is different from what occurs under the traditional tort system of compensating victims of an accident.

In the tort system, the party who is at fault is required to compensate the victims of the accident. The idea behind no-fault insurance is to keep small claims from being settled in our expensive legal system. To accomplish its purpose, no-fault insurance restricts the injured person's right to sue the negligent driver in those instances where the loss falls below a certain threshold.

Two types of thresholds are typically used: verbal thresholds and dollar thresholds. A dollar threshold prescribes a dollar limit that a claim must reach before the injured party regains his or her tort rights, and therefore the ability to sue.

A verbal threshold uses a written description to determine when the injured person regains his or her tort rights. For example, a person might regain his or her tort rights when the accident caused a serious handicap, such as permanent loss of a bodily function.

Q: What do I gain and what do I lose by giving up my tort rights?

A. Proponents of no-fault insurance argue policyowners gain a number of things by giving up their right to sue in minor accidents. For example, under no-fault insurance you typically pay lower automobile insurance premiums, collect claims payments faster, and spend less time in court. The biggest thing you lose by giving up your right to sue is the ability to collect payments for pain and suffering. No-fault insurance only pays your direct economic losses, such as hospital bills, lost wages, etc. It does not compensate you for any pain and suffering damages that you may incur as a result of an accident.

However, in most serious accidents, where the likelihood of incurring these non-economic losses is greatest, you regain your tort rights and therefore the ability to sue the negligent party for pain and suffering.

Q: I live in a state where I can elect either no-fault coverage or traditional tort coverage. Which one should I choose?

A. A number of states allow policyowners to choose whether they would like no-fault insurance or traditional tort coverage. Which one you choose depends upon your tolerance towards the risk that you may not be able to sue for pain and suffering damages in all accidents.

However, since the thresholds where you regain your tort rights are usually low, many policyowners choose the no-fault coverage because the premium can be substantially reduced by doing so.

Q: What factors can affect the cost of my auto insurance?

A. A number of factors can affect the cost of your automobile insurance - some of which you can control and some which are beyond your control. The type of car you drive, the purpose the car serves, your driving record, and where you live can all affect how much your automobile insurance will cost you.

Even your marital status can affect your cost of insurance. Statistics show that married people tend to have fewer and less costly accidents than do single people.

Q: What should I consider when purchasing auto or car insurance?

A. There are a number of factors you should consider when purchasing any product or service, and insurance is no different.

Here is a checklist of things you should consider when purchasing auto insurance.

  • First, purchase the amount of liability coverage which makes sense for you.
  • Second, you should decide which optional coverages you want. For example, do you want the optional physical damage coverages in Part D or is the market value of your car too low to warrant purchasing them.
  • Finally, once you have decided what you want in your automobile insurance policy, you can now decide who you would like to purchase the insurance from. For example, you may decide you like the idea of purchasing insurance from a mutual company rather than a stock company.
Q: How can I lower my car insurance rates?

A. There are a number of things you can do to lower the cost of your car or auto insurance. The easiest thing to do is to shop around. It is not surprising to find quotes on automobile insurance that can vary by hundreds of dollars for the same coverage on the same car. When you shop, be careful to make sure each insurer is offering the same coverage. Many insurers use the ISO policy forms, but this is not always the case.

Another way to lower the cost of your automobile insurance is to look for any discounts that you may qualify for. For example, many insurers will offer you a discount if you insure multiple cars under the same policy, or if you have had a driver education class in the last five years. Be sure to ask your agent or yOur Agency about their discount plans.

Another easy way to lower the cost of your automobile insurance is to increase the deductible. Simply raising your deductible from $250 to $500 can lower your premium sometimes by as much as five or ten percent. However, you should be careful to make sure that you have the financial resources necessary to handle the larger deductible.

4. Auto Safety Tips

Safe Drivers...
  • DO wear your seatbelt.
  • DO make sure everyone in the car wears a seatbelt (or sits in an appropriate child-safety seat) before you start the car.
  • DO park wisely. Choose a well-lit area of a parking lot or street. And if you're in an unfamiliar area, try to stay near well-traveled streets.
  • DO ignore sign language from other drivers.
  • DO look into cars with airbags and anti-lock brakes.
  • DO remember that speed limits are not posted arbitrarily. They're set to keep traffic moving steadily and to reduce accidents--and they're based on years of studying traffic patterns and conditions. Also, remember that accidents increase as the speed limit does.
DON'T be a lousy driver.

There are a lot of people out there setting an example, but you don't have to follow. Slow down. Back off. Use your signals. Yield. Remember the basics.

  • DON'T drink and drive. DO call a cab, designate a driver, take public transportation, call a spontaneous slumber party. Just use your head.
  • DON'T try to do too many things at once. Talking on a cellular phone or biting into a fully-loaded cheeseburger while you drive is flirting with disaster.
  • DON'T choose a car for its aesthetic appeal alone.
  • DON'T slack off on the maintenance. Letting the fluids or tires get low or letting bulbs burn out can get you in a lot of trouble.
  • DON'T let the cats out of their carriers on the way to the vet. Trust us.
  • DID we mention your seatbelt?

Safety isn't the first thing on a person's mind when they're looking at a sporty little roadster, but it is something to keep in mind. Generally, the larger the car, the greater protection it will provide in an accident. Check out the Highway Loss Data Institute's ratings of car makes and models at www.carsafety.org.

You're Less Likely To Have Your Car Stolen If You...
  • DO always close your windows and lock the doors when you leave your vehicle.
  • DO park in the garage (that is, if you have one). Cars are rarely stolen from garages, but frequently "disappear" from driveways and open spaces near homes.
  • DO use your antitheft device. If you keep it turned off, it's not a deterrent, it's a waste of money.
  • DO, when you park, turn your wheels toward the street until the steering wheel locks. This makes it a lot more difficult to push or tow your car away.
  • DON'T leave your keys in the car while it's unattended--running or not. In fact, never leave it running if you have to step away. Even for a second.
  • DON'T leave your house keys behind. If your car were stolen, you'd want to be the one that winds up with keys to your home.
  • DON'T leave anything of value--a roll of $100 bills, your wallet, your trombone--in the car. You'd be amazed at what people might steal. If you must leave something, make sure it's out of sight.
  • DON'T wait until you've found your parking spot to stow things out of sight. You never know who might be watching you take the extra effort to put things away.
  • DON'T forget that it's just a car. If someone wants it badly enough to stop you and ask you for it--however impolitely--don't take any unnecessary risks. Cars can be replaced.


Renters Insurance

Just as most of us would not think of owning an automobile without auto insurance, renters need protection for their personal possessions and from liability. Even the smallest apartment can easily contain personal property worth thousands of dollars.

Common Renting Myths
  • MYTH #1 - Insurance is too expensive. Some renters fail to insure their personal possessions because they believe insurance is too expensive, but renters insurance is typically available for as little as $100 a year.
  • MYTH #2 - My landlord's insurance protects me. Many renters think they are protected under their landlord's policy. However, the property owner's insurance covers the building itself and seldom a tenant's possessions. Clarify this with your landlord before signing a lease.
  • MYTH #3 - My landlord is liable if someone trips in my apartment and gets injured. Again, the owner's policy may specifically exclude liability for something that occurs within your rented residence. You could be held liable for injury to another person or damage to another person's property if the incident occurred within your rented residence.
A Look At Premiums

Renters insurance, because you are not insuring a building, is surprisingly inexpensive. Of course, like all property protection policies, the value of the property to be insured and other risk factors are weighed by the insurance company to determine your premium. As with your automobile insurance, your renters deductible is the amount you agree to pay in the event of a loss. For example, if your $2,000 stereo is stolen from your home, and you have a deductible of $250, the insurance company would pay you $1,750, which is $2,000 minus your deductible.

Coverage For All

Renters insurance offers the same general personal property coverage and liability protection as a homeowners policy. Property insurance covers the cost of repairing or replacing personal property that has been damaged, destroyed or stolen. Your property is covered both within your home and when you are traveling.

You also receive liability protection. If someone suffers an injury or damage to their property because of something you did or did not do, you could be liable. If, for example, your grandmother's oak dresser dents the walls in your apartment's lobby while you are carrying it into the building, you could be held liable. Likewise, if a fire starts in your apartment and spreads throughout the building, and you are deemed at fault, you could be held liable for damage to the entire building.

In addition, most renters policies include coverage for additional living expenses (also called "loss-of-use" coverage) if you are forced by fire or other damage to temporarily live elsewhere.

Alterations For a Better Fit

Most policies limit the amount of reimbursement for theft of valuable items, such as jewelry, furs, silverware and guns. If you have some particularly valuable items in these categories, you may need to purchase additional coverage called a "floater." These types of policies cover each item individually and are usually quite inexpensive.

Other additions to your renters insurance that add or change the policy's provisions are called endorsements. Some endorsements extend the number of risks insured against, some cover property otherwise excluded and some increase the amount the insurer will pay for a covered loss.

Also, it is important to note that the standard policy excludes damage from earthquakes and floods, so talk to your independent insurance agent about coverage for these incidents.

What It's All Worth

If your property does get damaged, destroyed or stolen, the insurance company will use one of two ways to determine its value:

  • 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, the value of it might have depreciated 50%. Therefore, the amount of your coverage for that set would be $250.
  • 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 amount of your coverage.

You can select which type of coverage you would prefer. Having replacement coverage adds only about 10% to 15% to the cost of the premium and may well be worth this slight increase.

Renting With Roommates

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.

A Final Note

At least once during a lifetime most people will rent a home. Paying rent instead of a mortgage payment does not make your personal possessions any less valuable.

Should your belongings be damaged or destroyed, or should someone suffer an injury in your home, renters insurance can offer the peace of mind of knowing that you are protected. We can help you find the best combination of coverage and price to meet your rental insurance needs.


Business Insurance 101

General Business

1. Evaluating the Insurance Marketplace

Before you choose and meet with an independent agent or broker to discuss insurance, compile the following information:

  • Current business insurance policies
  • Updated payroll and sales records
  • Current profit and loss statement
  • Loss information from the current and three prior years
  • Your OSHA log, if available
  • Current schedule of vehicles and Motor Vehicle Reports (MVR)
  • Safety programs/procedures and safety meeting records
  • YOur Agency's promotional literature

Once your papers are in order, assess how much risk you should retain - the deductible. The risk the insurance company assumes is the limit of liability over and above the deductible. Insurance allows you to transfer the risk of financial uncertainty to an insurance company for a known premium. So, first calculate how much of that financial uncertainty you're willing to take on and how much risk you want the insurance company to assume.

Generally, the premium you pay depends on the deductible, or risk, you're willing to assume if a loss occurs. By choosing a higher deductible, you retain more risk, but pay a lower premium. On the other hand, if you choose a lower deductible, your premium will be higher. When premiums are high or coverage is difficult to obtain, you may want to choose a higher deductible and directly pay for smaller losses. The premium savings you'll realize may allow you to purchase other essential coverages. This strategy makes the most of your insurance dollar, providing you with the maximum protection against losses that can result in bankruptcy, debt financing or the postponement of future business plans.

If you take this approach, make sure you build the average annual costs of smaller losses into your budget. Once you've determined how much risk you will retain and how much risk you want the insurance company to assume, you're ready to choose an insurance agent.

2. Managing Your Business Insurance Plan

The following list includes only a few helpful steps. Consult with insurance agent and a loss control representative to learn more about containing insurance costs.

General Considerations
  • Increase your deductibles.
  • Establish a safety program.
  • Implement and maintain professional loss control recommendations.
  • Notify your insurer as soon as you learn of a loss.
Property Protection
  • Keep your workplace clean and orderly.
  • Carefully store all combustible products and equipment.
  • Make sure all fire extinguishers are accessible and in good condition.
  • Establish emergency procedures and conduct employee drills.
  • Install a sprinkler system at your workplace and inspect it regularly
Auto Protection
  • Review the Motor Vehicle Reports (MVRs) of your drivers annually.
  • Establish fleet safety and fleet maintenance programs.
Employee Workers' Compensation
  • Maintain accurate records of payroll divisions.
  • Maintain an accurate OSHA log.
  • Carefully review and track the progress of all workers' compensation claims.
  • Implement an occupational injury management program to help bring injured employees back to work quickly.

3. Insuring Your Home based Business

Let's face it. Launching and running a business takes capital, motivation and yes, even physical stamina to handle the stress and demands of a new or growing venture. And it's risky. In fact, one out of every five businesses fails within the first five years of opening.

Handling inventory, scheduling time, purchasing supplies, handling payroll -- there are a myriad of procedures every home or small business entrepreneur needs to know, but one of the most critical and often neglected is buying proper insurance coverage.

Taking Your Business Inventory

What would happen if a fire or other disaster destroyed your property, making it impossible for you to get back to business right away? Would you remember what property had been destroyed? One way is by taking a complete inventory of all your personal business property, determining its value, and deciding what's worth insuring. Having an up-to-date business inventory will help you get your insurance claim settled faster, verify losses for your business' income tax return and help you purchase the correct amount of insurance.

Start by making a list of personal business property, describing each item and noting where you bought it and its make and model. Clip to your list any sales receipts, purchase contracts, and appraisals you have.

What's the Right Coverage for You?

Then there's the question of what types of coverages you'll need. Aside from personal business property, there is liability insurance, business income, insurance for the building, boiler and machinery, human failure, employee protection and management protection, among others. The type of coverage you need depends on a number of factors including what kind of business you operate.

How to Keep Costs Down

Start your search for a policy with trade associations or business groups. In many cases, these organizations are able to provide reduced insurance rates based on the volume of business they can offer the insurance company. They've also negotiated coverage specific to your type of business, which can save you significant time in determining what you should cover. Also make sure that you are working with an agent that understands your type of business.

Source: Insurance Information Institute

4. Do I Need Business Interruption Insurance?

Business interruption insurance can be as vital to your survival as a business as fire insurance. Most people would never consider opening a business without buying insurance to cover damage due to fire and windstorms. But too many small businessowners fail to think about how they would manage if a fire or other disaster damaged their business premises so that they were temporarily unusable. Business interruption coverage is not sold separately. It is added to a property insurance policy or included in a package policy.

A business that has to close down completely while the premises are being repaired may lose out to competitors. A quick resumption of business after a disaster is essential.

  1. Business interruption insurance compensates you for lost income if yOur Agency has to vacate the premises due to disaster-related damage that is covered under your property insurance policy, such as a fire. Business interruption insurance covers the profits you would have earned, based on your financial records, had the disaster not occurred. The policy also covers operating expenses, like electricity, that continue even though business activities have come to a temporary halt.

  2. Make sure the policy limits are sufficient to cover yOur Agency for more than a few days. After a major disaster, it can take more time than many people anticipate to get the business back on track. There is generally a 48-hour waiting period before business interruption coverage kicks in.

  3. The price of the policy is related to the risk of a fire or other disaster damaging your premises. All other things being equal, the price would probably be higher for a restaurant than a real estate agency, for example, because of the greater risk of fire. Also, a real estate agency can more easily operate out of another location.

Source: Insurance Information Institute

5. Disaster-Proof Your Business

Businesses that recover quickly are those that plan in advance. This involves not only purchasing the right insurance, but also developing and maintaining an adequate recovery plan.

Minimize the risk of damage in advance of an emergency by:

  • Training employees in fire safety, particularly those responsible for storage areas, housekeeping, maintenance and operations where open flames or flammable substances are used.
  • Modernizing the electrical system since faulty wiring causes a large percentage of nonresidential fires.
  • Situating your business in a fire-resistant building - a structure made of non-combustible materials with firewalls that create barriers to the spread of fires - and in a building with a fire alarm system connected to the local fire department. It is also a good idea to have a sprinkler system to douse fires.
  • Limiting storm-related damage by making sure the building conforms to damage-resistant building codes.

Develop a disaster recovery plan by:

  • Keeping up-to-date duplicate records of both computerized and written records. Under federal law, if companies fail to maintain and safeguard accurate business records, the company may still be held liable.
  • Identifying the critical business activities and the resources needed to support them in order to maintain customer service while your business is closed for repairs.
  • Planning for the worst possible scenario. Do research before a disaster strikes by finding alternative facilities, equipment and supplies, and locating qualified contractors to repair your facility.
  • Setting up an emergency response plan and training employees how to execute it.
  • Considering the resources you may need to activate during an emergency such as back-up sources of power and communications systems. Also, stockpiling the supplies you may need such as first-aid kits and flashlights.
  • Compiling a list of important phone numbers (including cell phone numbers) and addresses, including local and state emergency management agencies, major clients, contractors, suppliers, realtors, financial institutions, insurance agents and claims representatives. The list should also include employees and company officials. Keep copies off the premises in case the disaster is widespread.
  • Deciding on a communications strategy to prevent loss of your customers. Clients must know how to contact yOur Agency at its new location. Among the possibilities to explore, depending on the circumstances, are posting notices outside the original premises; contacting clients by phone, e-mail or regular mail; placing a notice or advertisement in local newspapers; and asking friends and acquaintances in the local business community to help disseminate the information.
  • Reviewing your plan on a regular basis and communicate changes to key employees.

Source: Insurance Information Institute

6. Employment Practice Liability (EPL)

Your staff could be 5 or 500, in today's environment, every business is at risk. Employment practice liability concerns will touch virtually every single business in the U.S. The increase in employment-related lawsuits appearing in the media is just the tip of the iceberg - there are thousands more that you'll never hear about. What do these suits cost? The average suit will cost the average company hundreds of thousands of dollars, internal employee unrest and public relations damage that can take years to undo.

The fact is that the tide of employee-related laws keeps rising and employees are more savvy than ever about pursuing legal action. We can help protect your exposures with EPL coverage that is uniquely adapted to a volatile marketplace.

Q: Who Needs Employment Practices Liability Coverage?

Corporate entities or organizations with at least one employee.

Q: What Can EPL Insurance Cover?
  • Failure to promote
  • Unwarranted discipline
  • Invasion of privacy
  • Wrongful dismissal faulty evaluation
  • Emotional distress
  • Misrepresentation
  • Defamation
  • Harassment
  • Discrimination
  • Ill-directed discipline
  • Breach of employment contract
Q: What Federal Laws Affect Employment Liability?
  • Civil Rights Act of 1964 - Title VII Prohibits discrimination by employers based on color, race, religion, sex or national origin. The law applies to all employers with 15 or more employees.
  • The Family and Medical Leave Act - Requires that all employers with 50 or more employees provide up to 12 weeks of paid leave per year for an employee due to: birth of a child, placement of a child with an employee for foster care or adoption, or the need to care for oneself, a child, spouse or parent with a serious health condition.
  • The Age Discrimination in Employment Act (ADEA) - The ADEA prohibits employment discrimination against persons aged 40 and older based solely on their age. ADEA applies to employers with 20 or more employees.
  • Civil Rights Act of 1991 - This act amends Title VII of the Civil Rights Act of 1964 to include additional recoveries for a claimant and also allows a claimant the right to demand a jury trial.
  • Americans with Disabilities Act (ADA) - The ADA prohibits discrimination on the basis of disabilities and also requires an employer to make reasonable accommodations in the workplace for disabled employees. This law currently applies to employers with 15 or more employees.

Works Compensation

1. General Information

While the coverage included in any workers' compensation policy is largely mandated by state statute, we distinguish the policy by going beyond those requirements to expand coverage in several key areas. Better yet, we complement those expanded coverages with exceptional claims handling and a variety of cost containment services.

What Is Workers' Compensation - And Workers' Compensation Insurance?

In general, the current workers' compensation system represents a compromise between employers and employees regarding employment-related injuries or illnesses. Basically, employees relinquish their right to sue employers if they suffer some job-related injury or illness. In return, employers agree to provide state-mandated benefits if such injuries or illnesses occur.

To ensure employers will have the money to pay these mandated benefits, most states require that employers demonstrate that they have the financial ability to pay any claims that may arise. Typically, this financial ability is demonstrated through the purchase of workers' compensation insurance.

Most workers' compensation insurance policies actually provide two types of coverage:

  • Workers' compensation Coverage. Pure workers' compensation coverage provides benefits for injured workers as required by state law -- regardless of who is at fault for the injury or illness. In other words, whatever benefits your state requires that employers provide for injured workers, your workers' compensation policy provides.
  • Employer's Liability Coverage. This additional coverage provides employers with liability protection in case they are ever sued for damages arising from employment-related accidents or diseases. However, to collect benefits provided by Employer's Liability Coverage, both the employee as well as anyone else not covered by workers' compensation laws (i.e., spouses and dependents), would have to prove that the employer was actually legally responsible for the employee's injury or disease.
Who This Policy Will Cover?

In general, workers' compensation insurance is designed to provide benefits for your employees. However, the individuals that are defined as employees are determined by state law. And in workers' compensation cases, courts have typically been very liberal in their definition of employees, so as to provide injured workers with broad protection under the state's workers' compensation laws.

The Employer's Liability insurance included in your workers' compensation policy can also provide damages to injured workers separate from their workers' compensation benefits. Family members and other third party claimants may also receive benefits under this coverage -- if they prove the employer's legal liability.

What Expenses This Policy May Pay?

Typically, your workers' compensation policy will pay for:

  • Medical benefits for a covered injury or disease -- including medical, hospital, surgical and other related health care costs as well as physical therapy and prosthetic devices
  • Disability income benefits - including compensation for lost wages
  • Rehabilitation benefits - including services to help an injured worker return to productive work, such as vocational rehabilitation
  • Death benefits - including a flat amount for burial expenses as well as partial replacement of the worker's weekly wage.
What Protection This Policy Offers?
Work-Related Injuries

If one of your employees is accidentally injured while on the job, your workers' compensation policy will pay for a wide range of services to aid the injured worker's recovery and return to productive work. These services can include the cost of medical care, compensation for lost wages, and rehabilitation therapy.

If your employee is accidentally killed while on the job, your policy will also provide death benefits -- including burial expenses and partial replacement of the worker's weekly wage.

Occupational Illnesses

If some condition in your working environment actually causes one of your employees to become ill or contract a work-related disease, your workers' compensation policy will provide a wide range of benefits to help treat this illness and speed the employee's recovery. These benefits will typically cover the cost of medical care, compensation for lost wages, and other required therapy.

If your employee dies from this disease, your policy will also provide death benefits -- including burial expenses and partial replacement of the worker's weekly wage.

Coverage for Employees Not Subject to Workers' Compensation Laws

Most workers' compensation policies only provide benefits for those employees your state specifically identifies as subject to workers' compensation laws. But some policies go beyond this requirement. It automatically extends bodily injury coverage to employees who aren't expressly covered by your state's workers' compensation laws -- such as volunteers. (Not available in Wisconsin and New Jersey.)

Liability Suits Related to an Employee Injury

To recover benefits under your state's workers compensation law, your employees don't have to prove you were somehow responsible for their employment-related accident or disease. But if they can prove you were liable for their accident or illness, they may be able to successfully sue to recover damages beyond the workers' compensation benefits.

If so, you'll be comforted to know that the Employer's Liability portion of your workers' compensation policy can pay for the damages awarded to your injured employee, as well as, the legal expenses involved in such a suit. This coverage may also provide certain benefits if you are ever sued by a third party affected by a workplace injury, such as a family member of the injured worker.

Expenses You Incur as Part of a Workers' Compensation Claim

If you are ever involved in a workers' compensation claim, proceeding, or suit, most workers' compensation policies will pay for any reasonable expenses you incur at our request to participate in these proceedings or help prepare your defense. In fact, we'll even pay for any earnings you lose because of these activities -- a benefit most standard workers' compensation policies do not offer.

Legal Expenses in Workers' Compensation Cases

If you are protected by workers' compensation policy, you generally won't have to worry about bearing any legal expenses related to a workers' compensation or employer's liability claim. In fact, we will assume the responsibility of investigating, defending and settling any related claims, proceedings or suits. We will also supply the services of an attorney to represent you in any such suit. In short, we will:

  • Pay the cost of defending you in any hearings, suits, etc, that result from any occurrences covered by workers' compensation; and
  • Pay damages if you are successfully sued because of a job-related injury or disease.
Compensation for Family Members

If an injured worker's family members can prove that you were legally liable for a work-related injury or illness, they may be able to collect damages from you. In such cases, the employer's liability coverage provided by your policy may pay for:

  • compensation for family members for their "loss of consortium" or access to the injured worker; and
  • damages for injuries to spouses or relatives that result from the injury to the spouse or relative.
Coverages for Employees While Traveling on Business

Most workers' compensation policies only provide coverage for the states in which you do business, as specified in your actual policy. Therefore, check your policy if it extends its workers' compensation coverage to employees traveling outside the standard policy territory (excluding U.S., Canada, Cuba, Iran, Iraq, Cambodia, North Korea, Libya, and Lebanon).

Accidents Over Navigable Waterways

If any of your employees ever have an accident while carrying out their job responsibilities over a navigable waterway, they may be subject to the workers' compensation benefits provided by the United States Longshore and Harbor workers' compensation Act. Typically, benefits mandated by this act are more extensive than those provided under a state's workers' compensation law.

Employer's Liability in Monopolistic States (NV, OH, WA, WV, WY)

In six states, the state governments mandate that employers purchase workers' compensation insurance from the state fund. Referred to as "monopolistic states", these states don't even allow insurance companies to sell workers' compensation to employers headquartered within their borders.

Even if your business isn't domiciled in one of these states, you could still be affected by their laws. If one of your employees is injured in any of these states and decides to file a workers' compensation claim, that state's laws would apply. In such a situation, you'll be reassured to know that most workers' compensation policies automatically provide "employer's liability" coverage. This coverage would pay for related expenses and damages in case you are ever sued for the employment-related injury or illness. Other insurers may offer this extended coverage in these states -- but only if you specifically request that they add it to your policy.

Third Party Suits Against the Employer

If your employees are injured in an accident, they may try to sue a "third party" (a company other than yours) -- if they believe that party is somehow responsible for their injury. In turn, that third party may sue you -- if it believes yOur Agency is legally liable for the accident.

For example, an employee injured while using a piece of equipment may sue the equipment manufacturer for some alleged negligence or faulty design. However, the manufacturer can then turn around and sue yOur Agency -- if they believe the accident was instead caused by your improper maintenance of the equipment.

In this situation, the employer's liability coverage of your policy would pay any damages awarded by the court to compensate for the bodily injury.

Failure to Notify Insurer of Potential Hazards

When you apply for a workers' compensation policy, you have an obligation to disclose to the insurer all known hazards. But what if you don't even know you have a potential hazard at your business site? Unlike other policies, our workers' compensation policy explicitly states that we won't deny coverage if something happens as a result of that undisclosed hazard -- as long as you did not intentionally fail to notify us of its existence.

Investigation into Workers' Compensation Fraud

Unfortunately, fraudulent claims add to every employer's workers' compensation costs. And since most insurance companies are serious about helping you control costs, we're serious about fighting fraud. Our claim professionals can also coach you on how to spot and handle a potentially fraudulent claim.

2. Reducing Workers' Compensation Costs

Whether you employ only one part-time worker or thousands of employees in multiple locations, workers' compensation insurance can be a significant cost of doing business. Comprehensive education and ongoing training in the workplace will help you reduce worker's compensation costs.

Workers' compensation insurance premiums are calculated based upon a combination of factors including size of a company's payroll and claims history compared with other businesses in your industry. This means companies can do a great deal to impact their premium costs, reduce worker claims by creating a work environment oriented toward worker safety and training.

There is a great deal of information available to employers about how to improve on the job safety and training, primarily through your worker's composition carrier. Many insurance companies provide trained industrial hygiene specialists who will consult with you for little or no cost to evaluate your current safety and training programs.

Improving Your Current Worker Safety Programs

Loss prevention begins with an audit of yOur Agency's current safety programs. Study how employees are performing their jobs, how job processes can be improved to reduce and eliminate injuries. Review your industrial accident record. Is there any correlation between frequency of accidents and job process? You may want to consider the following steps to improve yOur Agency's programs.

1. Documentation

Worker safety programs should begin with documented written programs including job descriptions, proper use of equipment and safety procedures in the event of an industrial accident.

2. Training

All new employees should be thoroughly trained on their job duties and safe handling requirements. Existing employees should receive regular and updated training on proper use of equipment and job procedures.

3. Regular Updates and Supplemental Materials

Many workers' compensation carriers as well as industry associations and state regulators offer published information, videos and newsletters which can be distributed to employees to increase job safety awareness, enhance training and reduce on the job injuries.

4. Worker Safety Committees

Develop a committee or group comprised of internal staff from a variety of functional areas to evaluate and suggest improvements in yOur Agency's accident prevention programs. The charter of this organization should focus on process, education, and ongoing training.

5. Early Return to Work Programs

Encouraging early return to work by previously injured employees can help reduce the costs of workers' compensation claims in a number of ways. Historically, workers' compensation claims can be reduced if employees can be retrained for a new position because they possess valuable experience or historical information about the company. They can learn their new role more quickly make an immediate contribution. Job retraining is a proactive approach that improves employee morale significantly. Safety and education can result in substantial reductions in industrial accidents and worker's compensation claims. The first step is creating greater awareness about job hazards and safety processes among your personnel.

3. How to Control Your Workers' Compensation Premium

We believe these measures are so important that we will help our policyholders implement and maintain these programs, all at no additional charge.

Develop a Written Safety Program

If accidents don't happen, they can't affect your premium. Our loss prevention specialists can help you develop and implement a practical, effective safety program tailored to your special needs.

Implement a Drug Testing Policy

An integral part of any safety program is a drug testing policy, because drug-impaired employees cost companies an additional 25 percent of their salaries each year.

Determine Second Injury Fund Eligibility

The SIF is a state-administered program that may partially cover claims costs when an employee with a permanent, preexisting condition is injured on the job. To qualify, employers must have documented knowledge of the condition before the injury occurs. Post-employment questionnaires and health screenings that comply with the Americans with Disabilities Act (ADA) are the best way to obtain this information.

Develop a Return-to-Work Program

The faster you get employees back to work, the lower your claims costs will be. Before an accident occurs, establish a return-to-work program that includes written job descriptions, modified work assignments and set transitional duty periods.

Report Claims Within One Hour

Statistics show that late reporting can increase claims costs up to 50 percent. That's why you should report claims and injuries within one hour.

Report Suspected Fraud

Report fraud if you suspect a claim is fraudulent or if any of the following early warning signs are present: the injured employee is never home, you hear rumors the accident didn't occur on the job, the employee's story changes, the employee switches doctors after being released to work, there are no witnesses or the accident is reported late, on a Monday or before a layoff.

Conduct Accident Investigations

Train supervisors to investigate accidents and complete reports. Ask the employee and any witnesses to explain in detail how, where, when and why the injury occurred. Use this information to correct any hazards and also to spot possible third-party liability.

4. Workers' Compensation Tips for Employers

Workers' compensation insurance protects employers from claims resulting from injuries to employees. It protects your business from lawsuits and provides employees with compensation for on-the-job injuries.

1. Make sure that all your employees are trained properly for the job they are doing.

2. Make sure that the workplace is as ergonomically safe as possible. Don't have an employee who is 4'11" working in or on a workspace designed for someone 5'6". This is one of the main areas where problems can occur.

3. Make sure all employees are wearing proper equipment for the job. This includes not only those employees doing heavy manual labor, but also those individuals who are sitting at a desk and typing all day. Cumulative trauma, especially Carpal Tunnel Syndrome, is the fastest growing area of worker's compensation injuries. When an injury does happen, don't just ignore it. Handle the same way you would handle the injury of a loved one or a family member. This automatically sets up a feeling of caring between you and the injured worker.

4. Keep up the communication between you and your injured employee. Remember, whether this employee is on site or not, he or she is costing you money. The more you keep up the levels of communication, the better the chance the employee will want to return to work sooner. This not only saves you money, as in actual cash outlay, it also saves you money in indirect costs (hiring someone to temporarily take over the job, changing around shifts to accommodate workers absences, etc.).

5. In keeping up communication, that also means to contact the doctor who is treating the worker. This can definitely keep down costs as you are more aware of what is going on with the worker and the doctor. Not all doctors are saints. Some are just in it for the money, so it's in your best interest to keep up the lines of communication. Also, it is important to have more than one "Company Doctor". You should have not only the Emergency center, urgent care, etc., you should also have other types of doctors. Not everyone responds to the same person for every injury. Have a list of three or four different types of doctors, chiropractors, medical doctors, acupuncturists, etc. This gives the employee a chance to choose what kind and who he may wish to see for his injury.

5. Workers' Compensation Tips for Employees

The areas that require your attention are not as technical or restrictive as that of your employer, but none the less they require to take specific actions.

First and foremost, don't lie about the injury. This not only can cause you a lot of hassles, it is ILLEGAL in most if not all states. If you really hurt yourself playing softball last night don't do something stupid like say you hurt yourself at work. You will get caught.

Another don't is: don't exaggerate your symptoms as an expectation of getting a big payoff. It does not happen in workers' compensation. All payouts for disability are strictly regulated by the state or by the workers' compensation board.

It is important that you try to prevent all injuries, not look for them. Prevention is the name of the game. By preventing injuries, it saves the company money, which in turn can be passed on in pay raises and other benefits.

Make sure that you are properly trained and qualified for the job you are taking on. Pay attention to your supervisor or whoever is training you for the job. They are looking out for your best interest. They want the job done correctly, the first time. Redoing the job means time and money for both you and the employer. Have respect for your employer. He is the one paying you.

If you are injured and put on temporary disability, keep in touch with your supervisor. Let them know what is going on; How you are doing? When you are expected back, etc. This lets the employer know that you are not just taking them for a ride. You know, sitting home watching Oprah, hoping that you don't have to go back to work and just waiting for "your ship to come in".

As we said at the beginning, workers' compensation is a two-way street. Both you and your employer are directly involved and you both need to communicate this to each other.

6. What's a Return to Work Program?

Once an injury has occurred, the goal of a Return to Work program should be to return the injured employee to work as quickly as possible. To accomplish that, the employee's job may have to be reevaluated considering the following two alternatives:

1. Modified Work: The employee returns to his original job, but some restrictions are placed on the job by the treating physician. Restrictions may include reducing the amount of work time, and/or restricting certain activities such as bending or lifting. Modified Work is also referred to as Light Duty.

2. Temporary Alternate Work: The employee returns to work, but because the original job cannot be modified to conform with the physician's restrictions, he or she performs another job that accommodates the injured employee's abilities.

Benefits of a RTW Program

A RTW program is beneficial to both management and employees. Such a program:

  • Allows an injured employee to continue to be productive and to contribute to the company.
  • Maintains communications between injured employees and management.
  • Reinforces the company's interest and concern for an injured employee.
  • Improves communications between company, the employee and the treating physician.
  • Discourages malingering.
  • Reduces the disability associated with an injury and its related costs.

Another benefit of developing a RTW program is that it helps a company comply with the Americans with Disabilities Act (ADA). By following the steps listed below, specifically those in Job Descriptions, the essential components of each job will be identified and classified. This will help management identify jobs which potential employees with disabilities may be able to perform.

Steps to a Successful RTW Program

Top Management Support and Commitment

In order for a RTW program to be successful, it is imperative that management make a firm commitment to "drive home" the need of the program and its benefits to all employees. Once the program has been developed, management should develop a strategy for communicating its enthusiasm for the program throughout the company.

Job Descriptions

A written description should be developed for all present jobs as well as potential alternate jobs. The description should include a listing of the job's essential functions, the location where it is performed, length of shift, etc. Job functions such as lifting, carrying, bending, walking, standing, and other repetitive motions should be classified according to severity and recurrence.

Policies and Procedures

Top management should develop policies and procedures by which RTW programs will operate. A variety of issues must be addressed, including: Who administers the program, and how is that administrator selected? When can the program be used, and by whom? What sort of forms (job demands, doctor's release to work, standard letters) should be developed? How long should Temporary Alternate Work last? How long should Modified Work last?

Communication and Training

Once the program is developed, top management must develop a strategy for communicating with employees about the importance of the program and their role in it. This communication may take the form of training for management and supervisors, and group discussions or seminars with employees. Top management may also want to meet with treating physicians or other medical personnel to get their input and involvement.

Follow Up and Evaluation

Top management should establish a timetable for periodic follow-up and evaluation of the program. This will ensure the program's continued use, identify any incorrect procedures, and reveal concerns that may not have been addressed in the original program.

7. Workers' Compensation FAQs

Following are a series of frequently asked questions (FAQs) and answers about workers compensation insurance.


Q: What is workers' compensation?

A. Workers' compensation is an accident insurance program paid by your employer which may provide you with medical, rehabilitation and income benefits if you are injured on the job. These benefits are provided to help you return to work. It also provides benefits to your dependents if you die as the result of a job-related injury.

Q: How long do I have to work to be covered under workers compensation?

A. You are covered from the first day on your job.

Q: How do I know if the company I work for is covered by workers' compensation?

A. The law requires any business with three or more workers, including regular part-time workers, to have workers' compensation.

Q: When should I report an accident that happened on the job?

A. You should report any accident to your employer (boss, foreman, or supervisor) immediately. If you wait longer than 30 days, you might lose your benefits.

Q: What do I do about a doctor?

A. Your employer is required to post information identifying medical care providers. Your employer may satisfy this requirement in one of the following ways:

1. Post a Traditional Panel of Physicians consisting of at least four doctors. You may choose any one of the four. The panel must include one orthopedic physician and not more than two industrial clinics. Where possible a minority physician must be included. You may make one change to another doctor on the list without the permission of your employer.

2. Post a Conformed Panel of Physicians consisting of at least ten physicians. This panel shall include the same physicians required in the Traditional Panel plus a chiropractor and a general surgeon. You may make one change to another doctor on this panel without the permission of your employer.

3. Post the name of the Workers' Compensation Managed Care Organization (WC/MCO) certified by the Board which your employer has contracted with to provide medical services. Your employer must give you a notice of the eligible medical service providers and post a 24 hour toll free number for the managed care organization. A managed care representative will assist you in scheduling an appointment with the eligible medical provider of your choice. You may make one change to another eligible physician at any time, without the permission of your employer.

Q: Who pays for the doctor?

A. YOur Agency's workers' compensation insurance carrier will pay for your authorized doctor's visit if the injury was caused by an accident on the job.

Q: What medical treatment will be paid?

A. All authorized doctor bills, hospital bills, physical therapy, prescriptions, and necessary travel expenses if the injury or illness was caused by an accident on the job. You may also be entitled to medical rehabilitation.

Q: When do I get my benefits?

A. You are entitled to weekly income benefits if you have more than 7 days of incapacity. Your first check should be mailed to you within 21 days after the first day you missed work. If you miss more than 21 consecutive days, you will be paid for the first week.

Q: How much will my weekly benefits be?

A. You will receive two-thirds of your average weekly wage, but not more than $300.00 per week for an accident which occurred on or after July 1, 1996, or $325.00 for an accident which occurred on or after July 1, 1997.

Q: How long will I receive weekly benefits?

A. If your accident occurred on or after July 1, 1992 you are entitled to benefits for up to 400 weeks. If your injury is catastrophic in nature you may be entitled to lifetime benefits. In certain circumstances, your benefits may be reduced after you have been released to return to work with limitations or restrictions, or suspended if you are released to return to work with no limitations or restrictions.

Q: What if I am able to return to work but can only get a lower paying job as the result of my injury?

A. You will receive a reduced benefit based upon your earnings. This benefit will not exceed $192.50 per week if your accident occurred on or after July 1, 1994, or $216.67 if your accident occurred on or after July 1, 1997.

Q: What if my injury keeps me from getting a job?

A. Under the law, if you sustain a catastrophic injury, you are entitled to receive help in getting another job or learning to do another job. If you need help in this area, call the State Board of Workers' Compensation.

Q: What kind of benefits will I receive if I have a permanent disability?

A. You will receive weekly benefits based on the type and extent of your permanent disability. The authorized treating physician determines any percentage of disability or bodily loss ratings based upon Guides to the Evaluation of Permanent Impairment, Fourth Edition, published by the American Medical Association.

Q: What benefits will I receive if I lose a leg, arm, or other part of my body?

A. You will receive benefits based upon an amount set by law. For example, if you lost an arm or leg you will receive benefits for 225 weeks.

Q: Can I be compensated for loss of sight or hearing?

A. Yes.

Q: Can I receive benefits if I have lost the use of a part of my body?

A. Yes. Benefits are based upon the extent of loss of use of a part of your body as determined by the authorized treating physician.

Q: If I die as the result of an on-the-job accident, what benefits will my dependents receive?

A. Your dependents will receive two-thirds of your average weekly wage, or a maximum of $300.00 per week for death on or after July 1, 1996, and $325.00 per week for death on or after July 1, 1997. Your dependents are your surviving spouse, children or stepchildren. A widowed spouse with no children is limited to a total amount of $100,000.00 unless he or she remarries or cohabitants in a meretricious relationship.

Q: Can I be paid Social Security disability and workers' compensation at the same time?

A. Yes, but Social Security benefits may be reduced.

Q: What if I don't receive my workers' compensation benefits?

A. You must file a claim to protect your rights within one year from the date of your accident. This is accomplished by filing Form WC-14 with the State Board of Workers' Compensation.

Q: What happens after I file a claim?

A. If you do not receive any benefits, you may request a hearing before the State Board of Workers' Compensation. A hearing is like a trial in the courts. Your case will be decided by an Administrative Law Judge who listens to both sides of the case and determines what benefits, if any, you should receive. The judge's decision will be based on the law and the facts involved.

Q: When will the hearing take place?

A. The hearing generally will be scheduled within 45-90 days from the time the judge received the request.

Q: Where will the hearing take place?

A. The hearing will generally be held in or near the county where you were injured.

Q: Do I have to have a lawyer represent me at the hearing?

A. Everyone has the right to represent himself. However, your employer may be represented at the hearing by a lawyer. You may need help from a lawyer in order to present your case properly.

Q: How much will my lawyer charge me?

A. The attorney fee will be based on an agreement between you and your lawyer, subject to the approval of the State Board of Workers' Compensation.


Life & Health Insurance 101

Health & Financial Services 101

1. Do I Really Need Insurance for My Home?

2. Why should I consider purchasing an annuity?

Annuities can serve many useful purposes.

If you are in a saving-money stage of life, a deferred annuity can:

  • Help you meet your retirement income goals. Employer-sponsored plans such as a 401(k), 403(b) or Keogh are an important part of planning for retirement. However, contributions to these plans and to IRAs are limited, and they might not add up to enough for the retirement income you need, especially if you started saving for retirement late or had contributions interrupted—perhaps due to job changes and/or family responsibilities. Moreover, your social security and defined-benefit pension (if you have one) may provide less than you need to retire. Remember that the purchasing power of defined-benefit pension income is eroded by inflation.

  • Help you diversify your investment portfolio. Investment experts routinely advise that, to get the best return for a given level of risk, you should diversify your investments among a number of asset classes. Fixed annuities, in particular, offer a unique asset class—an investment that is guaranteed not to decrease and that will actually increase at a specified interest rate (and, often, potentially more). The guarantees are supported by the claims-paying ability of the insurer.

  • Help you manage your investment portfolio. Investment experts routinely advise that, whenever your investments in various asset classes get too far from the percentage allocations you prefer, you “rebalance” to the original formulation, by shifting funds from the classes that have grown faster to the ones that have grown more slowly. If you do this with mutual funds, you pay capital gains taxes; if you do it in a variable annuity, you don’t pay capital gains taxes. When you eventually withdraw money from the annuity (which could be many years after the rebalancing), you pay tax then at the ordinary income rate.

If you are in a need-income stage of life, an immediate annuity can:

  • Help protect you against outliving your assets. Social security pays retirement income for as long as you live, as do defined-benefit pension plans. But the only other source of income available that continues indefinitely is an immediate annuity.

  • Help protect your assets from creditors. Generally the most that creditors can access is the payments from an immediate annuity as they’re made, since the money you gave the insurance company now belongs to the company. Some state statutes and court decisions also protect some or all of the payments from those annuities.

Source: Insurance Information Institute

3. Planning for Long-term Care?

Did you know?

 By 2020 one out of six Americans will be over 65, that is 20 million more senior citizens than today.    (1)

  • The number of individuals 85 and older (which is currently 3.5 million) will double to 7 million by 2020, and will double again to 14 million by 2040.     (1)
  • 52% of all women and 33% of all men who are now 65 will spend their last years in a nursing home.     (2)
  • Home health care costs $25.32 per hour on average.      (3)
  • A day in a nursing home costs $194 per day or $70,912 on average in the US.     (3)
  • A private one-bedroom unit in an assisted living facility has an average annual cost of $32,294.  Connecticut (Bridgeport area) has the highest annual cost of $57,556, while North Dakota and Arkansa were the lowest at about $21,000).     (3) 
  • The average stay in a nursing home is 2.4 years.      (4)
  • 73% of Americans incorrectly think that Medicare is the primary funding source for long term health care.       (5)
  • 60% of Americans who reach age 65 will need long-term care at some point in their lives.      (6)

    1 Aging in the United States, published by the Bureau of the Census
    2       New England Journal of Medicine
    3      Genworth Financial Research survey February 2006
    4        Metlife 2005 Survey
    5      Gallup Organization Inc. Public Attitudes on Long Term Care: The EBRI Poll. August, 1993; 15.
    6          Centers for Medicare & Medicare Services (CMS)

It's a common misconception that either Medicare or major - medical insurance will cover LTC expenses. Medicaid covers LTC only after a person "spends down" his or her assets to qualify for assistance. Families are at risk of forfeiting hard-earned assets to pay for a loved one's long-term care needs.

Long-term care (LTC) is best defined as ongoing nursing, social, and rehabilitative personal care, or services provided in a nursing home, one's own home, or an alternative site, such as an assisted-living facility. Many people underestimate the costs of LTC and don't plan adequately for their future. Planning for LTC is crucial to retirement security plans because without it, individuals may be faced with insurmountable long-term care costs that can quickly deplete their life savings.

As baby boomers get closer to retirement age, there's been a shift in public policy, with more focus on assuring the solvency of such programs as Medicare and Social Security that provide life security to Americans. In so doing, both Democratic and Republican lawmakers have signaled that it's critical for Americans to assume personal responsibility for planning their long-term care and security.

Q: What is long-term care insurance?

A long-term care insurance policy pays you a daily benefit to cover the cost of long term care. Long term care is ongoing care for people with chronic disabilities. It includes custodial care -- assistance with activities of daily life like eating, bathing and getting dressed -- in a nursing home, an assisted living facility or in the patient's own home.

Q: Do you need it?

This type of care isn't covered by regular medical insurance policies or by Medicare, and it can be enormously expensive. The average cost of a year in a nursing home today is almost $71,000 while the average nursing stay is 2.4 years.  Government studies indicate that 60% of Americans who reach 65 will eventually need some type of long term care.  Long-term care insurance is essential if you are concerned about protecting your assets and maintaining your financial independence throughout your life.
It's a common misconception that either Medicare or major - medical insurance will cover LTC expenses. Medicaid covers LTC only after a person "spends down" his or her assets to qualify for assistance.  In fact, 73% of American incorrectly believe that Medicare is the primary funding source for long term care.   Families are at risk of forfeiting hard-earned assets to pay for a loved one's long-term care needs.

Q: What to look for in long-term care insurance?

Good Benefit Triggers

Benefit triggers are what cause benefits to start being paid. Your policy benefits should be triggered if you need assistance to perform at least two of the activities of daily living (ADLs), which include bathing, dressing, eating, toileting, continence, transferring (moving from a bed to a chair) and taking medication. Another trigger should be "cognitive impairment," which means coverage applies if you are mentally impaired (with Alzheimer's disease for example) even if you're physically able to take care of yourself.

Home Health Care Coverage

You will want to make sure your policy pays benefits for care at home as well as in an institution such as an assisted living care facility or a nursing home.

Guaranteed Renewable

This feature ensures that you will be able to continue your coverage without undergoing additional medical exams.

Inflation Riders

An inflation rider will increase the benefit amount by either a simple or compound inflation rate each year the policy is in effect. This can be a costly feature, but it is protection against the rising cost of long term care. It provides that the policy is much more likely to pay an adequate benefit in the future.

Q: How much coverage do you need?

Policy daily benefits can provide up to $300 a day. How much you need depends on what costs are in your area for assisted living facilities, nursing home and home health care as well as how much you could pay for from other resources, like savings and investments.

4. Disability Insurance

Q: If I cannot afford to buy both life insurance and disability insurance, which coverage should I buy?

A. Both life insurance and disability insurance are important and vital to the financial security of most individuals. In some instances, however, financial resources are inadequate to purchase the needed amounts of both types of insurance. Generally speaking, throughout the typical working lifetime (e.g., ages 20-65), the probability of an individual suffering a major disability (e.g., a disability lasting 3 months or longer) is considerably greater that the likelihood of dying. The probability of a young worker suffering a major disability is as much as 6 (or more) times the probability of dying; the multiple is still 2 or more even at the higher working ages. These relative probabilities would suggest that the purchase of disability income insurance is a more important purchase than is the purchase of life insurance. Another factor supporting this view is that, in the case of disability, total expenses of the family unit will also be higher due to the costs of caring for the disabled worker.

Q: How much disability insurance should I own?

A. The recommended amount of disability income insurance generally ranges from 60-70 percent of pretax income. The applicable percentage for higher-income persons is usually somewhat lower than the percentage recommended for lower-income individuals, due primarily to differences in income taxes. Amounts considerably less than full replacement of earnings are recommended due to a reduction in income taxes and decreases in commuting and other work-related costs that are likely to occur in the event of disability. On the other hand, medical, rehabilitation and certain other expenses are often higher for disabled individuals creating a need for larger amounts of replacement income. In determining how much disability income insurance to buy, any benefits payable under Workers' Compensation, Social Security, and employer-provided disability benefits under pension or group insurance plans should also be considered. Whether the disability benefits themselves are subject to income taxation should also be factored into this determination. The assistance of a professional insurance adviser normally should be sought in making this determination.

Q: What type of disability income insurance is best; insurance covering short-term disabilities only or policies that cover long-term disabilities?

A. Assuming that only one of these types of disability insurance products will be purchased, sound risk management principles would suggest the purchase of long-term disability (LTD) insurance. LTD insurance protects the insured against disabilities that may last many years, or even a lifetime, and thus provides protection against large losses of potentially catastrophic magnitude. Although long-term disabilities occur less frequently than disabilities of a relatively short duration (e.g., several weeks or even a few months), the loss of income for a short duration can be more easily absorbed by the family unit than can an income loss that lasts for several years or longer.

Q: What are the primary differences between short-term disability (STD) and long-term disability (LTD) insurance policies?

A. These two types of insurance coverage differ most importantly in terms of the length of the elimination (waiting) period, the length of the maximum benefit period, coordination of the benefits payable under the policy with benefits payable under social insurance programs (e.g., Social Security and Workers' Compensation), and the "definition of disability" incorporated into the contract language.

Q: What is an elimination, or waiting period and how does its definition differ between STD and LTD insurance policies?

A. The elimination, or waiting period in disability insurance refers to the length of time between the onset of a qualifying disability and the point in time when benefits under the disability insurance policy first become payable. In STD plans, waiting periods may range from 0 days to 3, 7, 10 or 14 days, depending on the specific insurance policy and the cause of disability. Disabilities resulting from accidents often are subject to shorter elimination periods (e.g., 3 or 7 days) than are disabilities caused by sickness. In LTD plans, elimination periods generally range from 3 to 6 months for disabilities arising from both accidents and illnesses.

Q: What is a maximum benefit period and how does its definition differ between STD and LTD insurance policies?

A. The maximum benefit period in disability income insurance refers to the maximum length of time during which benefits will be payable to an insured with an ongoing, qualifying disability. By definition, STD insurance policies are those policies whose maximum benefit period does not exceed two years (24 months) in length. Typically, however, STD insurance provides coverage for benefit periods lasting a maximum of 13 or 26 weeks. In contrast, LTD insurance policies typically provide benefits (contingent on continued disability, of course) for as long as 5 years, to age 65 or 70, or even lifetime.

Q: What types of "definitions of disability" are commonly included in STD and LTD insurance policies?

A. Some disability income insurance contracts provide coverage only for "total and permanent" disabilities. Others provide coverage for "total and permanent" disabilities, "partial disabilities," and "temporary" disabilities. Some policies providing "partial" disability coverage require that the "partial" disability be proceeded by a period of "total" disability. Since these terms are often confusing, with their definitions differing somewhat from one policy to the next, it is recommended that insureds discuss this issue at length with their insurance adviser.

Q: In addition to coverage of partial or total disabilities and temporary or permanent disabilities, what other aspects of a "definition of disability" are important to consider when purchasing disability income insurance?

A. The way in which a disability is defined, especially as it relates to the inability of the insured to perform a particular occupation, is exceedingly important. Several insurers market policies that define total disability in terms of the inability of the insured to perform the usual and customary duties of his or her "own occupation"--the job the insured was doing at the time of the injury or onset of sickness. Other policies define total disability in terms of the inability to perform the regular duties of "any occupation." "Any occupation" is often defined as a job for which the insured has the necessary skills and training and, possibly, at a salary commensurate with the one in which the insured was employed at the time of the incident. The "own occupation" definition is more liberal to the insured and is frequently recommended over an "any occupation" definition. Sometimes a "split definition" is used which incorporates an "own occupation" definition for an initial period (e.g., 2 years), followed by an "any occupation" definition thereafter.

Q: Are disability insurance policies available that do not express the eligibility for disability benefits in terms of an "occupational" definition?

A. Some insurers market disability insurance policies that define disability not in terms of a particular occupation, but rather simply in terms of the amount of income actually lost. Under these contracts, if an insurable event occurs such as an accident or illness, then disability benefits are payable to the extent that the insured suffers a loss of income that exceeds a threshold amount, e.g., a loss of 20 percent or more of the individual's earnings prior to the happening of the insured event. When the threshold amount is exceeded, the policy pays a benefit that is based on the percentage of total "prior earnings" lost due to the disability.

Q: Do all disability insurance policies cover losses arising from both accident and sickness?

A. No. Some policies cover only disabilities arising from an accidental injury, providing no coverage for disabilities caused by sickness. A careful reading of the contract is recommended to determine the extent of coverage provided under the disability insurance policy that you are considering purchasing. Sound risk management suggests the purchase of a policy that covers disabilities arising from either an accident or an illness.

Q: What specific causes of disability, if any, are generally excluded from coverage in disability insurance contracts?

A. Generally, injuries that are intentionally self-inflicted or caused by war or an act of war are excluded. Disability policies may also include a "preexisting conditions" exclusion whose purpose is to exclude from coverage, during an initial period (e.g., the first one or two policy years), a disability arising from an undisclosed health condition that was both present within a prescribed time period prior to policy issuance and required medical treatment or otherwise caused symptoms that normally would require medical care. Through the "military suspense provision," coverage under a disability insurance policy is suspended during any period that the insured is on active duty in the military.

Q: The terms "noncancelable" and "guaranteed renewable" are often used when referring to disability income insurance policies. What do these terms imply, and how do they differ?

A. "Noncancelable" policies provide insureds with the right to renew their policies each year, typically to age 65, by the timely payment of the required premium. A guaranteed premium is stipulated in the contract and may not be changed by the insurer. During the noncancelable period, the insurer is precluded from canceling the contract or otherwise making any unilateral change in the policy benefits. "Guaranteed renewable" contracts also provide insureds with the right to renew their policies to age 65 (typically) through the timely payment of the premium. However, under "guaranteed renewable" policies, the insurer retains the right to change premiums if it does so for all insureds in the same rating class. The insurer is not permitted to cancel the policy or unilaterally amend the policy benefits during the period that the policy is guaranteed renewable. Further, under both types of contracts, the insurer is not permitted to increase the premiums, on a selective basis, only for those insureds whose health status has deteriorated. Because of the premium guarantee feature, "noncancelable" policies may be somewhat more expensive than "guaranteed renewable" policies. In general, disability policies containing a "guaranteed renewable" or a "noncancelable" feature provide better protection to an insured, albeit possibly at a higher cost, than do "conditionally renewable" or other similar types of disability insurance policies that give the insurer a right to refuse to renew coverage for reasons stated in the policy (and typically also give the insurer the right to increase premiums and change benefits so long as these changes apply to all insureds in the same class).

Q: What factors affect the premium cost for disability income insurance?

A. A number of contract features and options affect the premium cost for disability income insurance. Several of the more important factors are (1) the amount of weekly or monthly benefit purchased, (2) the length of the elimination (waiting) period, (3) the length of the maximum benefit period, (4) whether or not the disability insurance benefits are coordinated with social insurance benefits, (5) the occupational class of the insured, (6) the definition of disability, and (7) whether the policy is noncancelable or guaranteed renewable.

Q: How do the lengths of the waiting (elimination) period and the maximum benefit period affect the premium cost of disability insurance?

A. The elimination (waiting) period in disability income insurance serves the same purpose as a deductible in medical expense, automobile and other types of insurance. It eliminates initial, or "first-dollar," benefits from coverage under the insurance policy. As such, longer waiting periods result in lower premiums. There is a similar, but opposite, relationship between varying maximum benefit periods and the premium cost for disability income insurance. As the length of the maximum benefit period increases, total premium cost also increases. When limited dollars are available to purchase disability income insurance, it is generally recommended that longer waiting periods be selected so that longer maximum benefit periods can be afforded. Of course, the amount of cash reserves available to the insured as a "safety net" should also be factored into the determination of the length of the waiting period that is selected.

Q: Why is it frequently true that group long term disability (LTD) insurance purchased at work is less expensive than individually purchased LTD insurance?

A. There are a number of reasons why group LTD may be purchased by employees at a lower premium cost than what these same individuals can purchase on their own, away from their place of employment. First, an employer often contributes toward the premium cost of group LTD coverage, thereby reducing the out-of-pocket cost to employees. Secondly, group LTD insurance plans almost always coordinate their benefits (i.e., plan benefits are reduced) with any disability benefits payable under Workers' Compensation or Social Security. In contrast, individual disability income insurance typically pays benefits in addition to any benefits payable under social insurance programs. Third, individual policies often contain a longer maximum benefit period, a "noncancelable" feature, a "cost-of-living" benefit rider, and an option to purchase additional insurance--expensive features not always found in group LTD policies. Fourth, marketing and sales, administrative, underwriting and other expenses are usually lower for employer-provided group insurance than for insurance purchased individually from an agent.

Q: What is the federal income tax treatment surrounding benefits received from a disability insurance policy?

A. The answer to this question depends on who paid the insurance premiums. If the insured paid the premiums with after-tax dollars, then the disability benefits should be received income tax-free. In contrast, if an employer paid part or all of the premiums then an equivalent portion of the benefits are generally taxable to the insured (in this instance, however, an income tax credit may be available to the insured). In any event, your tax adviser should be consulted with respect to the probable income tax treatment of any disability income coverage that you currently have or are contemplating purchasing.

Q: Where can more information on disability insurance be obtained?

A. A free copy of the Consumer's Guide to Disability Insurance can be obtained from the Health Insurance Association of America, 555 13th Street N.W., Suite 600 East, Washington, D.C. 20004-1109.

5. Life Insurance Basics

Life insurance is usually purchased by individuals to cover loss of income in case of death and to assist with subsequent expenses such as medical and funeral bills, child care costs, college expenses, and the costs associated with day-to-day living, such as mortgage and rental payments. Death is not always necessary for an insurer to pay the value of an insurance policy, however; some policies contain features providing retirement income and cash savings. Life insurance may offer both protection and savings.

Q: What types of life insurance are available?

There are many varieties of life insurance policies, but most can be divided into three basic types: term, whole life and endowment.

1) Term life insurance offers protection for a set number of years at a fixed premium and generally offers no savings feature or cash surrender value. The face amount of a term life insurance policy is generally payable only if the insured person dies during the period during which he or she is covered by the policy. Term life premiums are usually the least expensive, but at the end of the policy term, the policy usually may be renewable at the insured person's current age and at a higher rate. Some term life insurance policies contain a "convertible" feature, whereby the term policy can be converted to a whole life policy, usually without a medical examination.

2) Whole life insurance (also known as straight life or ordinary life) provides lifetime protection with limited savings values. Premium rates are generally constant throughout the life of the policy contract, and the premiums are payable as long as the insured person lives. Full payment of benefits is made upon the death of the insured person, or at attainment of age 97, 98, 99 or 100, depending on the insurance company. Whole life insurance provides good protection at relatively low cost. The insurer retains the policy's accumulated savings, but the policy has a cash surrender value, against which the insured person may borrow or which he or she may receive if the policy is allowed to lapse. "Limited-payment life insurance" is a variation of whole life insurance; premiums are paid for a set number of years, such as 20 or 30 years, or to age 65, after which protection continues for life without further payments. The face value of the policy is paid upon the death of the insured person.

3) Endowment life insurance policies are issued for varying periods of time (10, 20 or 30 years, for example) and emphasize savings rather than protection. If the insured person lives longer than the endowment period, he or she receives the face value of the policy. If he or she dies during the policy period, the face amount is paid to his or her beneficiary or estate. Endowment life insurance usually costs more than term or whole life insurance. It is commonly used to provide retirement income.

Q: What is variable life insurance?

Variable life insurance is designed to address inflation. Variable life insurance policies guarantee a minimum amount will be paid upon death, but they might pay more, as the insurer invests reserve monies from insurance policies. The cash value of the policy at its maturity depends upon the value of the investments made by the insurer.

Q: How are life insurance premiums determined?

In addition to being based on the type of policy issued, premiums are determined by insurers through the use of mortality tables. These tables are statistical analyses of the deaths of a given group of individuals, beginning at birth and extending until all members of the group are dead. For example, a mortality table will show the likelihood of death in terms of the number of deaths per thousand persons and in terms of the expectation of death at each age. So your age is a top factor in determining your life insurance premium. Other factors include your health, occupation and hobbies.

6. What are the Rules for an FSA Plan?

  1. The choices you make have to be made prior to your effective date on the Plan.
  2. If you do not have services rendered within the plan year that will allow you to use your spending account funds, you will lose those funds.  IRS regulations allow an additional 2 ½ months to spend the funds remaining in your account if permitted by your Plan Document.  Any funds left after that period will be forfeited.
  3. There can be NO change for a Plan Year without a life-changing event.  You will have the opportunity to change your elections annually, prior to each year.  (Note, your Health Care FSA account can only be changed annually regardless if you have a life-changing event unless specifically permitted by your Plan Document.)
  4. Life changing events are defined by the IRS as:
    • Your marriage
    • Your divorce or legal separation
    • Birth or adoption of your child
    • Death of spouse or dependent
    • Termination of your dependent relationship
    • Change of job status by you or your spouse
    • Significant changes in coverage or premium
    • A Qualified Medical Child Support Order (WMCSO)
    • Entitlement or Loss of Medicaid or Medicare Coverage
    • Change in Residence (out of area)

7. Medical Insurance Basics

Q: What are the principal types of medical expense insurance coverage?

Medical expense insurance is broadly classified into two principal types of coverage: base (or basic) plans and major medical plans. Base plans generally consist of either hospital expense coverage, surgical expense coverage, or both. Basic hospital and surgical expense plans generally provide coverage on a first-dollar basis (i.e., no deductible) and provide 100 percent reimbursement of covered expenses, up to a relatively low maximum of $10,000, $25,000, $50,000 or $100,000. Major medical plans, in contrast, apply a deductible to initial expenses, generally ranging from $250 to $1,500 per calendar year. After the deductible is satisfied, major medical plans typically reimburse 80 percent of eligible expenses to a maximum out-of-pocket   e.g., $1,000 to $5,000. Expenses are then reimbursed at 100% to a lifetime maximum of $1,000,000 to $5,000,000; some plans also provide unlimited lifetime benefits. Other major medical plans reimburse eligible expenses at 90 or 70 percent.
Major medical plans typically cover a broad list of medical expenditures, including hospital expense, surgical expense, physician (non-surgical) expense, private duty nursing, diagnostic X-ray and laboratory services, prescription drug expense, artificial limbs and organs, ambulance services, and many other types of medical expenses when prescribed by a duly licensed physician. Thus, in comparison with basic plans, major medical plans provide much broader coverage, with higher limits, but these plans require the insured to share in the cost of medical care through deductibles and coinsurance (i.e., 20 or 30 percent of eligible expenses above a deductible amount).

Q: What types of expenditures are commonly excluded under major medical expense plans?

Although providing very broad coverage, major medical plans typically contain a number of exclusions. Common exclusions include medical expenditures arising from:

  1. convalescent or custodial care;
  2.  cosmetic surgery unless required to correct a condition resulting from an injury or a birth defect;
  3. occupational injuries and illnesses that are otherwise covered under a Workers' Compensation law; and
  4. routine dental and vision care (care required for treatment of an injury and dental and eye surgery are frequently covered, however). Other common exclusions relate to benefits provided by government agencies (e.g., VA hospitals) and expenses paid under other insurance programs, including Medicare.
Q: Even though major medical plans provide broad coverage, insureds still incur certain "out-of-pocket" costs. What are these costs?

An insured's "out-of-pocket" costs under major medical expense plans include the deductible, cost-sharing amounts arising from the operation of the coinsurance clause, and medical expenditures that are deemed by the plan to be in excess of "reasonable and customary" charges. Only charges that are "reasonable and customary" for a specific type of service, in a particular location or geographic area, are eligible for reimbursement under medical expense plans. The definition of "reasonable and customary" may vary somewhat from one medical expense plan to another.

Q: What is the coinsurance clause in medical expense plans and how does it work?

Coinsurance, sometimes called "percentage participation," requires the insured to share in the cost of medical care. Under an 80/20 coinsurance provision, the medical expense plan pays 80 percent of eligible medical charges above any deductible. The insured is required to pay the remaining 20 percent. Other coinsurance arrangements, e.g., 70/30 or 90/10, are sometimes used. In the event of large or catastrophic medical expenses, an insured might suffer severe financial hardship due to the operation of the coinsurance clause. To compensate for this possibility, many major medical expense plans contain a coinsurance cap, or stop-loss limit. This provision places a limit on the insured's out-of-pocket costs in a given year arising from the operation of the coinsurance clause. The size of the coinsurance cap generally ranges from $2,000 to $3,000, depending on the plan, although limits as low as $1,000 are sometimes used. Once the coinsurance cap has been reached, all eligible expenses above this amount are paid in full, up to the plan's overall limit of coverage.

Q: What is the difference between coinsurance and copayment?

On occasion, these terms have been used interchangeably. However, it is preferable to define the two terms differently, despite their similarity of purpose. Under a copayment or copay provision, the insured usually is required to pay a set or fixed dollar amount (e.g., $30, $15, or $10) each time a particular medical service is used. Copayments are applied to each office visit and to each prescription that is filled.  Co-pays are not generally applied to the maximum out-of-pocket cost.

Q: What is a preexisting conditions clause and what is the effect of its inclusion in major medical expense plans?

A preexisting condition is often defined as a medical condition (i.e., an injury or illness) that required treatment during a prescribed period of time, e.g., 3 or 6 months, prior to the insured's effective date of coverage under the major medical expense plan. Sometimes, a preexisting condition is defined to include medical conditions that were known to the insured, even though no treatment was provided during the prescribed period. A preexisting conditions clause excludes coverage for preexisting conditions for possibly as long as 12 months after the effective date of coverage. Because the definition of a preexisting condition, and the provisions of the clause itself, may differ considerably from one plan to another, it is recommended that newly insured individuals (and prospective insureds) completely familiarize themselves with this policy provision.

Q: How does the medical expense coverage offered by Health Maintenance Organizations (HMOs) differ from the coverage provided under basic and major medical expense plans?

Basic and major medical expense plans are generally classified as indemnity contracts. These plans indemnify, or reimburse, the insured for medical expenses incurred and typically require the completion and filing of claim forms. In addition, these plans usually contain deductible and coinsurance cost sharing provisions and may restrict coverage for certain types of medical care expenditures. Indemnity plans, however, provide the insured with substantial freedom relative to the choice of physician, including whether a primary care physician or a specialist will be seen. In contrast, HMO coverage emphasizes comprehensive (including preventive) care and typically contains very few exclusions, no (or small) deductibles, and nominal copayments. However, there is much less freedom of choice of physician under traditional HMO coverage since the patient is typically required to be under the care of a primary care physician who serves as a "gatekeeper." In this role the primary care physician determines whether the services of a specialist are needed, in addition to determining what other medical services are required for treatment. Some HMOs today offer a point-of-service option, whereby patients may opt for indemnity type coverage (with a deductible and coinsurance) when they desire medical treatment outside the HMO network.

8. 10 Tips to Cut Your Medical Costs

At most companies, both the employer and employees contribute to the cost of their health plan. Remember, your physician should be your primary source of information for any decisions you make regarding medical services.

  1. Stay healthy. A healthy lifestyle along with regular preventive care can help keep your health care costs low. Exercise and good nutrition contribute to a healthier life.
  2. Use home health care remedies whenever possible. You can reduce the cost of health care for yourself and others by solving health problems at home when appropriate.
  3. Choose a family doctor. Visiting your regular doctor or primary care physician (PCP) is more cost-effective than seeking care from several different specialists.
  4. Avoid unnecessary medical tests. In certain situations the cost and risk of medical tests can, outweigh the benefits. Sometimes tests are given simply as a standard hospital procedure. You do not have to take any test. Before consenting to a test, ask:
    • What is this test is for?
    • How will it help me get better?
    • How much will the test cost?
    • Could it be done for less somewhere else?
    • Is there a less costly test that could provide the same information?
  5. Control your drug costs. It is important to ask questions and learn the benefits and risks of your prescribed medications. Don't expect a prescription for medicine each time you visit the doctor. You can help keep costs low by finding out how the medication will help you, whether there is a generic or similar, less expensive version of the drug, and whether you can try a sample first.
  6. Be prepared before you see a specialist. Specialists have in-depth training and experience in particular areas of medicine and can give you the care and information you need for a major medical problem. In general, specialists' care is more expensive. You can help get the most out of specialty care through good communication and preparation. Before you see a specialist, understand what your primary doctor's diagnosis is and what your primary doctor wants the specialist to do. Ask about your options for treatment, keep your regular doctor involved and have test results sent to both you and your primary doctor.
  7. Use emergency services only for emergencies. Modern emergency services are invaluable in trauma or life-threatening situations, but are inefficient for routine care. Emergency room services can be many times more expensive than care received at your regular doctor's office. When deciding whether to go to the emergency room, use your best judgment. In case of a true emergency, immediately go to the emergency room. Call ahead to let them know you're coming and notify your regular doctor if possible. Your family doctor can provide the emergency room staff with important medical information.
  8. Consider alternatives to hospitalization. If you need hospital care, keep your stay as short as possible. Hospital stays account for more than a third of your health plan premiums. Whenever possible, have tests done on an outpatient basis, use home nursing services and ask about hospice programs for the terminally ill. In certain situations, some health plans pay for home equipment and home nursing visits as an alternative to hospital care. Doctors are often very supportive of this option because they know most patients are more comfortable at home. If you are facing a hospital stay, ask your health carrier whether it can help you get the support that will allow you to return home sooner.
  9. If it's safe, wait. Sometimes physicians are afraid patients will think they're not doing their best if they don't take action right away. But, in many situations the old standby "take two aspirin and call me in the morning" is valid advice. On the other hand, waiting until a mild condition becomes serious can be both unpleasant and costly. Let your doctor know you're willing to wait, if that's appropriate. He or she may consider it helpful to know you're willing to let time and nature take their course, but only if it's safe to do so.
  10. Learn as much as you can about your medical needs. By conducting your own medical research, you may discover more options and be better prepared to decide which course of action is best for you. You can start your research by asking your doctor for information or calling the hospital's medical library or using medical resources available on the web.

9. What is a Medical Savings Account (MSA)?

A Medical Savings Account permits eligible individuals to establish a tax-deferred medical savings accounts (MSAs) to pay medical expenses in conjunction with a high-deduction health plan through a trust or custodial account. On January 1, 1997 a pilot program began that was limited to four years and 750,000 policies under the program. The pilot program must be extended by the IRS/US Treasury Department on a periodic basis.

To be eligible for an MSA, an individual must be either employed by a small employer with 50 or fewer employees that establish a high deductible health plan, or a self-employed person covered by a high deductible health plan.   In 2003 the Health Savings Account (HSA) was created.   Since HSAs are a more widely available and improved version of the MSA, the original program is by and large obsolete.  MSAs are still available, but there are only a few institutions that will open new MSA accounts.  Today, they are called Archer MSAs.

10. Health Savings Account (HSA) Basics

What is an HSA?

A Health Savings Account is a consumer-managed, tax-favored alternative to traditional health insurance created for the purpose of paying medical expenses. To open an HSA, you must be covered by a High Deductible Health Plan (HDHP).  Except for preventive care, you must meet the annual deductible before the plan pays benefits. Preventive care services are generally paid either before you meet your deductible, after you meet a smaller deductible or on a co-payment basis.   

Once you are enrolled, you own and have complete control over the money in your HSA. You make the decisions on how you want it spent, not a third party or a health insurer. You also get to decide how and where you want to invest this money to grow your account.

What are the benefits of an HSA?

  • Your own HSA contributions are tax-deductible.
  • Interest earned on your account is tax-free.
  • Withdrawals for qualified medical expenses are tax-free.   
  • Unused funds and interest are carried over, without limit, from year to year.
  • You own the HSA and it is yours to keep—even when you change plans or retiree.

Who is qualified to obtain an HSA?

You must be covered by a High Deductible Health Plan (HDHP) to take advantage of HSAs. You also must not receive coverage under another health insurance plan, not be enrolled in Medicare,and not be someone else’s dependent.

11. Health Savings Account (HSA) FAQs

How does an HSA work?

An HSA works in conjunction with high deductible health insurance. Your HSA money can be used to help pay the health insurance deductible and qualified medical expenses not covered by the health insurance, including dental and vision. Your HSA account earns tax-free interest and, in some plans, can be used for different types of investments such as mutual funds or money market accounts.  Your HSA is administered by a trustee/custodian.

What are the deductible and out-of-pocket expense limits for HDHPs in 2010?

The minimum deductible is $1,200 for self-only and $2,400 for families; for out-of-pocket expenses, the maximum is $5,950 for self-only and $11,900 for families.  A family is two or more people.

What is the difference between an aggregate deductible and an embedded deductible?

Most HSA plans have what is referred to as an aggregate deductible, which means there is one large family deductible that must be met before anyone in the family is covered. (I.E. If a family deductible is $3,000, there must be $3,000 in claims paid out of the client's pocket before any family member is covered.)

An embedded deductible has a family deductible however, "embedded" within it is an individual deductible. Usually the individual deductible is half or one-third of the family deductible. Embedded deductibles are what people are generally used to when they have a traditional PPO health plan.

What expenses qualify for reimbursement from my HSA?

Most expenses for medical, dental and vision care will be reimbursed under your HSA with some exceptions such as cosmetic surgery and health club dues. A list of reimbursable expenses is available on the IRS Web site, www.irs.gov.

Does making HSA contributions through my company save me money in other ways?

If your employer offers a Section 125 plan (also known as a “cafeteria plan”) that allows you to contribute to your HSA account through payroll deductions, you will avoid paying the employee share of the federal FICA tax on the amount you contribute. You also will reduce your tax liability and payments.

What are the tax deductible contribution limits?

For 2010, federal law limits annual contributions to $3,050 for self-only and $6,150 for families.  Catch-up contributions are $1000 for individuals 55 & over until Medicare enrolled.  Prior to 2007, annual contribution maximum was limited to the lesser of the HDHP deductible or the statutory contributory amount.

How do HSAs differ from Flexible Spending Accounts?

Unlike a Flexible Spending Account, unused money in your HSA isn’t forfeited at the end of the year; it continues to grow, tax-deferred. HSA contributions are always yours to keep.

Can my HSA be used for dependents not covered by the health insurance?

Generally speaking, it can be used to pay for the unreimbursed medical expenses of your spouse or dependents.  A Health Savings Account (HSA) can be used to pay for "qualified medical care expenses" of:  The insured,
His or her spouse, or Dependent children.

Can I use my Health Savings Account for nonmedical expenses?

Yes, but you have to pay income tax and a 10% penalty for a nonmedical withdrawal prior to age 65.  At age 65, you only pay income tax on the amount of the nonmedical withdrawal.

Can I make a Rollover from an IRA into an HSA?

The Tax Relief and Health Care Act of 2006 (HR 6111) was designed to improve Health Savings Accounts (HSAs).   These changes are significant and could make it more attractive for plan sponsors to offer HSAs, and more attractive to plan members to choose them.  One of the provisions included in HR 6111 permits a one-time tax-free irrevocable rollover from an IRA into an HSA.  The amount of the rollover cannot exceed the annual H S A contribution limit (which varies depending on whether person has self-only or family HDHP coverage).   Important Note:  Failure to maintain eligibility for the H S A contributions for a period of 12 months following the IRA transfer would result in income tax and a 10% penalty on the transfer.  

Once I turn 65, what happens to the money in a Health Savings Account?

Once you hit 65, the amounts can be used for health expenses and to pay certain insurance premiums like Medicare Part A & B, Medicare HMO and the employee's share of retiree medical insurance premiums. It cannot be used to purchase a Medigap policy. It can also be used for medical expenses Medicare does not cover. If used for medical expenses, the amounts come out of the account tax free. If used for other expenses, the amount received will be taxable at ordinary income tax rates.
Are health insurance premiums eligible under my HSA?

Generally, health insurance premiums are NOT "Qualifying Medical Care Expenses" except for the following:

  • Qualified long-term care insurance
  • COBRA health care continuation coverage
  • Health care coverage while an individual is receiving unemployment compensation
  • In addition, for individuals over age 65, premiums for Medicare A or B, Medicare HMO, and the employee share of premium for employer-sponsored health insurance.
  • Premiums for Medigap policies or Life insurance policies are NOT qualified medical expenses.

12. HSA, HRA, and FSA Comparison Chart

Health Reimbursement Arrangement Health
Savings Account
History IRS Code 105(h) passed in 2002 IRS Code 223 passed in 2003 IRS Code 125 passed in 1978
Overview The funding option that gives the employer the most control. Employer determines what services are covered, and retains control over unused funds. HSAs are created at financial institutions in the employees' names and allow them to save and pay for medical expenses tax-free. Requires enrollment in a HDHP. FSAs allow employees to pay for medical expenses (deductibles, copays, etc.) tax-free. Requires employer involvement.
Account Owner Employer Employee   Employee
Earnings Investments Generally, no earnings paid. Generally interest paid and investments allowed. Earnings grow tax-free. No earnings paid.
Excluded Persons S-Corp, LLC, LLP, Partnership Owners, & their Spouse; Non-dependent domestic partners Medicare enrolled persons (cannot fund H S A but can continue to claim money already set aside in the H S A trust account); Non-Dependent Domestic partners. S-Corp, LLC, LLP, Partnership Owners, & their Spouse: Non-dependent domestic partners.          
Employer Tax Savings  Contributions are tax-deductible when paid to the participant to reimburse an expense.  Contributions are tax-deductible in the year the contribution is made.  Contributions are tax-deductible when paid to the participant to reimburse an expense. As a result of salary reductions, lower adjusted employee income reduces employer-matching FICA & federal unemployment. 
Employee Tax Savings  Reimbursements for eligible expenses are excluded from income.  Contributions can be pre-tax or are tax-deductible on the employee’s personal tax return. Funds earn interest tax-free. Reimbursements for qualified medical expenses are excluded from income. Employee may withdraw funds for non-medical expenses that are subject to income and excise tax.  Contributions are made pre-tax. Reimbursements for eligible expenses are excluded from income. 
2008 Maximum Contributions  Employer determines maximum contribution.  Lesser of annual deductible or $2,900 (self-only), $5,800 (family). Additional contributions up to $900 allowed for ages 55 and older.  Employer determines maximum contribution for health care FSA.  Child care FSA is limited to $5,000.
Source of Funding  Employer  Employer, employee and for any other individuals  Employer and employee
Who owns Unused Funds?  Employer  Employee (eligible individual name on the established trust account)  Employer
Is Fund Portable?  No   Yes, funds belong to the employee (or eligible individual).  No
Do funds Roll Over?  Yes, if employer specifies. Yes  No. However, an employer may establish up to a 2 1/2 month grace period.
Eligible Medical Expenses 213 medical expenses; including health-related premiums and long term care insurance  premiums; excludes LTC services 213 medical expenses; excludes most  health related premiums unless unemployed; includes long term care premiums & services 213 medical expenses; excludes any health related premiums
Funding Requirement  Not required to pre-fund - uniform coverage rule does not apply.  Funds must be present before withdrawal is made. Employer may contribute to HSA over time or all at once.  Uniform coverage rule applies. Claims must be paid without regard to contribution amount. 
2008 Deductible  An HRA is not subject to a minimum deductible  (deductible amount is established by employer).  $1,100 min self-only $2,200 family Healthcare FSA is not subject to a minimum deductible.  
2008 maximum Out-of-Pocket  Employer sets levels. $5,500 self-only
$11,000 family
Not applicable.
Allowable Expenses and Plan Restrictions  Can be offered alone or in conjunction with a major medical plan. Allows otherwise unreimbursed Code 213(d) medical expenses, including health insurance premiums. May not reimburse expenses for qualified long-term care services. Employer may restrict scope of reimbursements by plan design. If participant also has an HSA, HRA must be limited to dental expenses, vision expenses and expenses constituting preventive care.  Can only be established by those who have qualifying high-deductible health plan coverage (deductible must meet statutory limit) and no disqualifying non-high deductible health plan coverage. Employees who are entitled to Medicare cannot establish or contribute. Allows otherwise unreimbursed medical Code Section 213(d) expenses, excluding most premiums. Employer cannot restrict the scope of HSA distributions, except for expenses paid with an electronic payment card. Can be offered alone or in conjunction with a major medical plan. Allows otherwise unreimbursed Code 213(d) medical expenses, excluding premiums on qualified long-term care services. Employer may restrict scope of reimbursements by plan design. If participant also has an HSA, FSA must be limited to dental expenses, vision expenses and expenses constituting preventive care. 
Non-Medical Expense Withdrawals  No Taxable and subject to a 10 percent penalty (no penalty if age 65 or older, or disabled as defined by Code Section 72).  No