Home Owners Insurance Policies - Property Coverages Under Homeowners Policies

Home Owners Insurance Policies

First-party property coverages provide for indemnification to the insured, for damage to or destruction of covered property by an insured peril. There are several concepts set forth in the previous sentence. First, there is the concept of insured capacity. In order to be entitled to payment under the first-party property coverages of a homeowners, condominium owners, townhouse owners, or tenants' policy, the person seeking payment must qualify as an insured.

Second, there is the concept of insurable interest. In order to be entitled to payment under the property coverages of a homeowners policy, the person seeking payment must not only qualify as an insured but also have an ownership or other insurable interest in the damaged or destroyed item of property. Although people commonly speak of property insurance as insuring property, it actually does not. 

Rather, property insurance policies are personal contracts between the insured and the insurer. The insurer is actually insuring the insured's pecuniary interest in property. This pecuniary interest in property of an insured person is the concept of insurable interest.

Third, the item of damaged or destroyed property for which a loss payment is sought under the property coverages of a homeowners policy must qualify as covered property.

Fourth, in order for payment to be made for damage to or destruction of an item of covered property, the loss to the property must be the result of covered peril. Perils are active physical forces, fortuitous (that is, unexpected or unintended) in nature, that damage or destroy property.

INSURED CAPACITY: NAMED INSUREDS 

Commonly, more than one person qualifies as an insured under a policy. The person named in a policy's declarations is the named insured. The named insured under the policy has greater rights and responsibilities than other persons who may also qualify as insureds. Home Owners Insurance Policies

Insured Capacity: Other Persons Insured

The policy's definitions sections will define who, other than the named insured, may qualify as persons insured under a homeowners policy.

For example, your mortgage lender is added to coverage as an additional insured to the extent of its security interest in your house, condominium, or townhouse. This is generally the outstanding loan balance. A mortgage lender is usually added to coverage under an insurance industry standard endorsement or provision known as a standard mortgage clause. Sometimes the language of the standard mortgage clause is included directly within the policy form, as opposed to being added as an endorsement to the policy.

The definition of insured under the ISO standard HO 3 homeowners policy includes such persons as:

• the named insured and his or her relatives who are residents of the named insured's household;
• nonrelatives of the named insured under the age of 21 who are residents of the household and are in the care of the named insured; and,
• full-time students who were 
• (a) residents of the named insured's household before moving out to attend school, and 
• (b) relatives of the named insured, and 
• (c) under the age of 24, or 
• (d) in the care of a named insured or a relative resident of a named insured and under the age of 21.

The persons insured provisions of homeowners policies issued by insurers that use their own forms may differ. Depending on your particular circumstances, the definition of who does and does not qualify as an insured under different insurers' policies may be of importance to you. 

For example, some insurers' homeowners coverage persons insured definitions do not extend insured capacity to students off premises. Thus, if you have a child away at school or college, his or her personal property may not be covered if your policy does not include your child as an insured person while away at school or college. Home Owners Insurance Policies

What is most important to note is that residents of a household who are not relatives of the named insured and who are (a) over 21 and (b) not in the care of a named insured do not qualify as insureds. An example of this would be if the named insured is renting a room to a boarder or is letting a nonrelative live on the insured premises without charge. 

In this situation, that person's property (i.e., his or her clothing and other possessions) is not covered by the named insured's homeowners policy, because such persons do not qualify as persons insured.

Insurable Interest

In order to qualify for coverage under the first-party property coverages of the homeowners policy, a person cannot simply qualify as an insured. He or she also must also have an insurable interest in the damaged or destroyed property for which payment of a loss is sought.

This principle is perhaps best illustrated by considering the situation of a mortgage lender that is an insured under a homeowners policy issued to the borrower on the home loan. The mortgage lender has a security interest in the residence to the extent of the outstanding balance owed by the borrower. By virtue of the mortgage clause in the homeowners policy, the mortgage lender has an insurable interest in the residence and is entitled under the policy to be named as a payee on any check issued by the insurer for damage to or destruction of the home. 

The mortgage lender does not, however, have an insurable interest in the home as to any sums payable for damage to or destruction of the residence that exceed the outstanding loan balance, Nor does the mortgage lender have any insurable interest in the homeowner/borrower's personal property and is not entitled to payment for damage to or destruction of the borrower's personal possessions. 

Next post, we'll talk about Covered Property Insurance. At mean time, if you are interested, you can get Home Owners Insurance Policies and learn more secrets of insurance.

Read the rest of this entry »

Posted in Home Owners Insurance Policies

How To Protect Your Home - Homeowners Insurance

How To Protect Your Home

What most people think of as homeowners insurance really is composed of several categories that include policies intended for:

• owners of single-family residences, including duplexes and triplexes where the property owner occupies one or more dwelling unit (i.e., homeowners policies);
• owners of homes that are not single-family residences, but rather where there are multiple units in a given building, where the building is jointly owned by the owners of individual living units (i.e., condominiums, townhouses, and cooperatives); and,
• tenants policies.

Each of these categories of policies is structured and organized in the same overall fashion. That basic structure follows, with detailed information regarding specific parts discussed later in detail. First, the policy's declarations appear, where the subject matter of the coverages afforded are stated. This material includes:

• the name of the insurer;
• the policy number;
• the inception and expiration dates of the policy (i.e., the , policy period);
• the named insured;
• the named insured's mailing address, and if different, the address of the premises insured;
• the policy limits applicable to: 
• the property coverages;
• the liability coverage; and,
• the medical payments coverage;
• the deductibles;
• the forms and endorsements comprising the policy; and,
• in states requiring that the agent countersign the policy, the agent's countersignature.

In addition, most states require that the declarations of the policy issued by nonadmitted insurers (that is, excess or surplus lines insurers) must inform the insured that he or she will not be protected by that state's insurance guaranty fund in the event of insolvency of the insurer. How To Protect Your Home

The policy's definitions section often follows, although some insurers' policies reserve the definitions for the last section of the policy. Personal lines policies more commonly place the definitions at or near the beginning of the policy, with commercial lines policies placing the definitions at or near the end of the policy.

The policy's property coverage provisions appear next, which are usually presented in the following order. The insuring agreements (or coverage grants) appear first. There are typically separate insuring agreements applicable to:

• the dwelling and separate structures;
• personal property; and,
• additional living expense.

The exclusions applicable to each of these subsets of coverages appear next. In most cases the need for a separate listing of exclusions applicable to the building and contents coverages is pretty obvious. Exclusions' fall into two primary categories: perils (i.e., risks of loss) not covered and types or items of property that are not covered.

The policy's conditions specifically applicable to the property coverages appear next. Policy conditions generally state acts that must be done or that the insured must refrain from doing in the event of a claim in order for coverage to exist. Policy conditions can also set forth items such as the manner in which claims will be valued, dispute resolution mechanisms, or may provide procedural mechanisms for how losses will be paid in the event of death or incapacity of the insured. 

There is usually a separate list of conditions that apply only to the liability coverages and another list of policy conditions that apply to both the property and the liability coverages. The most important typical conditions are highlighted later.

The policy's liability and medical payments coverage provisions appear next, and are usually presented in the same order as just outlined for the property coverages. First, the liability and medical payments insuring agreements (also known as coverage grants) are stated. The statement of these insuring agreements often includes the description of so-called additional coverages. In some circumstances, the statements of these additional coverages follows, rather than precedes, the exclusions. How To Protect Your Home

The exclusions applicable to the liability and medical payments coverages are stated. These exclusions are often broken down into several categories or groups, such as:

• the exclusions applicable only to the liability coverages; 
• the exclusions applicable to both the liability and the medical payments coverages; and,
• the exclusions applicable only to the medical payments coverages.

The conditions applicable to the policy's liability and medical payments coverages are next stated. One of the most important groups of conditions applicable to the liability coverages is the one stating the insured's duties in the event a third party sues or makes a claim against the insured. It is key if someone makes a claim against you or sues you to notify your insurer immediately. Keep copies of all demand letters you receive and all legal papers that are served on you. Give copies of these documents to your insurer promptly when it asks for them. 

Do not discuss the claim or the law suit with the person who is making the claim or suing you, nor with that person's attorney. Do not admit liability. Do not make any payments to the person who is suing you without the advance knowledge and consent of your insurance company. 

Such payments might later be characterized as an admission of liability. Your insurer should hire a lawyer to defend you. If you hire your own lawyer before the insurer hires a lawyer to defend you, the fees charged by your lawyer may not be covered.

Most policies' basic coverage forms conclude with a section that contains the conditions that apply to both the property and to the liability coverages.

Finally, your policy probably will contain a number of endorsements that add to, delete, or modify provisions contained in the basic policy form. Endorsements are usually one, two, or three pages long each. Insurers use endorsements in order to reduce the administrative costs of reprinting their entire policy form in order to incorporate these new or changed provisions.

Often, endorsements are used to restate a policy provision after a court decision interprets the provision in question in a manner different from how the insurer believed it should have been interpreted.

Commonly, endorsements add exclusions not stated in the basic policy form, These often include exclusions for such things as sexual molestation, physical abuse, or mental abuse of minors; home daycare services performed for a profit; and dog bites.

The following blog posts, I'll discuss the principal coverages of the standard HO 2 and HO 3 homeowners policy forms published by the Insurance Services Office (ISO). ISO is an insurance industry support organization that develops rates and policies. Most insurers' policies rely heavily on ISO policy language, even if they do not actually use ISO policy forms.

At mean time, if you want to know more about secrets of insurance, you can get How To Protect Your Home right now.

Read the rest of this entry »

Posted in How To Protect Your Home

Johnson Insurance - Auto Lessors And Lenders

Johnson Insurance

Regardless of where in the United States you live, if you are leasing a car or a truck or are making payments on a vehicle purchase loan, the leasing company or auto loan finance company will include as a contract provision the requirement that they be shown as an insured party on your automobile policy. Your auto lease or loan contract may even specify the minimum coverages you are obligated to maintain (typically collision and comprehensive coverages).

The lease or auto loan contracts often give the lessor or lender the right to place coverage to protect their interest in the event of loss (but not your interest) and to charge you for the cost of such coverage. This will happen unless you make sure that your auto insurer provides evidence of coverage at each policy renewal.

Usually, notifying your insurer is done at the time the lease or loan documents are signed, Many automobile dealers will not release a vehicle to a customer until the dealers have confirmation that your insurer has been informed of your lease or purchase of a new vehicle. It is often a dealership's finance department that undertakes this notification, based on information supplied by the customer.

However, it is usually a better practice for you to call your insurance agent and personally provide him or her with the new vehicle purchase or lease information, It is better to take the responsibility to handle the notification yourself and to make sure it is done right. Johnson Insurance

Even if you do not have all the information needed (such as the correct legal name of the lender or its address), you can at least tell your agent the name of the dealership, its telephone number, and the name of the correct person at the dealership to contact in order to obtain the financing and additional insured information necessary. This will guarantee that the auto leasing company or automobile finance company is properly included as an insured party under your automobile policy.

If you are trading in a vehicle as part of the transaction or if you have sold it in a private party transaction, you will need to call your agent to advise him or her of that change to the policy. Also, if you pay off any outstanding loan balance, then you will need to notify your agent that the prior lender should be deleted from your policy.

When in doubt, more notice to your agent (i.e., both from you and from the auto lender) can never hurt. It is only a failure to give notice or complete and accurate information to your agent that can lead to trouble.

OTHER SECURED PARTIES

As individuals, your mortgage (including home equity lender) and auto lenders are the most common entities you will need to assure are added as insureds under your insurance policies. If, however, you run a business and have policies for your business, you may encounter circumstances in which you need to add other persons or companies to coverage as insureds under your policies.

ADDITIONAL INSURED INTERESTS UNDER LIABILITY COVERAGES
 
The preceding sections deal with additional insured interests under policies covering items of real and personal property. There are circumstances, usually limited to commercial policies, in which a policyholder may need to add another person or business as an additional insured under the policies' liability coverages. Common situations in which this can occur include a wide variety of circumstances.

• Construction contractors may be obligated under contracts with property owners for whom the contractors are performing services to add the owner as an additional insured under the contractors' policy for liability arising out of the contractor's work for the owner. Similarly, construction subcontractors maybe contractually obligated to add the developer or general contractor they are performing services for as an additional insured for liability arising out of the subcontractor's work. Johnson Insurance
• Persons who lease business premises may be obligated to add the owner of the premises as an additional insured for liability arising out of the use and occupancy of the premises pursuant m the lease.
• Churches and charitable organizations may obtain additional insured endorsements extending coverage to officers, trustees, board or vestry members, or volunteers in other roles, while they are acting in their respective capacities for the church's or organization's activities.

There is a wide variety of standard form additional insured endorsements, including, in some cases, more than one form that may apply to a particular situation. If an inappropriate version of such an additional insured endorsement is obtained, the person or company to whom you owe the obligation to procure additional insured status may not receive the expected coverage. It could result in that person or company turning to you personally for the costs of the defense in the event of lawsuit or for paying a claim in the event of a loss that would have been covered if the correct form of additional insured endorsement had been employed.

It is beyond the scope of this blog to detail all the different types of additional insured endorsements available or to detail when a particular form of additional insured endorsement is more appropriate than another in a given circumstance. In order to help ensure that you obtain the correct additional insured coverage for your particular circumstances, it is important that you provide as much information as possible to your agent or broker. This may include copies of your leases or contracts with parties who require additional insured status under your policy. 

This will help to assure that the correct or most appropriate additional insured endorsement is added to your policy and that the person or other company added as an additional insured is correctly specified. It is also important to specify the activities for which additional insured status is sought so the additional insured is not receiving coverage that is broader than that required by the terms of the lease or contract in question.
 
Finally, for some persons or entities that are receiving coverage as additional insureds under the policies of another person or company, it is necessary that they inform their own agent or broker of that fact, so that he or she can take appropriate steps to coordinate the coverages. Specifically, if a person or company is an additional insured under the policy of another, the insured may want that additional insurance to apply to claims or lawsuits as primary insurance. In those situations, it would want the coverage of its own policy to apply only as excess coverage, that is, only after exhaustion of its coverage as an additional insured under the other party's policy.

Hope you have better understanding about insuring other interests. To learn more, you can get Johnson Insurance and find out even deeper secrets of insurance.

Read the rest of this entry »

Posted in Johnson Insurance

Bell Insurance - Insuring Other Interests

Bell Insurance

Everyone understands that the fundamental concept of buying insurance is to protect one's own financial interests. What is not well understood is that our legal relationships with others create obligations to protect their financial interests as well. When we assure that those legal obligations are taken care of, we secure our own financial well-being.

Once this abstract discussion is reduced to everyday terms, the concept does not seem so strange. These are relationships of great importance to individuals and businesses in their everyday lives and activities and one's insurance decisions are interwoven with these relationships. These relationships can include:

• mortgage lenders on your home;
• lenders on your auto loan;
• lenders on other items, whether as lenders or lessors on contracts for business equipment; and,
• persons with whom you have contracted to sell goods or to provide goods and services, who require that they be named as additional persons insured under your policies.

MORTGAGES OR TRUST DEED HOLDERS

If you live in the eastern states, you recognize the former concept - mortgage. If you live in the western states, where there is a different legal usage, you recognize that the lender on your home is a holder of your trust deed as the security interest on your home loan. Either way, the fundamental concept is the same. You, the named insured under your homeowners policy, have a home loan. You want to insure your interest in your home. Bell insurance

Your home loan lender, which holds a security interest in your home to the extent of the unpaid loan balance, wants you to assure that you insure your home so as to protect its security interest. Not only that, your lender requires that you do so and that you cause it to be named an additional insured in the loan documents of your home loan.

It is very important for you to make sure that your homeowners insurer:

• is always timely and promptly informed of who your home loan lender is, what their appropriate address is, and what your loan number is;
• shows your home loan lender on your policy as an additional insured to the extent of its interest in your property; and,
• supplies your home loan lender with evidence that they are an insured every year at the time your homeowners policy is renewed.

Most homeowners insurers are pretty good about assuring that your home loan lender receives evidence of insurance on renewal each year. That does not, however, mean that you do not need to make sure that they do. It is possible for your insurer to become confused as to who your current mortgage lenders are that need to be shown as additional insured interests on your policy, particularly when many individuals are refinancing their home loans at frequent intervals or are taking out second mortgages or home equity lines of credit. 

There can be potential adverse consequences to you if your home loan lender does not receive evidence of insurance each year at your policy's renewal. These potential adverse consequences to you make your attention to assuring that this detail is attended to each year necessary. Bell insurance

If your lender does not receive timely evidence that its security interest is not insured, your loan documents permit your lender to place insurance-solely to protect its interests at your expense - through its own master insurance program. It can also charge the costs - not just the premiums, but also the administrative costs - to your loan.

This is something you do not want to happen. First, you are only digging yourself in deeper with respect to the amount of your outstanding loan balance.

Second, the insurer with which your home loan lender places such forced coverage is often an affiliate or a subsidiary' of the lender. Do you think that the premiums charged by such an insurer are going to be competitive with the premiums you could obtain in the marketplace with respect to your own policy? Think again. They have an inherent profit motive and conflict of interest, but one that your contract with your lender - and the law - supports. They have no reason to charge a competitive premium for such force-placed coverage.

Third, the terms of coverage are limited and favor only the lender. You get something only if they have managed to insure for a sum greater than the amount of the outstanding loan balance - something that rarely happens. Your home loan lender does not have an insurable interest in your property in an amount greater than the amount of its outstanding loan balance.

Fourth, these forced placement policies do not cover your personal property (i.e., your contents). In the event of a loss, you are on your own.

Fifth, defaulting on your obligation to insure your property and failure to have your home loan lender named an additional insured on your homeowners policy to the extent of its interest can be reported as a breach of your obligation under your home loan. This can result in a negative (and serious) credit report that can affect your ability to obtain other credit.

If you are a homeowner, and have a first, second, or third home loan, mortgage, home equity line of credit, or any other credit facility that is secured by your house, condominium, or farm, you need to make certain that your lenders' security interests are protected by appropriate endorsements to your policy. You need to make sure that your insurer knows of the existence of all of these interests, the address of each of the lenders in question, the loan number, and the need to make sure that all secured parties receive annual evidence:

• of the fact that you continue to maintain property insurance on the property in which they have an interest;
• that the amount of the insurance you maintain is sufficient to protect its interests (i.e., the total amount of outstanding loans); and,
• that each such secured party is an insured under your policy.

To get more information about insurance, you can get Bell Insurance and learn the secrets of insurance right away!

Read the rest of this entry »

Posted in Bell Insurance

Hanover Insurance - Guaranty Funds

GUARANTY FUNDS

Each state has an insurance guaranty fund. Each operates in substantially the same way. In the event of insolvency of an insurer whose policies are covered by the guaranty fund (i.e., an admitted insurer in that state), policyholders of that insolvent insurer are covered up to the statutory limit. This limit varies from state to state, but is sufficient to cover most anticipated property claims and all the genuinely catastrophic liability claims. In addition, the guaranty fund statutes provide for defense of liability claims in addition to paying judgments or settlements up to the amount of the statutory limit.

The protection offered by the guaranty fund is not perfect protection. But, the protection offered is far better than having none and is a substantial reason to purchase insurance coverage from an admitted insurer as opposed to a nonadmitted insurer.

Guaranty funds are funded by you,and every other policyholder in your state. You are all providing protection for each other. The initial capitalization (i,e., start-up funds) for guaranty funds comes from assessments of all admitted insurers doing business in that state, in proportion to the respective amount of premiums written by each insurer in that state. Under the guaranty funds statutes of all states, the insurers that have paid these assessments to provide the start-up capital to establish the guaranty fund were, and are, entitled to recover the costs of those assessments. 

This is recovered premium surcharges on all of their policyholders. If you were to examine your premium billing notice over a period of time, you will notice such surcharges, typically between $1 and $5. This charge is imposed by your insurer proportionately on all of its policyholders to cover the costs of assessments it has been obligated to pay to fund the guaranty fund in your state.

The guaranty fund in each state operates much like an insurance company. Guaranty funds set reserves, retain defense counsel, and settle and defend claims. They also adjust property claims. The primary difference is in the source of their funding, Insurance companies fund their operations primarily by charging premiums and by realizing investment income on their reserves (premium reserves and loss, loss adjustment expense, and other reserves).

Guaranty funds likewise generate income by investments received on reserves. They do not have, however, premium income as a source of income. Nor do guaranty funds have the overhead associated with marketing and selling policies, as do insurance companies.

When an insurance guaranty fund needs to generate income because the claims it has paid are depleting it imposes assessments on all admitted insurers doing business within the state.

CHOOSING WHAT IS BEST FOR YOU 

A good independent agent is likely to be the best place for most insurance consumers to start. By employing an independent agent, you preserve the maximum number of options for yourself. And, you are less likely to find yourself in a situation in which you have insufficient limits or unexpected gaps in insurance coverage in the event of a major loss.

This is particularly true if you are the owner of a small business. The underwriting of commercial insurance policies is inherently more complex than is the underwriting of personal lines policies, Independent agents are much more likely than captive agents to have a substantial volume of commercial business in addition to their personal lines book of business.

Consequently, a good independent agent is likely to be much more attuned to the inquiries necessary to assure that your coverages are as complete as possible and to avoid coverage gaps. This is particularly true with respect to the form of and the amount of business interruption insurance, plus additional, optional commercial coverages, that may be appropriate for you.

These are some common examples of situations where a good independent agent's skills are important. For example, a developer might want its own coverage to apply only as excess coverage over its coverage as an additional insured under the policies of the subcontractors working for it on a construction project. The knowledge of the developer's loss exposures and the ability to assure that those loss exposures are covered appropriately requires expertise that is often beyond that of an agent for a direct writer.

Similarly, a vendor might want the coverage of its own policy to apply only as excess coverage over its coverage as an additional insured under a manufacturer's policy for product liability suits brought against the vendor by a purchaser of an alleged defective product made by that manufacturer. Again, effecting the insurance needs of such a vendor requires a certain level of knowledge and expertise that may be beyond that of many personal lines oriented agents.

The choice is yours; The important point is for you to realize that you have a choice and that exercising that choice means that you need to better inform yourself so that you obtain the protection best suited to your needs. If you want to learn more, you can get lots of other insurance information from Secrets of Insurance.

Read the rest of this entry »

Posted in Hanover Insurance

Peerless Insurance - Purchasing Insurance From Nonadmitted Carrier

Peerless Insurance

There is a reason why one of an insurance agent's most essential functions is to place coverages on behalf of their customers with insurers that are financially strong. This is because the amounts typically available in the event of insurer insolvency under the various states' insurance guaranty funds may be less than the loss exposures of many insureds.

State laws exist that require warnings to the insurance purchaser of the risks involved in purchasing insurance from a nonadmitted carrier. However, few, if any, brokers involved in the sale of such policies generally warn of or explain these risks and the trade-offs involved to their customers adequately. This is particularly true in the personal auto liability coverage context, where these abuses are most prominent.

A far too common circumstance, particularly in major urban areas, with large numbers of substandard risk insureds, is for high-volume brokers to run mass-marketed commercials, promising to be able to provide auto insurance to anyone, and at great savings. Such mass marketers of insurance olken emphasize that coverage can be available for low down payments, and low monthly payments. 

These representations are often highly deceptive. Such operations often sell ridiculously expensive, low-limits policies, often issued by nonadmitted insurers. Rarely do such operations inform their customers of their state's assigned risk programs, which, if applicable, usually provide better coverage than that from a nonadmitted insurer.
 
Unfortunately, the fact is that while certain high-risk insureds may need to consider purchasing insurance from nonadmitted insurers, these insureds are usually commercial insureds with higher exposure to risk and loss histories - individually or as an industry classification. This leaves them perceived as high-risk from an underwriting standpoint. The average personal auto or homeowners insured should rarely be in such a position.

Other disadvantages exist using a nonadmitted insurer. Nonadmitred insurers prey on persons who have been advised that they are substandard risks, particularly in the personal auto context. The claims service offered by nonadmitted insurers is generally poor or nonexistent. They offer and sell policies that are often apparently cheap (compared with the premiums that would be charged by an admitted insurer) and they let the insured nominally satisfy their state's financial responsibility/proof of insurance laws. However, their promises are often functionally smoke and mirrors.

An insurer that does not pay claims promptly or does not step in and defend an unsured when he or she has been sued has given none of the protections expected by someone who has purchased an insurance policy. It does you little good when you are faced with a lawsuit resulting from an accident to find yourself having to fight a two-front war - one against the person suing you and a second against your insurer to obtain the coverage that you paid for.
 
Brokers that routinely place personal lines policies with nonadmitted carriers may argue that they are saving their customers money. These claims are usually illusory. In most cases, however, the premium savings do not offset the risks of an uncovered loss in the event of insolvency of the insurer, or in the case of a nonadmitted insurer simply failing to observe its policy obligations. Many nonadmitted insurers are domiciled outside the United States, making suing them and recovering an uncertain proposition.

There is almost never any need for an individual or a family to turn to a surplus lines/nonadmitted insurer for personal auto or homeowners insurance. Many states have what are called alternative market mechanisms.

Examples of such alternative market mechanisms are automobile assigned risk plans, and FAIR plans. (FAIR refers to fair access to insurance requirements, under the plan established under the California Insurance Code.)

Under such plans, all admitted insurers writing automobile or property insurance are required to participate or fund these plans. In the case of most assigned risk auto insurance plans, when a person qualifies (usually by virtue of proof of refusal to issue a policy by a certain minimum number of insurers), he or she is assigned to an insurer that must issue a policy. This is subject to such policy limit and premium limitations as may be established by the plan.

Nonetheless, the ability to purchase a policy through an assigned risk plan guarantees that an individual is going to be able to obtain coverage from a standard lines admitted carrier. Assigned risk plan policies are more expensive, but the insured has the security of coverage with an admitted insurer. 

If the policyholder cleans up his or her loss, violation, or infraction history, he or she can eventually purchase coverage in the standard insurance markets and will no longer need to rely on coverage through an assigned risk plan.

FAIR plans ate alternative market mechanisms for hard-to-place homeowners or other property insurance polices. These are used in areas such as Southern California, urban areas that are underserved by standard lines insurance markets, and other areas that are considered higher than normal risk (such as homes located in and near brush areas). Again, the issuers of policies offered through these types of programs are entitled to charge premiums that reflect the increased risk assumed. 

However, for most persons, policies procured through such plans are preferable to policies from nonadmitted insurers. This is due to the protections afforded by the fact that these policies are covered by each state's insurance guaranty funds and because of better and more reliable claims service. 

So, do you have a better understand about insurance after reading the details? Next post, we'll talk about Guaranty Funds. To learn more about insurance, you can get Secrets of Insurance online and have it delivered to you right away!

Read the rest of this entry »

Posted in Peerless Insurance