Insurance 101

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	Definitions
	Know Your Needs
	Know Your Agents
	Know the Company
	Rate Changes
	Auto Insurance
	Watercraft Insurance
	Life Insurance
	Homeowner's
	Flood Insurance
	Commercial

This area of our website is designed to provide you with basic education about insurance and the regulations that apply. It is our goal to educate our clients so they can better understand and shop for their insurance coverage. Click on the links above to view information about the category that interests you.

Insurance Definitions

In its purest form, insurance is defined as a contract (policy) between you and an insurance carrier that states that you will pay an agreed upon sum (premium) to the insurance carrier incase any number of predetermined types of perils listed in the policy actually occur. If the peril is listed (covered) and does occur during the policy period you can file a claim.

Insurance terms can be misleading and you should educate yourself well to understand the services being offered to you. Your agent will provide you with this information and in the case additional terminology is unclear, here is a link to an industry glossary from the Insurance Information Institute - http://www.iii.org/media/glossary/

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Know Your Needs

The Florida Department of Financial Services provides a variety of consumer resources to help you understand the laws and analyze the insurance you need to have. The following are some links which can be very useful in helping you understand your needs:

Consumer Resources Site Assistance http://servicepoint.fldfs.com/eService_enu/start.swe?SWECmd=Start

Division of Consumer Services -Consumer Guides
http://www.myfloridacfo.com/Consumers/publications.htm

Florida Department of Financial Services – Industry Links
http://www.fldfs.com/Agents/indlink.htm

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Know Your Agents

In the State of Florida, it is a requirement that agents be licensed per the appropriate state regulations and that they maintain themselves up-to-date with their continuing education credits. To assure you are doing business with a licensed agent, go to the Florida Department of Financial Services website (http://www.fldfs.com/Data/AAR_ALIS1/index.htm).

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Know Your Insurance Company

When purchasing insurance, it is important to understand the financial stability of the company you choose. The most widely accepted industry standard is the AM Best rating provided by the AM Best Company http://www.ambest.com/. This tool allows you to thoroughly research and compare prospective insurance carriers.

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About Rate Changes

Insurance companies are constantly assessing their risk by looking at loss ratios and statistics in their coverage areas. In most cases, rates are adjusted annually in order for carriers to protect their assets. In turn, we, the customers, end up paying more for our premiums. In rare occasions, rates actually go down. There are several factors used by carriers to set or change rates such as the cost of reinsurance, rate of return on investments (i.e. stock market and real estate), and extraordinary events (i.e. terrorism or large natural disasters). In the State of Florida, all standard carriers must seek approval from Florida Department of Financial Services (formally known as the Department of Insurance) with justification for rate changes prior to making them effective.

If your rate increases significantly or you don’t understand why the rate increase occurred, your agent will be able to review the coverage and policy with you and verify it for accuracy.

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About Automobile Insurance

An auto insurance policy actually consists of several different types of coverage:

Liability Insurance
If you're at fault in an accident, liability insurance pays for the injury and property damage expenses of the third party involved in the accident. Property damage pays for the replacement or repair of anything that was damaged by you. Bodily injury expenses cover lost wages and medical bills. If you cause a major accident, your current coverage may not cover you sufficiently especially if you only purchased state minimums.

Collision
If you're at fault in an accident, collision coverage will cover expenses needed to repair your vehicle. Your car may be considered a “total loss” if the repairs exceed the market value of the car. If this occurs, the insurance company will pay you the actual cash value of your vehicle, minus the deductible.

Depreciation:
A decrease in value of your vehicle as it ages and increases in mileage.

Actual Cash Value (ACV):
The value of your car, which is calculated by subtracting the depreciation from the replacement cost.

Comprehensive:
Comprehensive coverage will pay for any other damage your car may sustain other than an accident. This includes fire, vandalism, theft, natural disaster, and even accidents with animals.

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About Watercraft Insurance

Although watercraft (i.e. boat) insurance is not required, you might want to consider purchasing a policy to provide you with liability and physical damage coverage. It is a common and incorrect assumption that your watercraft is covered under homeowners insurance, because in most cases it is not. The coverage available is similar to automobile insurance with some options that are specific to boating hazards.

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About Life Insurance

Types of Life Insurance
There are two basic types of life insurance: term and permanent. Term insurance is purely an insurance policy that pays your beneficiaries only in the event of your death, while permanent or "whole life" policies include a savings element that can be drawn upon by the insurer before death. The selection of which type you need should be based on your personal situation as to which type will fulfill your needs and goals. Term insurance typically caries much lower premiums when compared to permanent or whole life products available.

How Much Life Insurance Do I Need?
To provide your family with a sense of security, most agents would recommend that a life insurance policy should cover at least 2-6 times your annual income. Of course, it depends on your personal situation. Take into consideration the rate of inflation, potential college tuition costs, or large loans and home mortgages which maybe on going.

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Homeowner's Insurance

A homeowners insurance policy pay for financial losses related to your home or your property during the policy term. Furthermore the insurance company also agrees to pay for damages resulting from injuries or damage to other people for which you are held legally responsible. Several options are available within these policies, which can be tailored to fit your needs. Ask your agent what options (endorsements) are available that fit your needs best. Don’t forget to ask your agent what is not covered. For example, many homeowners policies do not cover animal liability. If you own pet with this exclusion on your homeowners policy you have exposure that is not insured should your pet cause any harm.

The three main items you will need to know to obtain a quote from your agent for property insurance are square footage, year of construction, and type of construction. If you are not sure of these facts, you can research them at the Hillsborough County Property Appraiser http://www.hcpafl.org/www/search/index.shtml or http://www.hcpafl.org/www/links.shtml for related links including other counties.

Your inventory:
It is important to make note of all items of value, and especially of those items with high value/high replacement cost. Create a list all of your possessions in a table or spreadsheet for easy future reference and store it at location other than your home such as your bank safety deposit box.

Deductibles:
With any type of insurance policy, you'll have to decide how much your deductibles are going to be. In general, the higher the deductible, the lower your premium will be. In Florida, your may have two deductibles, an all perils deductible and a hurricane deductible.

Replacement Cost and Actual Value:
Basic policies begin with coverage for the actual cash values of your covered belongings. Example: An 8-year-old-sofa would be covered for its initial cost, minus the depreciated cost. An 8-year-old sofa is really not worth much today, so in the end, you wouldn't get much cash for it. If you have items like this, it may be better to opt for replacement cost coverage instead. With this coverage, you would be reimbursed for the total current cost of a new sofa.

Specialty Items:
If you have very valuable items that are typically capped in most homeowners policies, you might want to consider a “floater”. Items that might be included: antiques, jewelry, furs, firearms, special electronic equipment, etc.

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Flood Insurance

The most important thing for homeowners to know is that basic homeowners insurance policy does not include flood damage cause by nature. This coverage must be obtained from a provider that associates with the NFIP (National Flood Insurance Program).

Flooding is second only to fire with respect to common natural disaster. For a flood to be considered “a covered event,” two adjacent properties must be under water.

The Federal Emergency Management Agency (FEMA) provides useful information in regards to Flood insurance requirements and general information at http://www.fema.gov/hazard/flood/info.shtm

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Commercial Insurance

Commercial insurance is a broad term, which encompasses one or more of the coverage types:

General Liability
General Liability coverage is the most basic type of commercial insurance and is limited to liability claims of bodily injury or property damage. Coverage is provided for accidents on your premises or at your customer's location. You and your employees are covered if they damage client's property. General Liability excludes errors and omissions claims related to professional services.

Product Liability
Product Liability coverage provides protection against claims arising from products you manufacture, sell or distribute.

Workers Compensation
Workers’ Compensation-Employer’s Liability: Someone who provides any type of service for your business who are ill, injured, or die in the course of providing those services may attempt to claim an employment relationship with you, for the purpose of collecting workers' compensation benefits.

The State of Florida provides employers with valuable information and forms to use in relation to Workers Compensation at http://www.fldfs.com/WC/forms.html. Take special note of link to form DWC-250. This is a “Notice of Election to be Exempt” which allows officers of corporations who own 10% or more of the corporation to be exempt from Workers Compensation coverage.

Employment Practices
Standard commercial liability insurance generally doesn't cover this area. This is where EPLI comes in. Employment Practices Liability Insurance provides coverage for employers who are targets of lawsuits that are not covered under general liability. EPLI coverage includes harassment, discrimination, and wrongful termination suits. EPLI will not only cover your finance, but may also provide legal counsel.

Directors and Officers
This type of product insures corporate directors and officers against claims alleging loss from wrongful acts in their respective capacitates as directors and officers of the corporation. Coverage is limited to the extent that the corporation has indemnified the directors and officers for such loss. The insurer will pay on behalf of the directors and officers.

Commercial Automobile
Commercial automobile insurance works like personal automobile insurance with the exception that there are several endorsements to address the liability exposure inherent in commercial ventures.

Professional Liability (E&O)
Errors and Omissions (E&O) Insurance protects your company from claims if a client holds you responsible for errors, or your failure to perform the work as promised in your contract. Coverage includes legal defense costs. E&O Insurance will pay for any resulting judgments against you, including court costs, up to the coverage limits on your policy.

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