Commercial FAQ'S

Commercial FAQ's

Q: What is fire legal coverage?

A: Fire legal coverage provides coverage to for you if you rent a business space and are held responsible for fire damages to that rented space. It does not apply to all business risks.

Q: What is the difference between Replacement Cost (RC) and Actual Cash Value (ACV)?

A: Replacement Cost is the current cost to replace property. Actual Cash Value is the replacement cost less depreciation.

Q:What does 80% co-insurance mean?

A: Insurance carriers require that an insured party insure at least 80% of the property's value in order to collect a partial loss in full. This is the way the insurance company encourages all insureds to adequately insure their property in relation to other insureds.

Q:Does my policy cover physical damage to a vehicle I rent?

A: This damage will be covered only if that type of coverage is purchased.

Q: Can other people drive my business vehicle?

A: Other people may drive your vehicle with your permission. It is important that they be listed on your policy if they are regular drivers of the vehicle.

Q: How does an audit work?

A: At the end of the policy term, the insurance company will review the policy and either charge or credit the policyholder based upon an audit of estimated figures. Examples of estimated auditable items include sales and payroll. Audits can be performed onsite by an auditor or via mail or telephone. A premium is charged for audit estimations.

Q: Why do I need certificates of insurance from sub-contractors?

A: An audit may require you to show proof that sub-contractors had their own insurance coverage. The sub-contractors' certificates of insurance will prevent you from being charged for their exposure.

Q: What is General Liability?

A: General Liability provides coverage if you are liable for damages to other individuals arising from your premises, general operations (ongoing and after completion) and products manufactured or sold.

Q: What does Products/Completed Operations mean?

A: Products/Completed Operations refers to the liability coverage for damages caused by your operation or products after the point at which you no longer have control of them.

Q: What is Business Interruption/Extra Expense coverage?

A: Business Interruption/Extra Expense coverage provides coverage for income loss and the expense of establishing a temporary site during repairs due to damages related to a fire or compensable loss.

 

 

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Life Insurence

Q: How much life insurance should an individual own?

A: Rough "rules of thumb" suggest an amount of life insurance equal to 6 to 8 times annual earnings. However, many factors should be taken into account in determining a more precise estimate of the amount of life insurance needed.
Important factors include:

  • Income sources (and amounts) other than salary/earnings

  • Whether or not the individual is married and, if so, what is the spouse's earning capacity

  • The number of individuals who are financially dependent on the insured

  • The amount of death benefits payable from Social Security and from an employer sponsored life insurance plan

  • Whether any special life insurance needs exist (e.g., mortgage repayment, education fund, estate planning need), etc.


It is recommended that a person's insurance professional be contacted for a precise calculation of how much life insurance is needed.

Q: What about purchasing life insurance on a spouse and on children?

A: In certain circumstances, it may be advisable to purchase life insurance on children; generally, however, such purchases should not be made in lieu of purchasing appropriate amounts of life insurance on the family breadwinner(s). It is of utmost importance that the income earning capacity of the primary breadwinner be fully protected, if possible, through the purchase of the required amount of life insurance before contemplating the purchase of life insurance on children or on a non-wage earning spouse. In a dual-earning household, it is important to protect the income earning capacity of both spouses. Life insurance on a non-wage earning spouse is often recommended for the purpose of paying for household services lost at this individual's death.

Q: Should term insurance or cash value life insurance be purchased?

A: Although a difficult question--one whose answer will vary depending on circumstances--several principles should be followed in addressing this issue.
It must first be recognized that in any life insurance purchasing decision, there are at least two basic questions that must be answered:

  • "How much life insurance should I buy?" and

  • "What type of life insurance policy should I buy?"


The question contained in (1) involves an "insurance" decision and the question contained in (2) requires a "financial" decision. 

The "insurance" question should always be resolved first. For example, the amount of life insurance that you need may be so large that the only way in which this needed amount of insurance can be afforded is through the purchase of term insurance with its lower premium. 

If your ability (and willingness) to pay life insurance premiums is such that you can afford the desired amount of life insurance under either type of policy, it is then appropriate to consider the "financial" decision--which type of policy to buy. Important factors affecting the "financial" decision include whether the need for life insurance is short-term or long-term (e.g., 20 years or longer).

Q:How does "mortgage protection" term insurance differ from other types of term life insurance?

A: The face amount under mortgage protection term insurance decreases over time, consistent with the projected annual decreases in the outstanding balance of a mortgage loan. Mortgage protection policies are generally available to cover a range of mortgage repayment periods, e.g., 15, 20, 25 or 30 years. Although the face amount decreases over time, the premium is usually level in amount. Further, the premium payment period often is shorter than the maximum period of insurance coverage --for example, a 20-year mortgage protection policy might require that level premiums be paid over the first 17 years.

Q:Can an existing life insurance policy be used to provide for the repayment of an outstanding mortgage loan?

A:Yes, the purchase of a new mortgage protection term insurance policy is usually not required by the lender. An existing policy, either term or cash-value life insurance, can be used for many purposes, including paying off an outstanding mortgage loan balance in the event of the insured's death.
Credit life insurance is frequently recommended in conjunction with the taking out of an installment loan when purchasing expensive appliances or a new car, or for debt consolidation. Is credit life insurance a good buy? 

Credit life insurance is frequently more expensive than traditional term life insurance. Further, if you already own a sufficient amount of life insurance to cover your financial needs, including debt repayment, the purchase of credit life insurance is normally not advisable due to its relatively high cost.