Personal Insurance Products

Home Insurance

Home insurance, also commonly called hazard insurance or homeowner’s insurance (often abbreviated in the real estate industry as HOI), is the type of property insurance that covers private homes. It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one’s home, its contents, loss of its use (additional living expenses), or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory. It requires that at least one of the named insured’s occupies the home. The dwelling policy (DP) is similar, but used for residences which don’t qualify for various reasons, such as vacancy/non-occupancy, seasonal/secondary residence, or age.

It is a multiple-line insurance, meaning that it includes both property and liability coverage, with an indivisible premium, meaning that a single premium is paid for all risks. Standard forms divide coverage into several categories, and the coverage provided is typically a percentage of Coverage A, which is coverage for the main dwelling.

The cost of homeowner’s insurance often depends on what it would cost to replace the house and which additional riders – additional items to be insured – are attached to the policy. The insurance policy itself is a lengthy contract, and names what will and what will not be paid in the case of various events. Typically, claims due to floods or war (whose definition typically includes a nuclear explosion from any source), amongst other standard exclusions (like termites), are excluded. Special insurance can be purchased for these possibilities, including flood insurance. Insurance should be adjusted to reflect replacement cost, usually upon application of an inflation factor or a cost index.

The home insurance policy is usually a term contract – a contract that is in effect for a fixed period of time. The payment the insured makes to the insurer is called the premium. The insured must pay the insurer the premium each term. Most insurers charge a lower premium if it appears less likely the home will be damaged or destroyed: for example, if the house is situated next to a fire station; if the house is equipped with fire sprinklers and fire alarms; or if the house exhibits wind mitigation measures, such as hurricane shutters. Perpetual insurance, which is a type of home insurance without a fixed term, can also be obtained in certain areas.

In the United States, most home buyers borrow money in the form of a mortgage loan, and the mortgage lender always requires that the buyer purchase homeowner’s insurance as a condition of the loan, in order to protect the bank if the home were to be destroyed. Anyone with an insurable interest in the property should be listed on the policy. In some cases the mortgagee will waive the need for the mortgagor to carry homeowner’s insurance if the value of the land exceeds the amount of the mortgage balance. In a case like this even the total destruction of any buildings would not affect the ability of the lender to be able to foreclose and recover the full amount of the loan.

Home insurance in the United States may differ from other countries; for example, in Britain, subsidence and subsequent foundation failure is usually covered under an insurance policy. Reportedly, United States insurance companies used to offer foundation insurance, which was reduced to coverage for damage due to leaks, and finally eliminated altogether.

 

Types of policies

Currently, the ISO has seven standardized homeowners insurance forms in general use:

HO1 – Basic Form Homeowner Policy

A basic policy form that provides coverage on a home against 11 listed perils; contents are generally included in this type of coverage, but must be explicitly enumerated. The perils include fire or lightning, windstorm or hail, vandalism or malicious mischief, theft, damage from vehicles and aircraft, explosion riot or civil commotion, glass breakage, smoke, volcanic eruption, and personal liability. Exceptions include floods, earthquakes.

HO2 – Broad Form Homeowner Policy

A more advanced form that provides coverage on a home against 17 listed perils (including all 11 on the HO1). The coverage is usually a “named perils” policy, which lists the events that would be covered.

HO3 – Special Form Homeowner Policy

The typical, most comprehensive form used for single-family homes. The policy provides “all risk” coverage on the home with some perils excluded, such as earthquake and flood. Contents are covered on a named peril basis. (Note: “All Risk” is poorly termed as it is essentially named exclusions (ie, if it is not specifically excluded, it is covered))

HO4 – Renter’s Insurance

The “Tenants” form is for renters. It covers personal property against the same perils as the contents portion of the HO2 or HO3.

HO5 – Premier Homeowner Policy

Covers the same as HO3 plus more. On this policy the contents are covered on an open peril basis, therefore as long as the cause of loss is not specifically excluded in the policy it will be covered for that cause of loss. (can also be achieved by endorsing an HO15 to the HO3)

HO6 – Condominium Policy

The form for condominium owners.

HO8 – Older Houses

The “Modified Coverage” form is for the owner-occupied older home whose replacement cost far exceeds the property’s market value.

 

 

Coverage rates

According a 1998 NAIC report, 83% of homes were covered by owner-occupied homeowners policies. Of these, 87% had the HO3 Special and 9% had the more expensive HO5 Comprehensive. Both of these policies are “all risks” or “open perils,” meaning that they cover all perils except those specifically excluded. 3% were the HO2 Broad, which covers only specific named perils. Others include the HO1 Basic and the HO8 Modified, which is the most limited in its coverage. HO8, also known as older home insurance, is likely to pay only actual cash value for damages rather than replacement.

The remaining 13% of home insurance policies were covered by renter’s or condominium insurance. Two-thirds of these had the HO-4 Contents Broad form, also known as renters insurance, which covers the contents of an apartment not specifically covered in the blanket policy written for the complex. This policy can also cover liability arising from injury to guests as well as negligence of the renter within the coverage territory. Common coverage areas are events such as lightning, riot, aircraft, explosion, vandalism, smoke, theft, windstorm or hail, falling objects, volcanic eruption, snow, sleet, and weight of ice. The remainder had the HO-6 Unit-Owners policy, also known as a condominium insurance, which is designed for the owners of condos and includes coverage for the part of the building owned by the insured and for the property housed therein. Designed to span the gap between the coverage provided by the blanket policy written for the entire neighborhood or building and the personal property inside the home. The Association’s by-laws may determine the total amount of insurance necessary.

In addition, about 2.4% of homes were covered by a dwelling fire policy which covers property damage to a structure and is typically sold to noncommercial owners of rented houses. It may also cover the owner’s personal property (such as appliances and furnishings). The owner’s liability may be extended from their own primary home insurance and, thus, may not comprise part of the Dwelling Fire policy.

Typically consumers can save money by purchasing their insurance directly from a company rather than through an agent, but there are not many companies which sell home insurance directly. However, an experienced agent can provide expertise (especially expertise with the local insurance environment) that a company may lack.

 

Classes of coverage

For each policy, there are typically 5 classifications of coverage. These are based on standard Insurance Services Office or American Association of Insurance Services forms.

Coverage A – Dwelling

Covers the value of the dwelling itself (not including the land). Typically, a coinsurance clause states that as long as the dwelling is insured to 80% of actual value, losses will be adjusted at replacement cost, up to the policy limits. This is in place to give a buffer against inflation. HO-4 (renter’s insurance) typically has no Coverage A, although it has additional coverage’s for improvements.

Coverage B – Other Structures

Covers other structure around the property which are not used for business, except as a private garage. Typically limited at 10% to 20% of the Coverage A, with additional amounts available by endorsement.

Coverage C – Personal Property

Covers personal property, with limits for the theft and loss of particular classes of items (e.g., $200 for money, banknotes, bullion, coins, medals, etc.). Typically 50 to 70% of coverage A is required for contents, which means that consumers may pay for much more insurance than necessary. This has led to some calls for more choice.

Coverage D – Loss of Use/Additional Living Expenses

Covers expenses associated with additional living expenses (i.e. rental expenses) and fair rental value, if part of the residence was rented, however only the rental income for the actual rent of the space not services provided such as utilities.

Additional Coverages

Covers a variety of expenses such as debris removal, reasonable repairs, damage to trees and shrubs for certain named perils (excluding the most common causes of damage, wind and ice), fire department changes, removal of property, credit card / identity theft charges, loss assessment, collapse, landlord’s furnishing, and some building additions. These vary depending upon the form.

Exclusions

In an open perils policy, specific exclusions will be stated in this section. These generally include earth movement, water damage, power failure, neglect, war, nuclear hazard, intentional loss, and concurrent causation (for HO-3).

Auto Insurance

Vehicle insurance (also known as auto insurance, car insurance, or motor insurance) is insurance purchased for cars, trucks, and other road vehicles. Its primary use is to provide protection against physical damage and/or bodily injury resulting from traffic collisions and against liability that could also arise there from.

Automotive insurance, in the United States and elsewhere, is designed to insulate drivers from the costs incurred if their car is damaged. All states require drivers to carry some minimum level of insurance, except for Virginia. In these states, automotive insurance is said to be compulsory. Other states do not require drivers to carry insurance, but even these states offer drivers the option of carrying insurance. Drivers typically pay insurers a monthly fee, often called an insurance premium. The insurance premium drivers pay is usually determined by a variety of factors including the type of car they drive, their age, driving history, and location.

Coverage generally

Consumers may be protected by different levels of coverage depending on which insurance policy they purchase. Some states require drivers to carry at least liability insurance coverage to ensure that their drivers can cover the cost of damage to other people or property in the event of an accident. Some states, such as Wisconsin, have more flexible “proof of financial responsibility” requirements.

In the United States, automotive liability insurance covers claims against the policy holder and usually any other operator of an insured vehicle; provided they do not live at the same address as the policy holder and are not specifically excluded on the policy. Drivers living at the same address must specifically be covered on the policy. Thus it is necessary, for example, when a young adult reaches driving age that they be added to the policy. Liability insurance sometimes does not protect the policy holder if they operate any vehicles other than their own. When you drive another person’s car you are covered under their policy. Non-owners policies are also available. These policies insure drivers on any vehicle they drive, even if it belongs to someone else. This coverage is available only to those who do not own their own vehicle and is sometimes required by the government for drivers who have previously been found at fault in an accident. Non-owners policies are also known as Named Operator Policies. The policies are useful for people whose drivers license has been suspended and they have to have insurance for their license to be reinstated.

Liability coverage

Liability coverage is offered for bodily injury (BI) or property damage (PD) for which the insured driver is deemed responsible. The amount of coverage provided (a fixed dollar amount) will vary from jurisdiction to jurisdiction. Whatever the minimum, the insured can usually increase the coverage (prior to a loss) for an additional charge.

An example of property damage is where an insured driver (or 1st party) drives into a telephone pole and damages the pole, liability coverage pays for the damage to the pole. In this example, the drivers insured may also become liable for other expenses related to damaging the telephone pole, such as loss of service claims (by the telephone company), depending on the jurisdiction. An example of bodily injury is where an insured driver causes bodily harm to a third party and the insured driver is deemed responsible for the injuries. However, in some jurisdictions, the third party would first exhaust coverage for accident benefits through their own insurer (assuming they have one) and/or would have to meet a legal definition of severe impairment to have the right to claim (or sue) under the insured driver’s (or first party’s) policy. If the third party sues the insured driver, liability coverage also covers court costs and damages that the insured driver may be deemed responsible for. If a state requires liability coverage, both parties are usually required to bring and/or submit copies of insurance cards to court as proof of liability coverage.

In some jurisdictions: Liability coverage is available either as a combined single limit.

Combined single limit

A combined single limit combines property damage liability coverage and bodily injury coverage under one single combined limit. For example, an insured driver with a combined single liability limit strikes another vehicle and injures the driver and the passenger. Payments for the damages to the other driver’s car, as well as payments for injury claims for the driver and passenger, would be paid out under this same coverage.

Split limits

A split limit liability coverage policy splits the coverage’s into property damage coverage and bodily injury coverage. In the example given above, payments for the other driver’s vehicle would be paid out under property damage coverage, and payments for the injuries would be paid out under bodily injury coverage.

Bodily injury liability coverage is also usually split into a maximum payment per person and a maximum payment per accident.

The limits are often expressed separated by slashes in the following form: “bodily injury per person”/”bodily injury per accident”/”property damage”. For example, California requires this minimum coverage:

  • $15,000 for injury/death to one person
  • $30,000 for injury/death to more than one person
  • $5,000 for damage to property

This would be expressed as “$15,000/$30,000/$5,000”.

Another example, in the state of Oklahoma, drivers must carry at least state minimum liability limits of $25,000/$50,000/$25,000. If an insured driver hits a car full of people and is found by the insurance company to be liable, the insurance company will pay $25,000 of one person’s medical bills but will not exceed $50,000 for other people injured in the accident. The insurance company will not pay more than $25,000 for property damage in repairs to the vehicle that the insured one hit.

In the state of New York, the minimum liability limits are $25,000/$50,000/$10,000, so there is a greater property damage exposure for only carrying the minimum limits.

Full coverage

Full coverage is the term commonly used to refer to the combination of comprehensive and collision coverage’s (Liability is generally also implied.) The term full coverage is actually a misnomer because, even within traditional full coverage insurance, there are many different types of coverage, and many optional amounts of each.

One common misconception in the United States is that vehicles that are financed on credit through a bank or credit union are required to have “full” coverage in order for the financial institution to cover their losses in case of an accident. While most states do require additional coverage to be purchased, some such as Pennsylvania only require Comprehensive and Collision to be purchased in addition to liability and not “full” coverage. Vehicles purchased with cash or paid off by the owner are generally required to only carry liability. In some cases, vehicles financed through a “buy-here-pay-here” car dealership–in which the consumer (generally those with poor credit) finances a car and pays the dealer directly without a bank–also only require liability coverage.

Collision

Collision coverage provides coverage for vehicles involved in collisions. Collision coverage is subject to a deductible. This coverage is designed to provide payments to repair the damaged vehicle, or payment of the cash value of the vehicle if it is not un-repairable or totaled. Collision coverage is optional, however if you plan on financing a car or taking a car loan, the lender will usually insist you carry collision for the finance term or until the car is paid off. Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW) is the term used by rental car companies for collision coverage.

Comprehensive

Comprehensive, also known as other than collision, coverage provides coverage, subject to a deductible, for cars damaged by incidents that are not considered collisions. For example, fire, theft (or attempted theft), vandalism, weather, or impacts with animals are types of comprehensive losses.

Uninsured/underinsured motorist coverage

Underinsured coverage, also known as UM/UIM, provides coverage if an at-fault party either does not have insurance, or does not have enough insurance. In effect, the insurance company pays the insured medical bills, then would subrogate from the at fault party. This coverage is often overlooked and very important. In Colorado, for example, it was estimated in 2007 that 24% of drivers did not carry the state minimum liability limits required by law. Unfortunately, this number goes up significantly during recessions. In some areas, it is estimated that 1 out of every 3 drivers doesn’t carry insurance. Usually the limits match the liability limits. Some insurance companies do offer UM/UIM in an umbrella policy.

In the United States, the definition of an uninsured/underinsured motorist, and corresponding coverage’s, are set by state laws.

Loss of use

Loss of use coverage, also known as rental coverage, provides reimbursement for rental expenses associated with having an insured vehicle repaired due to a covered loss.

Loan/lease payoff

Loan/lease payoff coverage, also known as GAP coverage or GAP insurance, was established in the early 1980s to provide protection to consumers based upon buying and market trends.

Due to the sharp decline in value immediately following purchase, there is generally a period in which the amount owed on the car loan exceeds the value of the vehicle, which is called “upside-down” or negative equity. Thus, if the vehicle is damaged beyond economical repair at this point, the owner will still owe potentially thousands of dollars on the loan. The escalating price of cars, longer-term auto loans, and the increasing popularity of leasing gave birth to GAP protection. GAP waivers provide protection for consumers when a “gap” exists between the actual value of their vehicle and the amount of money owed to the bank or leasing company. In many instances, this insurance will also pay the deductible on the primary insurance policy. These policies are often offered at auto dealerships as a comparatively low cost add-on to the car loan that provides coverage for the duration of the loan. GAP Insurance does not always pay off the full loan value however. These cases include but are not limited to:

  1. Any unpaid delinquent payments due at the time of loss
  2. Payment deferrals or extensions (commonly called skips or skip a payment)
  3. Refinancing of the vehicle loan after the policy was purchased
  4. Late fees or other administrative fees assessed after loan commencement

Therefore, it is important for a policy holder to understand that they may still owe on the loan even though the GAP policy was purchased. Failure to understand this can result in the lender continuing their legal remedies to collect the balance and the potential of damaged credit.

Consumers should be aware that a few states, including New York, require lenders of leased cars to include GAP insurance within the cost of the lease itself. This means that the monthly price quoted by the dealer must include GAP insurance, whether it is delineated or not. Nevertheless, unscrupulous dealers sometimes prey on unsuspecting individuals by offering them GAP insurance at an additional price, on top of the monthly payment, without mentioning the State’s requirements.

In addition, some vendors and insurance companies offer what is called “Total Loss Coverage.” This is similar to ordinary GAP insurance but differs in that instead of paying off the negative equity on a vehicle that is a total loss, the policy provides a certain amount, usually up to $5000, toward the purchase or lease of a new vehicle. Thus, to some extent the distinction makes no difference, i.e., in either case the owner receives a certain sum of money. However, in choosing which type of policy to purchase, the owner should consider whether, in case of a total loss, it is more advantageous for him or her to have the policy pay off the negative equity or provide a down payment on a new vehicle.

For example, assuming a total loss of a vehicle valued at $15,000, but on which the owner owes $20,000, is the “gap” of $5000. If the owner has traditional GAP coverage, the “gap” will be wiped out and he or she may purchase or lease another vehicle or choose not to. If the owner has “Total Loss Coverage,” he or she will have to personally cover the “gap” of $5000, and then receive $5000 toward the purchase or lease of a new vehicle, thereby either reducing monthly payments, in the case of financing or leasing, or the total purchase price in the case of outright purchasing. So the decision on which type of policy to purchase will, in most instances, be informed by whether the owner can pay off the negative equity in case of a total loss and/or whether he or she will definitively purchase a replacement vehicle.

Towing

Vehicle towing coverage is also known as roadside assistance coverage. Traditionally, automobile insurance companies have agreed to only pay for the cost of a tow that is related to an accident that is covered under the automobile policy of insurance. This had left a gap in coverage for tows that are related to mechanical breakdowns, flat tires and gas outages. To fill that void, insurance companies started to offer the car towing coverage, which pays for non-accident related tows.

Rental coverage

Generally, liability coverage purchased through a private insurer extends to rental cars. Comprehensive policies (“full coverage”) usually also apply to the rental vehicle, although this should be verified beforehand. Full coverage premiums are based on, among other factors, the value of the insured’s vehicle. This coverage, however, cannot apply to rental cars because the insurance company does not want to assume responsibility for a claim greater than the value of the insured’s vehicle, assuming that a rental car may be worth more than the insured’s vehicle.

Most rental car companies offer insurance to cover damage to the rental vehicle. These policies may be unnecessary for many customers as credit card companies, such as Visa and MasterCard, now provide supplemental collision damage coverage to rental cars if the rental transaction is processed using one of their cards. These benefits are restrictive in terms of the types of vehicles covered.

Personal property

Personal items in a vehicle that are damaged due to an accident would not be a covered under the auto policy. Any type of property that is not attached to the vehicle should be claimed under a homeowners or renters policy. However, some insurance companies will cover unattached GPS devices intended for automobile use.

Gender

Men average more miles driven per year than women do, and consequently have a proportionally higher accident involvement at all ages. Insurance companies cite women’s lower accident involvement in keeping the youth surcharge lower for young women drivers than for their male counterparts, but adult rates are generally unisex. Reference to the lower rate for young women as “the women’s discount” has caused confusion that was evident in news reports on a recently defeated EC proposal to make it illegal to consider gender in assessing insurance premiums. On 1st March 2011 the European Court of Justice controversially decided insurance companies who used gender as a risk factor when calculating insurance premiums were breaching EU equality laws. They ruled car insurance companies were discriminating against men and this had to stop. The new gender rules are set to come into play in December 2012, at which point young female drivers are set to face car insurance premium hikes of as much as 25%.

Age

Teenage drivers who have no driving record will have higher car insurance premiums. However, young drivers are often offered discounts if they undertake further driver training on recognized courses, such as the Pass Plus scheme in the UK. In the U.S. many insurers offer a good grade discount to students with a good academic record and resident student discounts to those who live away from home. Generally insurance premiums tend to become lower at the age of 25. Some insurance companies offer “stand alone” car insurance policies specifically for teenagers with lower premiums. By placing restrictions on teenagers’ driving (forbidding driving after dark or giving rides to other teens, for example) these companies effectively reduce their risk. A teenager driving a safer car such as a 4 door sedan rather than a flashy sports car can also get lower insurance rates. Senior drivers are often eligible for retirement discounts reflecting lower average miles driven by this age group.

Driving history

In most states, moving violations, including running red lights and speeding, assess points on a driver’s driving record. Since more points indicate an increased risk of future violations, insurance companies periodically review drivers’ records, and may raise premiums accordingly. Laws vary from state to state, but most insurers allow one moving violation every three to five years before increasing premiums. Accidents affect insurance premiums similarly. Depending on the severity of the accident and the number of points assessed, rates can increase by as much as twenty to thirty percent. Any motoring convictions should be disclosed to the insurers as you are assessed by your risk of driving on the road.

Marital status

Policy owners that are married often receive lower premiums than single persons. One reason is that marriage may be considered an indicator of stronger financial stability within the household.

Vehicle classification

Two of the most important factors that go into determining the underwriting risk on motorized vehicles are performance capability and retail cost. The most commonly available providers of auto insurance have underwriting restrictions against vehicles that are either designed to be capable of higher speeds and performance levels, or vehicles that retail above a certain dollar amount. Vehicles that are commonly considered luxury automobiles usually carry more expensive physical damage premiums because they are more expensive to replace. Vehicles that can be classified as high performance autos will carry higher premiums generally because there is greater opportunity for risky driving behavior. Motorcycle insurance may carry lower property damage premiums because the risk of damage to other vehicles is minimal, yet higher liability or personal injury premiums because motorcycle riders face different physical risks while on the road. Risk classification on automobiles also takes into account statistical analysis of reported theft, accidents, and mechanical malfunction on every given year, make, and model of auto.

Distance

Some car insurance plans do not differentiate in regard to how much the car is used. There are however low mileage discounts offered by some insurance providers. Other methods of differentiation would include: over road distance between the ordinary residence of a subject and their ordinary, daily destinations.

Reasonable estimation

Another important factor in determining car insurance premiums involves the annual mileage put on the vehicle, and for what reason. Driving to and from work every day at a specified distance, especially in urban areas where common traffic routes are known, presents different risks than how a retiree who does not work any longer may use their vehicle. Common practice has been that this information was provided solely by the insured person, but some insurance providers have started to collect regular odometer readings to verify the risk.

Credit ratings

Insurance companies have started using credit ratings of their policyholders to determine risk. Drivers with good credit scores get lower insurance premiums as it is believed that they are more financially stable, more responsible and have the financial means to better maintain their vehicles. Those with lower credit scores can have their premiums raised or insurance canceled outright. It has been shown that good drivers with spotty credit records could be charged higher premiums than bad drivers with good credit records.

Liability Insurance

Umbrella insurance refers to a liability insurance policy that protects the assets and future income of the policyholder above and beyond the standard limits on their primary policies. It is distinguished from excess insurance in that excess coverage goes into effect only when all underlying policies are totally exhausted, while umbrella is able to “drop down” to fill coverage gaps in underlying policies. Therefore, an umbrella policy can become the primary policy “on the risk” in certain situations. The term “umbrella” refers to how the policy shields the insured’s assets more broadly than primary coverage.

Typically, an umbrella policy is pure liability coverage over and above the coverage afforded by the regular policy, and is sold in increments of one million dollars. The term “umbrella” is used because it covers liability claims from all policies underneath it, such as auto insurance and homeowners insurance policies. For example, if the insured carries an auto insurance policy with liability limits of $500,000 and a homeowners insurance policy with a limit of $300,000, then with a million dollar umbrella, the insured’s limits become in effect, $1,500,000 on an auto liability claim and $1,300,000 on a homeowners liability claim.

Umbrella insurance provides broad insurance beyond traditional home and auto. It provides additional liability coverage above the limits of homeowner’s, auto, and boat insurance policies. It can also provide coverage for claims that may be excluded by the primary policies. These may include, but are not limited to:

  • False arrest
  • Libel
  • Slander
  • Invasion of privacy

Travel Insurance

Travel insurance is insurance that is intended to cover medical expenses, financial default of travel suppliers, and other losses incurred while traveling, either within one’s own country, or internationally. Temporary travel insurance can usually be arranged at the time of the booking of a trip to cover exactly the duration of that trip, or a more extensive, continuous insurance can be purchased from travel insurance companies, travel agents or directly from travel suppliers, such as cruise lines or tour operators. However, travel insurance purchased from travel suppliers tends to be less inclusive than insurance offered by insurance companies. Travel insurance often offers coverage for a variety of travelers. Student travel, business travel, leisure travel, adventure travel, cruise travel, and international travel are all various options that can be insured.

 

Coverage types

The most common risks that are covered by travel insurance are:

  • Medical/dental expenses
  • Emergency evacuation/repatriation of remains
  • Return of a minor child
  • Trip cancellation/interruption
  • Accidental death, injury or disablement benefit
  • Overseas funeral expenses
  • Curtailment
  • Delayed departure, missed connection
  • Lost, stolen or damaged baggage, personal effects or travel documents
  • Delayed baggage (and emergency replacement of essential items)
  • Legal assistance
  • Trip Cancellation
  • Flight Connection was missed due to airline schedule
  • Travel Delays due to weather
  • Medical Emergency and hospital care (Accident or Sickness)

 

Optional coverage

Some travel policies will also provide cover for additional costs, although these vary widely between providers.

In addition, often separate insurance can be purchased for specific costs such as:

  • Car rental collision coverage
  • Pre-existing conditions (e.g. asthma, diabetes)
  • Sports with an element of risk (e.g. skiing, scuba diving)
  • Travel to high risk countries (e.g. due to war, natural disasters or acts of terrorism)
  • Additional AD&D coverage
  • Kidnap and ransom insurance
  • 3rd Party Supplier insolvency (e.g. the hotel or airline to which you made nonrefundable pre-payments has gone into administration)

 

Common exclusions

  • Pre-existing medical conditions
  • War or terrorism – but some plans may cover this risk, and some do cover for acts of terrorism
  • Injury or illness caused by alcohol or drug use

Usually, the insurers cover pregnancy related expenses, if the travel occurs within the first trimester. After that, insurance coverage varies from insurer to insurer.

Travel insurance can also provide helpful services, often 24 hours a day, 7 days a week that can include concierge services and emergency travel assistance.

Commercial Insurance Products

Auto Insurance

Vehicle insurance (also known as auto insurance, car insurance, or motor insurance) is insurance purchased for cars, trucks, and other road vehicles. Its primary use is to provide protection against physical damage and/or bodily injury resulting from traffic collisions and against liability that could also arise there from.

Automotive insurance, in the United States and elsewhere, is designed to insulate drivers from the costs incurred if their car is damaged. All states require drivers to carry some minimum level of insurance, except for Virginia. In these states, automotive insurance is said to be compulsory. Other states do not require drivers to carry insurance, but even these states offer drivers the option of carrying insurance. Drivers typically pay insurers a monthly fee, often called an insurance premium. The insurance premium drivers pay is usually determined by a variety of factors including the type of car they drive, their age, driving history, and location.

Coverage generally

Consumers may be protected by different levels of coverage depending on which insurance policy they purchase. Some states require drivers to carry at least liability insurance coverage to ensure that their drivers can cover the cost of damage to other people or property in the event of an accident. Some states, such as Wisconsin, have more flexible “proof of financial responsibility” requirements.

In the United States, automotive liability insurance covers claims against the policy holder and usually any other operator of an insured vehicle; provided they do not live at the same address as the policy holder and are not specifically excluded on the policy. Drivers living at the same address must specifically be covered on the policy. Thus it is necessary, for example, when a young adult reaches driving age that they be added to the policy. Liability insurance sometimes does not protect the policy holder if they operate any vehicles other than their own. When you drive another person’s car you are covered under their policy. Non-owners policies are also available. These policies insure drivers on any vehicle they drive, even if it belongs to someone else. This coverage is available only to those who do not own their own vehicle and is sometimes required by the government for drivers who have previously been found at fault in an accident. Non-owners policies are also known as Named Operator Policies. The policies are useful for people whose drivers license has been suspended and they have to have insurance for their license to be reinstated.

Liability coverage

Liability coverage is offered for bodily injury (BI) or property damage (PD) for which the insured driver is deemed responsible. The amount of coverage provided (a fixed dollar amount) will vary from jurisdiction to jurisdiction. Whatever the minimum, the insured can usually increase the coverage (prior to a loss) for an additional charge.

An example of property damage is where an insured driver (or 1st party) drives into a telephone pole and damages the pole, liability coverage pays for the damage to the pole. In this example, the drivers insured may also become liable for other expenses related to damaging the telephone pole, such as loss of service claims (by the telephone company), depending on the jurisdiction. An example of bodily injury is where an insured driver causes bodily harm to a third party and the insured driver is deemed responsible for the injuries. However, in some jurisdictions, the third party would first exhaust coverage for accident benefits through their own insurer (assuming they have one) and/or would have to meet a legal definition of severe impairment to have the right to claim (or sue) under the insured driver’s (or first party’s) policy. If the third party sues the insured driver, liability coverage also covers court costs and damages that the insured driver may be deemed responsible for. If a state requires liability coverage, both parties are usually required to bring and/or submit copies of insurance cards to court as proof of liability coverage.

In some jurisdictions: Liability coverage is available either as a combined single limit.

Combined single limit

A combined single limit combines property damage liability coverage and bodily injury coverage under one single combined limit. For example, an insured driver with a combined single liability limit strikes another vehicle and injures the driver and the passenger. Payments for the damages to the other driver’s car, as well as payments for injury claims for the driver and passenger, would be paid out under this same coverage.

Split limits

A split limit liability coverage policy splits the coverage’s into property damage coverage and bodily injury coverage. In the example given above, payments for the other driver’s vehicle would be paid out under property damage coverage, and payments for the injuries would be paid out under bodily injury coverage.

Bodily injury liability coverage is also usually split into a maximum payment per person and a maximum payment per accident.

The limits are often expressed separated by slashes in the following form: “bodily injury per person”/”bodily injury per accident”/”property damage”. For example, California requires this minimum coverage:

  • $15,000 for injury/death to one person
  • $30,000 for injury/death to more than one person
  • $5,000 for damage to property

This would be expressed as “$15,000/$30,000/$5,000”.

Another example, in the state of Oklahoma, drivers must carry at least state minimum liability limits of $25,000/$50,000/$25,000. If an insured driver hits a car full of people and is found by the insurance company to be liable, the insurance company will pay $25,000 of one person’s medical bills but will not exceed $50,000 for other people injured in the accident. The insurance company will not pay more than $25,000 for property damage in repairs to the vehicle that the insured one hit.

In the state of New York, the minimum liability limits are $25,000/$50,000/$10,000, so there is a greater property damage exposure for only carrying the minimum limits.

Full coverage

Full coverage is the term commonly used to refer to the combination of comprehensive and collision coverage’s (Liability is generally also implied.) The term full coverage is actually a misnomer because, even within traditional full coverage insurance, there are many different types of coverage, and many optional amounts of each.

One common misconception in the United States is that vehicles that are financed on credit through a bank or credit union are required to have “full” coverage in order for the financial institution to cover their losses in case of an accident. While most states do require additional coverage to be purchased, some such as Pennsylvania only require Comprehensive and Collision to be purchased in addition to liability and not “full” coverage. Vehicles purchased with cash or paid off by the owner are generally required to only carry liability. In some cases, vehicles financed through a “buy-here-pay-here” car dealership–in which the consumer (generally those with poor credit) finances a car and pays the dealer directly without a bank–also only require liability coverage.

Collision

Collision coverage provides coverage for vehicles involved in collisions. Collision coverage is subject to a deductible. This coverage is designed to provide payments to repair the damaged vehicle, or payment of the cash value of the vehicle if it is not un-repairable or totaled. Collision coverage is optional, however if you plan on financing a car or taking a car loan, the lender will usually insist you carry collision for the finance term or until the car is paid off. Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW) is the term used by rental car companies for collision coverage.

Comprehensive

Comprehensive, also known as other than collision, coverage provides coverage, subject to a deductible, for cars damaged by incidents that are not considered collisions. For example, fire, theft (or attempted theft), vandalism, weather, or impacts with animals are types of comprehensive losses.

Uninsured/underinsured motorist coverage

Underinsured coverage, also known as UM/UIM, provides coverage if an at-fault party either does not have insurance, or does not have enough insurance. In effect, the insurance company pays the insured medical bills, then would subrogate from the at fault party. This coverage is often overlooked and very important. In Colorado, for example, it was estimated in 2007 that 24% of drivers did not carry the state minimum liability limits required by law. Unfortunately, this number goes up significantly during recessions. In some areas, it is estimated that 1 out of every 3 drivers doesn’t carry insurance. Usually the limits match the liability limits. Some insurance companies do offer UM/UIM in an umbrella policy.

In the United States, the definition of an uninsured/underinsured motorist, and corresponding coverage’s, are set by state laws.

Loss of use

Loss of use coverage, also known as rental coverage, provides reimbursement for rental expenses associated with having an insured vehicle repaired due to a covered loss.

Loan/lease payoff

Loan/lease payoff coverage, also known as GAP coverage or GAP insurance, was established in the early 1980s to provide protection to consumers based upon buying and market trends.

Due to the sharp decline in value immediately following purchase, there is generally a period in which the amount owed on the car loan exceeds the value of the vehicle, which is called “upside-down” or negative equity. Thus, if the vehicle is damaged beyond economical repair at this point, the owner will still owe potentially thousands of dollars on the loan. The escalating price of cars, longer-term auto loans, and the increasing popularity of leasing gave birth to GAP protection. GAP waivers provide protection for consumers when a “gap” exists between the actual value of their vehicle and the amount of money owed to the bank or leasing company. In many instances, this insurance will also pay the deductible on the primary insurance policy. These policies are often offered at auto dealerships as a comparatively low cost add-on to the car loan that provides coverage for the duration of the loan. GAP Insurance does not always pay off the full loan value however. These cases include but are not limited to:

  1. Any unpaid delinquent payments due at the time of loss
  2. Payment deferrals or extensions (commonly called skips or skip a payment)
  3. Refinancing of the vehicle loan after the policy was purchased
  4. Late fees or other administrative fees assessed after loan commencement

Therefore, it is important for a policy holder to understand that they may still owe on the loan even though the GAP policy was purchased. Failure to understand this can result in the lender continuing their legal remedies to collect the balance and the potential of damaged credit.

Consumers should be aware that a few states, including New York, require lenders of leased cars to include GAP insurance within the cost of the lease itself. This means that the monthly price quoted by the dealer must include GAP insurance, whether it is delineated or not. Nevertheless, unscrupulous dealers sometimes prey on unsuspecting individuals by offering them GAP insurance at an additional price, on top of the monthly payment, without mentioning the State’s requirements.

In addition, some vendors and insurance companies offer what is called “Total Loss Coverage.” This is similar to ordinary GAP insurance but differs in that instead of paying off the negative equity on a vehicle that is a total loss, the policy provides a certain amount, usually up to $5000, toward the purchase or lease of a new vehicle. Thus, to some extent the distinction makes no difference, i.e., in either case the owner receives a certain sum of money. However, in choosing which type of policy to purchase, the owner should consider whether, in case of a total loss, it is more advantageous for him or her to have the policy pay off the negative equity or provide a down payment on a new vehicle.

For example, assuming a total loss of a vehicle valued at $15,000, but on which the owner owes $20,000, is the “gap” of $5000. If the owner has traditional GAP coverage, the “gap” will be wiped out and he or she may purchase or lease another vehicle or choose not to. If the owner has “Total Loss Coverage,” he or she will have to personally cover the “gap” of $5000, and then receive $5000 toward the purchase or lease of a new vehicle, thereby either reducing monthly payments, in the case of financing or leasing, or the total purchase price in the case of outright purchasing. So the decision on which type of policy to purchase will, in most instances, be informed by whether the owner can pay off the negative equity in case of a total loss and/or whether he or she will definitively purchase a replacement vehicle.

Towing

Vehicle towing coverage is also known as roadside assistance coverage. Traditionally, automobile insurance companies have agreed to only pay for the cost of a tow that is related to an accident that is covered under the automobile policy of insurance. This had left a gap in coverage for tows that are related to mechanical breakdowns, flat tires and gas outages. To fill that void, insurance companies started to offer the car towing coverage, which pays for non-accident related tows.

Rental coverage

Generally, liability coverage purchased through a private insurer extends to rental cars. Comprehensive policies (“full coverage”) usually also apply to the rental vehicle, although this should be verified beforehand. Full coverage premiums are based on, among other factors, the value of the insured’s vehicle. This coverage, however, cannot apply to rental cars because the insurance company does not want to assume responsibility for a claim greater than the value of the insured’s vehicle, assuming that a rental car may be worth more than the insured’s vehicle.

Most rental car companies offer insurance to cover damage to the rental vehicle. These policies may be unnecessary for many customers as credit card companies, such as Visa and MasterCard, now provide supplemental collision damage coverage to rental cars if the rental transaction is processed using one of their cards. These benefits are restrictive in terms of the types of vehicles covered.

Personal property

Personal items in a vehicle that are damaged due to an accident would not be a covered under the auto policy. Any type of property that is not attached to the vehicle should be claimed under a homeowners or renters policy. However, some insurance companies will cover unattached GPS devices intended for automobile use.

Gender

Men average more miles driven per year than women do, and consequently have a proportionally higher accident involvement at all ages. Insurance companies cite women’s lower accident involvement in keeping the youth surcharge lower for young women drivers than for their male counterparts, but adult rates are generally unisex. Reference to the lower rate for young women as “the women’s discount” has caused confusion that was evident in news reports on a recently defeated EC proposal to make it illegal to consider gender in assessing insurance premiums. On 1st March 2011 the European Court of Justice controversially decided insurance companies who used gender as a risk factor when calculating insurance premiums were breaching EU equality laws. They ruled car insurance companies were discriminating against men and this had to stop. The new gender rules are set to come into play in December 2012, at which point young female drivers are set to face car insurance premium hikes of as much as 25%.

Age

Teenage drivers who have no driving record will have higher car insurance premiums. However, young drivers are often offered discounts if they undertake further driver training on recognized courses, such as the Pass Plus scheme in the UK. In the U.S. many insurers offer a good grade discount to students with a good academic record and resident student discounts to those who live away from home. Generally insurance premiums tend to become lower at the age of 25. Some insurance companies offer “stand alone” car insurance policies specifically for teenagers with lower premiums. By placing restrictions on teenagers’ driving (forbidding driving after dark or giving rides to other teens, for example) these companies effectively reduce their risk. A teenager driving a safer car such as a 4 door sedan rather than a flashy sports car can also get lower insurance rates. Senior drivers are often eligible for retirement discounts reflecting lower average miles driven by this age group.

Driving history

In most states, moving violations, including running red lights and speeding, assess points on a driver’s driving record. Since more points indicate an increased risk of future violations, insurance companies periodically review drivers’ records, and may raise premiums accordingly. Laws vary from state to state, but most insurers allow one moving violation every three to five years before increasing premiums. Accidents affect insurance premiums similarly. Depending on the severity of the accident and the number of points assessed, rates can increase by as much as twenty to thirty percent. Any motoring convictions should be disclosed to the insurers as you are assessed by your risk of driving on the road.

Marital status

Policy owners that are married often receive lower premiums than single persons. One reason is that marriage may be considered an indicator of stronger financial stability within the household.

Vehicle classification

Two of the most important factors that go into determining the underwriting risk on motorized vehicles are performance capability and retail cost. The most commonly available providers of auto insurance have underwriting restrictions against vehicles that are either designed to be capable of higher speeds and performance levels, or vehicles that retail above a certain dollar amount. Vehicles that are commonly considered luxury automobiles usually carry more expensive physical damage premiums because they are more expensive to replace. Vehicles that can be classified as high performance autos will carry higher premiums generally because there is greater opportunity for risky driving behavior. Motorcycle insurance may carry lower property damage premiums because the risk of damage to other vehicles is minimal, yet higher liability or personal injury premiums because motorcycle riders face different physical risks while on the road. Risk classification on automobiles also takes into account statistical analysis of reported theft, accidents, and mechanical malfunction on every given year, make, and model of auto.

Distance

Some car insurance plans do not differentiate in regard to how much the car is used. There are however low mileage discounts offered by some insurance providers. Other methods of differentiation would include: over road distance between the ordinary residence of a subject and their ordinary, daily destinations.

Reasonable estimation

Another important factor in determining car insurance premiums involves the annual mileage put on the vehicle, and for what reason. Driving to and from work every day at a specified distance, especially in urban areas where common traffic routes are known, presents different risks than how a retiree who does not work any longer may use their vehicle. Common practice has been that this information was provided solely by the insured person, but some insurance providers have started to collect regular odometer readings to verify the risk.

Credit ratings

Insurance companies have started using credit ratings of their policyholders to determine risk. Drivers with good credit scores get lower insurance premiums as it is believed that they are more financially stable, more responsible and have the financial means to better maintain their vehicles. Those with lower credit scores can have their premiums raised or insurance canceled outright. It has been shown that good drivers with spotty credit records could be charged higher premiums than bad drivers with good credit records.

Property Insurance

Property insurance provides protection against most risks to property, such as fire, theft and some weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance or boiler insurance. Property is insured in two main ways – open perils and named perils. Open perils cover all the causes of loss not specifically excluded in the policy. Common exclusions on open peril policies include damage resulting from earthquakes, floods, nuclear incidents, acts of terrorism and war. Named perils require the actual cause of loss to be listed in the policy for insurance to be provided. The more common named perils include such damage-causing events as fire, lightning, explosion and theft.

 

Types of Coverage

There are three types of insurance coverage. Replacement cost coverage pays the cost of replacing your property regardless of depreciation or appreciation. Premiums for this type of coverage are based on replacement cost values, and not based on actual cash value. Actual cash value coverage provides for replacement cost minus depreciation. Extended replacement cost will pay over the coverage limit if the costs for construction have increased. This generally will not exceed 25% of the limit. When you obtain an insurance policy, the coverage limit established is the maximum amount the insurance company will pay out in case of loss of property. This amount will need to fluctuate if homes in your neighborhood are rising; the amount needs to be in step with the actual value of your home. In case of a fire, household content replacement is tabulated as a percentage of the value of the home. In case of high value items, the insurance company may ask to specifically cover these items separate from the other household contents. One last coverage option is to have alternative living arrangements included in a policy If a fire leaves your home uninhabitable, the policy can help pay for a hotel or other living arrangements.

 

Perils Covered

The following causes of loss are covered:

  • Fire
  • Lightning
  • Explosion/Implosion
  • Aircraft damage
  • Riot, Strike
  • Terrorism
  • Storm, Flood, inundation
  • Impact damage
  • Malicious damage
  • Subsidence, landslide
  • Bursting or overflowing of tanks
  • Missile Testing Operations
  • Bush fire etc.

Exclusions

The following are excluded from insurance coverage:

  • Loss or damage caused by war, civil war and kindred perils
  • Loss or damage caused by nuclear activity
  • Loss or damage to the stocks in cold storage caused by change in temperature
  • Loss or damage due to over-running of electric and/ or electronic machines

Claims 

In the event of a fire loss covered under the fire insurance policy, the Insured shall immediately give notice there of to the insurance company. Within 15 days of the occurrence of such loss the Insured should submit a claim in writing giving the details of damages and their estimated values. Details of other insurances on the same property should also be declared.

Liability Insurance

Liability insurance is a part of the general insurance system of risk financing to protect the purchaser (the “insured”) from the risks of liabilities imposed by lawsuits and similar claims. It protects the insured in the event he or she is sued for claims that come within the coverage of the insurance policy. Originally, individuals or companies that faced a common peril, formed a group and created a self-help fund out of which to pay compensation should any member incur loss (in other words, a mutual insurance arrangement). The modern system relies on dedicated carriers, usually for-profit, to offer protection against specified perils in consideration of a premium. Liability insurance is designed to offer specific protection against third party insurance claims, i.e., payment is not typically made to the insured, but rather to someone suffering loss who is not a party to the insurance contract. In general, damage caused intentionally as well as contractual liability are not covered under liability insurance policies. When a claim is made, the insurance carrier has the duty (and right) to defend the insured. The legal costs of a defense normally do not affect policy limits unless the policy expressly states otherwise; this default rule is useful because defense costs tend to soar when cases go to trial.

 

What liability insurance provides

Liability insurers have two (or three, in some jurisdictions) major duties: 1) the duty to defend, 2) the duty to indemnify and (in some jurisdictions), 3) the duty to settle a reasonably clear claim.

  • To defend

The duty to defend is triggered when the insured is sued and in turn “tenders” defense of the claim to its liability insurer. Usually this is done by sending a copy of the complaint along with a cover letter referencing the relevant insurance policy or policies and demanding an immediate defense. At this point, the insurer has three options, to: (1) seek a declaratory judgment of no coverage; (2) defend; or (3) refuse either to defend or to seek a declaratory judgment.

If a declaratory judgment is sought, the issue of the insurer’s duty to defend will be resolved.

If the insurer decides to defend, it has thus either waived its defense of no coverage (later stopped), or it must defend under a reservation of rights. The latter means that the insurer reserves the right to withdraw from defending in the event that it turns out the claim is not covered, and to recover from the insured any funds expended to date.

If the insurer chooses to defend, it may either defend the claim with its own in-house lawyers (where allowed), or give the claim to an outside law firm on a “panel” of preferred firms which have negotiated a standard fee schedule with the insurer in exchange for a regular flow of work. The decision to defend under a reservation of rights must be undertaken with extreme caution in jurisdictions where the insured has a right to Cumis counsel.

The choice to do nothing can be very risk because a later determination that the duty applied often leads to the tort of bad faith. (So, insurers often prefer to defend under a reservation of rights rather than simply do nothing.)

  • To indemnify

The duty to indemnify means the duty to pay “all sums” for which the insured is held liable, up to a set policy limit.

  • To settle reasonable claims

In some jurisdictions, there is a third duty, the duty to settle a reasonably clear claim against the insured. The duty is of greatest import during situations in which the settlement demand equals or exceeds the policy limits. In that case, the insurer has an incentive not to settle, since if it settles, it will certainly pay the policy limit. But this interest is at odds with the interest of its insured. The company has incentive not to settle since if the case goes to trial, there are only two possibilities: its insured looses and insurer pays the policy limits (nothing gained nothing lost), or its insured wins, leaving the insurer with no liability. But, if the insurer refuses to settle, and the case goes to trial, the insured might get stuck with a settlement far exceeding the the settlement offer.

This is where the duty to settle comes in. To avoid endangering an insured to gain a remote possibility of avoiding paying on the policy, the duty to defend obligates the insurance company to settle reasonably clear claims. The standard judicial test is that an insurer must settle a claim if a reasonable insurer, notwithstanding any policy limits, would have settled the claim.

  • Effects of breach

An insurer who breaches any of these three duties may be held liable for the tort of insurance bad faith in addition to breach of contract.

 

Types of liability insurance

In many countries, liability insurance is a compulsory form of insurance for those at risk of being sued by third parties for negligence. The most usual classes of mandatory policy cover the drivers of vehicles, those who offer professional services to the public, those who manufacture products that may be harmful, constructors and those who offer employment. The reason for such laws is that the classes of insured are deliberately engaging in activities that put others at risk of injury or loss. Public policy therefore requires that such individuals should carry insurance so that, if their activities do cause loss or damage to another, money will be available to pay compensation. In addition, there are a further range of perils that people insure against and, consequently, the number and range of liability policies has increased in line with the rise of contingency fee litigation offered by lawyers (sometimes on a class action basis). Such policies fall into three main classes:

 

Public liability

Industry and commerce are based on a range of processes and activities that have the potential to affect third parties (members of the public, visitors, trespassers, sub-contractors, etc. who may be physically injured or whose property may be damaged or both). It varies from state to state as to whether either or both employer’s liability insurance and public liability insurance have been made compulsory by law. Regardless of compulsion, however, most organizations include public liability insurance in their insurance portfolio even though the conditions, exclusions, and warranties included within the standard policies can be a burden. A company owning an industrial facility, for instance, may buy pollution insurance to cover lawsuits resulting from environmental accidents.

Many small businesses do not secure general or professional liability insurance due to the high cost of premiums. However, in the event of a claim, out-of-pocket costs for a legal defense or settlement can far exceed premium costs In some cases, the costs of a claim could be enough to shut down a small business.

Businesses must consider all potential risk exposures when deciding whether liability insurance is needed, and, if so, how much coverage is appropriate and cost-effective. Those with the greatest public liability risk exposure are occupiers of premises where large numbers of third parties frequent at leisure including shopping centers, pubs, clubs, theaters, sporting venues, markets, hotels and resorts. The risk increases dramatically when consumption of alcohol and sporting events are included. Certain industries such as security and cleaning are considered high risk by underwriters. In some cases underwriters even refuse to insure the liability of these industries or choose to apply a large deductible in order to minimize the potential compensations. Private individuals also occupy land and engage in potentially dangerous activities. For example, a rotten branch may fall from an old tree and injure a pedestrian, and many ride bicycles and skateboards in public places. The majority of states requires motorists to carry insurance and criminalize those who drive without a valid policy. Many also require insurance companies to provide a default fund to offer compensation to those physically injured in accidents where the driver did not have a valid policy.

In many countries claims are dealt with under common law principles established through a long history of case law and, if litigated, are made by way of civil actions in the relevant jurisdiction.

 

Product

Product liability insurance is not a compulsory class of insurance in all countries, but legislation such as the UK Consumer Protection Act 1987 and the EC Directive on Product Liability (25/7/85) require those manufacturing or supplying goods to carry some form of product liability insurance, usually as part of a combined liability policy. The scale of potential liability is illustrated by cases such as those involving Mercedes-Benz for unstable vehicles and Perrier for benzene contamination, but the full list covers pharmaceuticals and medical devices, asbestos, tobacco, recreational equipment, mechanical and electrical products, chemicals and pesticides, agricultural products and equipment, food contamination, and all other major product classes.

 

Employers

New policies have been developed to cover any liability that might be imposed on an employer if an employee is injured in the course of his or her employment. In many states in the US, the insurers are prohibited from including conditions within their policies that seek to impose any unreasonable conditions precedent to liability, or require the insured either to take reasonable precautions or to comply with current legislation and regulations. In those countries where such insurance is not compulsory, smaller organizations are often driven into bankruptcy when faced by claims not covered by insurance.

Note that in the United Kingdom Employers Liability Insurance is compulsory, unless the only employee is the owner of the company (who holds at least 50% of the shares) or the business is a family business which is not incorporated as a limited company.

Workers’ compensation in the United States in most states operates through administrative adjudication outside of the federal and state courts; in turn, workers’ comp insurance is regulated and underwritten separately from liability insurance. That is, most businesses will go to a liability insurer for a Commercial General Liability policy, and to a specialized workers’ comp insurer for a workers’ comp policy (which is usually compulsory unless the employer can demonstrate the capability to self-insure for workers’ comp).

 

General liability

Many of the public and product liability risks are often covered together under a general liability policy. These risks may include bodily injury or property damage caused by direct or indirect actions of the insured.

In the United States, general liability insurance coverage most often appears in the Commercial General Liability policies obtained by businesses, and in homeowners’ insurance policies obtained by individual homeowners.

 

Insurable risks

Generally, liability insurance covers only the risk of being sued for negligence or strict liability torts, but not any tort or crime with a higher level of mens rea. This is usually mandated either by the policy language itself or case law or statutes in the jurisdiction where the insured resides or does business.

In other words, liability insurance does not protect against liability resulting from crimes or intentional torts committed by the insured. This is intended to prevent criminals, particularly organized crime, from obtaining liability insurance to cover the costs of defending themselves in criminal actions brought by the state or civil actions brought by their victims. A contrary rule would encourage the commission of crime, and allow insurance companies to indirectly profit from it, by allowing criminals to insure themselves from adverse consequences of their own actions.

It should be noted that crime is not uninsurable per se. In contrast to liability insurance, it is possible to obtain loss insurance to compensate one’s losses as the victim of a crime.

 

Evidentiary rules regarding liability insurance

In the United States, most states make only the carrying of auto insurance mandatory. Where the carrying of a policy is not mandatory and a third party makes a claim for injuries suffered, evidence that a party has liability insurance is generally inadmissible in a lawsuit on public policy grounds, because the courts do not want to discourage parties from carrying such insurance. There are two exceptions to this rule:

  1. If the owner of the insurance policy disputes ownership or control of the property, evidence of liability insurance can be introduced to show that it is likely that the owner of the policy probably does own or control the property.
  2. If a witness has an interest in the policy that gives the witness a motive or bias with respect to specific testimony, the existence of the policy can be introduced to show this motive or bias. Federal rules of civil procedure rule 26 was amended in 1993 to require that any insurance policy that may pay or may reimburse be made available for photocopying by the opposing litigants, although the policies are not normally information given to the jury. Federal Rules of Appellate Procedure rule 46 says that an appeal can be dismissed or affirmed if counsel does not update their notice of appearance to acknowledge insurance. The Cornell University Legal Institute web site includes congressional notes.

 

Liability insurance and the technology industry

Because technology companies represent a relatively new industry that deals largely with intangible yet highly valuable data, some definitions of legal liability may still be evolving in this field. Technology firms must carefully read and fully understand their policy limits to ensure coverage of all potential risks inherent in their work.

Typically, professional liability insurance protects technology firms from litigation resulting from charges of professional negligence or failure to perform professional duties. Covered incidents may include errors and omissions that result in the loss of client data, software or system failure, claims of non-performance, or negligent overselling of services. For example, some client companies have won large settlements after technology subcontractors’ actions resulted in the loss of irreplaceable data. Professional liability insurance would generally cover such settlements and legal defense, within policy limits.

Additionally, client contracts often require technology subcontractors working on-site to provide proof of general liability and professional liability insurance.

Umbrella Insurance

Umbrella insurance refers to a liability insurance policy that protects the assets and future income of the policyholder above and beyond the standard limits on their primary policies. It is distinguished from excess insurance in that excess coverage goes into effect only when all underlying policies are totally exhausted, while umbrella is able to “drop down” to fill coverage gaps in underlying policies. Therefore, an umbrella policy can become the primary policy “on the risk” in certain situations. The term “umbrella” refers to how the policy shields the insured’s assets more broadly than primary coverage.

Typically, an umbrella policy is pure liability coverage over and above the coverage afforded by the regular policy, and is sold in increments of one million dollars. The term “umbrella” is used because it covers liability claims from all policies underneath it, such as auto insurance and homeowners insurance policies. For example, if the insured carries an auto insurance policy with liability limits of $500,000 and a homeowners insurance policy with a limit of $300,000, then with a million dollar umbrella, the insured’s limits become in effect, $1,500,000 on an auto liability claim and $1,300,000 on a homeowners liability claim.

Umbrella insurance provides broad insurance beyond traditional home and auto. It provides additional liability coverage above the limits of homeowner’s, auto, and boat insurance policies. It can also provide coverage for claims that may be excluded by the primary policies. These may include, but are not limited to:

  • False arrest
  • Libel
  • Slander
  • Invasion of privacy

Workers' Compensation

Workers’ compensation (colloquially known as workers’ comp) is a form of insurance that provides wage replacement and medical benefits for employees who are injured in the course of employment, in exchange for mandatory relinquishment of the employee’s right to sue his or her employer for the tort of negligence. The tradeoff between assured, limited coverage and lack of recourse outside the worker compensation system is known as “the compensation bargain.” While plans differ between jurisdictions, provision can be made for weekly payments in place of wages (functioning in this case as a form of disability insurance), compensation for economic loss (past and future), reimbursement or payment of medical and like expenses (functioning in this case as a form of health insurance), and benefits payable to the dependents of workers killed during employment (functioning in this case as a form of life insurance). General damages for pain and suffering, and punitive damages for employer negligence, are generally not available in worker compensation plans, and negligence is generally not an issue in the case. These laws were first enacted in Europe and Oceania, with the United States following shortly thereafter.

 

Compensation before statutory law

Before the statutory establishment of workers’ compensation, employees who were injured on the job were only able to pursue their employer through civil or tort law. In the United Kingdom, the legal view of employment as a master-servant relationship required employees to prove employer malice or negligence, a high burden for employees to meet. Although employers’ liability was unlimited, courts usually ruled in favor of employers, paying little attention to the full losses experienced by workers, including medical costs, lost wages, and loss of future earning capacity.

Statutory compensation law

Statutory compensation law provides advantages to employees and employers. A schedule is drawn out to state the amount and forms of compensation to which an employee is entitled, if he/she has sustained the stipulated kinds of injuries. Employers can buy insurance against such occurrences. However, the specific form of the statutory compensation scheme may provide detriments. Statutes often award a set amount based on the types of injury. These payments are based on the ability of the worker to find employment in a partial capacity: a worker who has lost an arm can still find work as a proportion of a fully-able person. This does not account for the difficulty in finding work suiting disability. When employers are required to put injured staff on “light-duties” the employer may simply state that no light duty work exists, and sack the worker as unable to fulfill specified duties. When new forms of workplace injury are discovered, for instance: stress, repetitive strain injury, silicosis; the law often lags behind actual injury and offers no suitable compensation, forcing the employer and employee back to the courts (although in common-law jurisdictions these are usually one-off instances). Finally, caps on the value of disabilities may not reflect the total cost of providing for a disabled worker. The government may legislate the value of total spinal incapacity at far below the amount required to keep a worker in reasonable living conditions for the remainder of his life.

A related issue is that the same physical loss can have a markedly different impact on the earning capacity of individuals in different professions. For instance, the loss of a finger could have a moderate impact on a banker’s ability to do his or her job, but the same injury would totally ruin a pianist.

At the turn of the 19th century workers’ compensation laws were voluntary for a couple of reasons. Specifically, an elective law made passage easier and many felt that compulsory workers’ compensation laws would violate the 14th amendment due process clause of the U.S. Constitution. Since workers’ compensation mandated benefits without regard to fault or negligence, many felt that compulsory participation would deprive the employer of property without due process. The issue of due process was resolved by the United States Supreme Court in 1917 when in New York Central Railway Co. v. White it was held that an employer’s constitutional rights weren’t affected. After the ruling most states enacted new compulsory workers’ compensation laws.

In 1855, Georgia and Alabama passed Employer Liability Acts; 26 other states passed similar acts between 1855-1907. These acts simply permitted injured employees to sue the employer and then prove a negligent act or omission. (A similar scheme was birthed in Britain’s 1880 Act.)

After Germany’s 1884 Act, workers’ compensation laws began to be reformed to reduce the need for litigation, and to mitigate the requirement that injured workers prove their injuries were their employer’s “fault”. For example, The 1897 British Act replaced the 1880 Act.

In the United States, the first state such worker’s compensation law was passed in Maryland in 1902, and the first law covering federal employees was passed in 1906. By 1949, all states had enacted some kind of workers’ compensation regime. Such schemes were originally known as “workman’s compensation,” but today, most jurisdictions have adopted the term “workers’ compensation” as a gender-neutral alternative.

In the United States, most employees who are injured on the job have an absolute right to medical care for any injury, and in many cases, monetary payments to compensate for resulting temporary or permanent disabilities. Most employers are required to subscribe to insurance for workers’ compensation, and an employer who does not may have financial penalties imposed. Texas employers have the unique ability to opt out of the Workers’ Compensation system under the original state law written in 1913. However, those employers, known as nonsubscribers, still need insurance coverage in the event of workplace injury. This then is how the non subscription industry in Texas began.

In many states, there are public uninsured employer funds to pay benefits to workers employed by companies who illegally fail to purchase insurance. Insurance policies are available to employers through commercial insurance companies: if the employer is deemed an excessive risk to insure at market rates, it can obtain coverage through an assigned-risk program.

Workers’ compensation is administered on a state-by-state basis, with a state governing board overseeing varying public/private combinations of workers compensation systems. The federal government has its own workers’ compensation program, subject to its own requirements and statutory parameters for federal employees. In the vast majority of states, workers’ compensation is solely provided by private insurance companies. 12 states operate a state fund (which serves as a model to private insurers and insures state employees), and a handful have state-owned monopolies. To keep the state funds from crowding out private insurers, they are generally required to act as assigned-risk programs or insurers of last resort, and they can only write workers’ compensation policies. In contrast, private insurers can turn away the worst risks and can write comprehensive insurance packages covering general liability, natural disasters, and so on. Of the 12 state funds, the largest is California’s State Compensation Insurance Fund. The federal government pays its workers’ compensation obligations for its own employees through regular appropriations.

It is illegal in most states for an employer to terminate or refuse to hire an employee for having reported a workplace injury or filed a workers’ compensation claim. However, it is often not easy to prove discrimination on the basis of the employee’s claims history. To abate discrimination of this type, some states have created a “subsequent injury trust fund” which will reimburse insurers for benefits paid to workers who suffer aggravation or recurrence of a compensable injury. It is also suggested that laws should be made to prohibit inclusion of claims history in databases or to make it anonymous. (See privacy laws.)

Some employers vigorously contest employee claims for workers’ compensation payments. In any contested case, or in any case involving serious injury, a lawyer with specific experience in handling workers’ compensation claims on behalf of injured workers should be consulted. Laws in many states limit a claimant’s legal expenses to a certain fraction of an award; such “contingency fees” are payable only if the recovery is successful. In some states this fee can be as high as 40% or as little as 11% of the monetary award recovered, if any.

In the vast majority of states, original jurisdiction over workers’ compensation disputes has been transferred by statute from the trial courts to special administrative agencies. Within such agencies, disputes are usually handled informally by administrative law judges. Appeals may be taken to an appeals board and from there into the state court system. However, such appeals are difficult and are regarded skeptically by most state appellate courts, because the point of workers’ compensation was to reduce litigation. A few states still allow the employee to initiate a lawsuit in a trial court against the employer. Ohio allows appeals to go before a jury.

Various organizations focus resources on providing education and guidance to workers’ compensation administrators and adjudicators in various state and national workers’ compensation systems. These include the American Bar Association (ABA), the International Association of Industrial Boards and Commissions (IAIBC), and the National Association of Workers’ Compensation Judiciary (NAWCJ).

 

Workers’ Compensation law in New York

Workers’ compensation is required by law for business owners to have in place for their employees. In March 2007, the state of New York adopted major reforms to its Workers’ Compensation law. These reforms included an increase in available temporary disability payments for injured workers with the trade-off being that lifetime permanent partial disability benefits are no longer available for injuries after July 1, 2008. As with many systemic changes to broad legal schemes, the reforms have spawned significant litigation to clarify the meaning of many of the changed statutory sections. The Workers’ Compensation Board has also attempted to resolve many more cases administratively, meaning that no hearing may be held to resolve a particular dispute, but this change has had unintended consequences. For example, injured workers may not sufficiently understand their rights, since an administrative decision may easily be confused with a proper legal determination (which it may not be). Injured workers are advised to consult an experienced Workers’ Compensation attorney since consultation is free (a lawyer in New York cannot charge a fee regarding a Workers’ Compensation claim without getting the fee approved by a Workers’ Compensation Law Judge). In cities like Rochester, the Workers’ Compensation Board has become a central location around which many of the experienced lawyers on both sides have located their offices. Owners of for-profit corporations are exempt from workers compensation insurance however non-profit companies do not get the exclusion.

Business Package

Business Owners Package Policy is a combination of property, liability, and business interruption insurance. It is usually written to cover expenses of small and medium size businesses resulting from (1) damage or destruction of business’s property or (2) when actions or non-actions of the business’s representatives result in bodily injury or property damage to another individual(s).

Businesses that qualify under this heading include office buildings three stories or under not to exceed 100,000 square feet; apartment buildings six stories or under not to exceed 60 dwelling units; any other buildings not to exceed 7500 square feet for mercantile space, occupied principally as an apartment, office, or engaging in trade or commerce. Properties that cannot be insured under this policy include banks, condominiums, bars, restaurants, automobiles, recreational vehicles, contractor functions, and manufacturing operations.

Liability Coverage

Coverage that protects a business, up to the policy limits, if actions or non-actions of the insured result in a legally enforceable claim for bodily injury, property damage, or personal injury. Included are coverages for: (1) non-owned automobiles used by the business in its normal operations (owned automobiles are excluded); (2) host liquor liability where the business is having a social gathering. For example, liability at an office party would be covered, since this social function is incidental to normal business activity (excluded would be operation of a liquor store on the premises of the business); (3) fire and explosion legal liability, where the insured is renting business space in a building. If a fire or explosion from business operations is proven to be of negligent origin, the insurer of the owner of the building has subrogation rights against the business; (4) products, for which completed operations coverage is provided. Excluded from Section II coverages are professional liability, owned automobiles of the business, operation of airplanes and other aircraft, Workers Compensation, liquor liability (other than that served as a host at business social functions), and off-premises operation of boats.

Property Coverage

A contract that details coverage for business property losses in three specific areas:

Coverage A (Building). All buildings on the site are covered with no coinsurance requirement and on a replacement cost basis to include: the buildings themselves; the owner’s personal property used to maintain the building(s) and provided to tenants; permanent fixtures, equipment and machinery; improvements and betterments by tenants; removal of debris; and outdoor furniture and fixtures.

Coverage B (Personal Property of the Business). All personal property used in the business on the premises, as well as personal property of others under the care, custody and control of the owner of the building used to operate the business; and limited coverage for items temporarily away from the premises of the business as well as for property purchased and placed at a new business location.

Coverage C (Loss of Income). Reimbursement for loss of income because of inability to collect business rent; interruption of normal business functions; and extra expenses associated with resuming normal business activities as the result of the damage or destruction of business property by an insured peril. (Optionally, under Section I, coverage can be extended to insure against burglary, robbery, theft, employee dishonesty, and boiler and machinery explosion. Earthquake damage can be covered through an endorsement.)

PHONE: (718) PROTECT (776-8328)

FAX: (718) 841.6252

EMAIL: info@protectplusins.com

ADDRESS: 3917 15TH AVE BROOKLYN NY 11218

2 + 15 =