Thinking about using an "Insurance Broker"?

Tip 1: Obtain the broker's business card.

By law, a broker must include his or her license number on his or her business card, and on any written price quote given to you. Obtain the business card of each broker who talks to you about insurance! If the broker says he or she does not have a business card, ask him or her to write down his or her first, middle and last name, along with his or her license number. Keep the business card or piece of paper along with your other insurance papers.

The California Department of Insurance Web site www.insurance.ca.gov lists all licensed brokers. You can find out whether the person who helped you buy insurance is licensed by checking this Web site, or by calling the Department of Insurance at (800) 927-HELP or (213) 897-8921. If you buy insurance from a person who does not have a license, you are legally entitled to have any broker fee you paid refunded.

TIP 2: Understand the difference between an insurance company and an insurance broker

Brokers are not insurance companies; they are independent insurance salespersons. The broker represents you, the client. In order to find insurance for you, a broker will usually review the premium rates and coverages of several insurance companies.

A broker will usually have the words "insurance agency", "insurance broker", "insurance brokerage", or "insurance services" in its business name. An insurance company is responsible for paying any claims you have; a broker is not. An insurance company will usually have the word "insurance company", "casualty company", "indemnity company", "insurance underwriters" or "assurance company" in its name.

Some insurance companies will use the services of another business, called a "managing general agent" or "general agent". These businesses may perform underwriting, claims handling, and billing on behalf of the insurance company issuing the policy.

Remember, when purchasing insurance through a broker you could be dealing with several different companies:

1. The insurance broker
2. A managing general agent
3. The insurance company

In addition, if you need to borrow money to help pay your premium, another type of company, a "premium finance company", may be involved.

TIP 3: Obtain and keep important insurance papers.

Application

When you apply for insurance, the broker will probably help you complete an insurance application form. This form will be sent to the insurance company. Read the application carefully before you sign it. Do not sign the application if any information on it is missing or incorrect, even if the broker says it is OK to do so, or that the wrong information will save you money. An insurance company can sometimes deny your claim if you signed an application with incorrect information. Obtain and keep a copy of the application.

Binder

When an insurance company accepts an application, it typically mails the actual insurance policy several weeks later. If you need insurance right away or within a few weeks, the broker should provide you with an insurance form called a "binder" or "certificate of insurance."

These forms provide you with proof that you have insurance coverage until the insurance company actually sends you the policy. A binder of certificate should show the name of the insurance company, the date your insurance takes effect, your name, a description of your vehicle, the types of coverage you bought, the liability coverage limit if you bought liability insurance, and deductibles if you bought comprehensive or collision coverage. Obtain and keep the binder. Don't accept a broker's word that you are covered or will be covered as of a certain, future date; get it in writing. Every broker should be able to give you a binder if you need coverage quickly.

Receipt

You will usually have to pay some or all of the premium to the broker when you apply for insurance. Obtain a signed receipt for your premium payment.

Insurance company payment plans

Many people choose to pay their insurance premium in installments. For these people, the insurance company may offer an installment payment plan for a small, extra charge. However, not all companies offer such plans.

Premium finance companies

Another option for people who cannot, or prefer not to, pay their insurance premium all at once, is to obtain a loan from a "premium finance company". With premium financing, you will pay a down payment to the broker when you apply for the insurance. The finance company will pay the full premium to the insurance company. After that, you will reimburse the finance company over several months. Be aware that premium financing typically includes a nonrefundable fee and an interest rate that is usually much higher than banks impose on credit cards.

In order to obtain premium financing, a premium finance application form must be completed. Do not let a broker sign this form for you - obtain it, take your time to read it carefully, ask the broker to explain anything you don't understand, then sign it if you still want to have premium financing.

The form will contain very important information - how much you will have to pay, how often, how much the fees are, what the interest rate is, an what the total principal and interest will be. Once you sign-up for premium financing, it may be expensive to cancel it.

If a broker suggests using a premium finance company, be sure to ask the broker about insurance companies that offer installment payment plans. Even if an insurance company with an installment plan charges more premium than an insurance company that does not have an installment plan, your total cost of insurance may be less if you don't have to pay loan fees and interest to a premium finance company.

Broker fee disclosure and agreement

To charge a broker fee, a broker must have you sign a broker fee agreement, and must give you a special broker fee disclosure. Obtain copies of both these documents.

TIP 4: Take your time and ask questions.

Read all forms carefully, and take your time. Don't let anyone try to rush you. Ask questions - a broker should take the time to explain everything slowly and with words you understand. If a broker makes any promise to you, get it in writing. Never sign any form that has empty spaces - have the broker draw a line through those spaces before you sign the form.

TIP 5: Find out more about insurance.

Insurance is expensive. You can save a lot of money, possibly hundreds of dollars each year, year after year, by learning more about insurance. A good place to start is at the Department of Insurance Web site at www.insurance.ca.gov, or by getting brochures from the Department of Insurance help line, 1-800-927-HELP (4357) or (213) 897-8921. You can obtain pamphlets about many insurance topics, such as different types of insurance, how to file claims, and how to buy insurance.

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Renters Insurance Vs Condo Insurance, Is there a difference?

Renters Insurance

News reports of apartment fires often include tragic stories of renters who have lost everything because they weren't insured. Your landlord does not provide insurance for your personal property. Having all your personal possessions destroyed in a fire or other insurable event, without coverage, is a tragedy that does not have to happen.

To protect your belongings, you should consider purchasing renter's insurance, also known as "tenant's insurance." The renter's policy may be used to provide coverage for your personal contents located in the property that you occupy. Coverage is also provided for loss of use, personal liability protection and medical payments to others.

Coverage generally Provided under a Renter's Policy:

• Coverage C - Personal Property  - An amount, designated by the insured, subject to a minimum as determined by your insurance company
• Coverage D - Loss of Use  - 20% of Coverage C
• Coverage E - Personal Liability  - Generally subject to a minimum of $100,000
• Coverage F - Medical Payments to Others  - Generally Subject to a minimum of $1,000

Condominium Insurance

Condominium insurance covers the unit-owner and is similar to renters insurance. Coverage includes interior damage to your unit, personal property and improvements. Loss of use is generally limited to 40 percent of the contents limit. The condominium association generally purchases insurance for the building structure and common areas, such as corridors. Loss Assessment Coverage can be an important policy provision for you. It covers you for certain assessments the condominium association makes. However, you should check if it covers you for earthquake losses and how much it will provide you in the event of an earthquake loss. You should also carefully analyze the type of insurance your association has and how it would affect you in the event of a loss. Most condominium association policies cover the common areas and walls.

What Limits should I set on My Policy?

The "dwelling" limit should be the amount it would cost to replace your home. This may have nothing to do with the purchase price or the current market value of your home, as homeowners insurance does not generally cover the land value of your insured property. Your insurance policy is not governed by the real estate market, but by the cost of the materials and labor involved in rebuilding your home. Insurance companies have formulas that they use to evaluate the replacement cost of your home. Since the formulas developed are unique for each company, different insurers may suggest or require different limits of coverage for your dwelling limit. 

The following information can assist you to determine if the limit set by your company accurately reflects the price it would cost to rebuild your home in the event of a total loss:

• Contact your agent or broker for assistance in evaluating your dwelling limit. In order to prevent a "he said, she said" situation from arising in the future, you need to document your discussions and inquiries in writing.
• Review your dwelling limit initially and upon renewal. Discuss any changes to your home in writing to your agent, broker, or insurer that may cause your dwelling limit to increase or decrease.
• Know the replacement cost of your home. Be familiar with the building materials that make up your home including the construction type and any special features. 
• Stay informed as to the current building costs in your area. Contact local general contractors and ask what the current price per square foot is for a home similar to your own.
• Keep accurate records of updates, renovations, and improvements to your home. Save receipts and samples of materials used when possible and contact your insurance agent or broker to increase the dwelling limit when appropriate.
• Contact your agent, broker, or insurance company to request a comprehensive inspection of your home if you believe your policy limits may be inadequate.

If you believe that your dwelling limit is undervalued or overvalued, and you have submitted documentation in writing to your agent, broker, or insurer to raise or lower the limits and your request is refused, then contact the DOI.  

The "contents" limit is generally around 50% of the dwelling amount; however, this is a guideline only, as the most competent source on the replacement value of your personal possessions is you. Be sure to take into account all of your personal property when calculating the contents limits. Read and understand the limited coverage amounts for specific types of personal property such as:

• Jewelry
• Fine arts
• Silverware
• Antiques
• Collectibles
• Firearms
• Computer hardware and software
• Business personal property
• Money

The limited coverage amounts for specific types of personal property are not separate limits in addition to the contents limit. These limits are included in the overall contents limit and represent the maximum paid out for that specific type of personal property. Therefore, it is very important to add an endorsement (sometimes referred to as a "rider" or a "floater") to coverage which specifically schedules and takes into account the value of personal property that you may own above the special limits. Contact your agent or broker to discuss how to adequately cover any personal property that is valuable, falls above the limits, or is in any way out of the ordinary. Also, make sure to take into account commonplace household items when calculating your contents limit. Often, people concern themselves only with big ticket items purchased for use in their homes and neglect to account for all the many things you need to run your household and enjoy your home such as small appliances, kitchen utensils, linens, window coverings, and sundries. Remember, personal property also includes clothing, shoes, accessories, and personal items.

Two major problems suffered by homeowners on their Residential Property/Homeowners insurance policies in the Northern and Southern California fires were:

(a) Many of the dwellings were under-insured, i.e., insured for amounts inadequate for rebuilding. Insurers sometimes refer to this as inadequate insurance-to-value.

(b) The problem of increased cost of construction was evident in many situations. When rebuilding, homeowners have to comply with new building code requirements. In some instances the difference between the dwelling limit and the code upgrades was a significant amount. Also, the extreme heat of some fires (and some new building code requirements) necessitated building new foundations along with appropriate debris removal. This is a situation that can be easily overlooked when determining building limits.

An important part to owning any property is protecting the property to the best of your ability. Homeowners insurance is a vital component to the protection of your property. By knowing and understanding the coverage and limits of your policy, and by making sure that values are current, your greatly add to you and your family's peace of mind in any loss situation.

What is covered under Homeowners Insurance?

What Is Covered By Homeowners Insurance?

The homeowners policy contains two sections. Section I provides property coverages (A, B, C and D) while Section II provides liability coverages (E and F). A brief description of the individual coverages follows:

• Coverage A - Dwelling
• Coverage B - Other Structures
• Coverage C - Personal Property
• Coverage D - Loss of Use
• Coverage E - Personal Liability
• Coverage F - Medical Payments to Others

Coverage A - Dwelling

Coverage A provides major property coverage that protects your house and attached structures if it is damaged by a covered peril.

Coverage B - Other Structures

This coverage provides protections to other structures on the residence premises that are not attached to the dwelling. Items covered include detached garages, tool sheds, etc. Coverage B is normally limited to 10% of the coverage A limit. However, you may purchase more coverage for an additional premium.

Coverage C - Personal Property

This coverage provides protection for the contents of your home and other personal belongings owned by you and other family members who live with you. Coverage C is normally 50% of coverage A or is subject to an established amount agreed upon by you and the insurance company.

Coverage is limited on certain types of property that are especially susceptible to loss, such as:

• Jewelry
• Furs
• Fine Arts
• Silverware
• Antiques
• Collectibles
• Firearms
• Money

Additional amounts of insurance may be purchased. You may want to consider scheduling these items separately. Ask your agent for specifics.

Coverage D - Loss of Use

This coverage will help with additional living expenses if your home is damaged by a peril insured against to the extent that you cannot live in your home. These expenses include, but are not limited to, housing, meals and warehouse storage. Coverage D is normally limited to 20 percent of Coverage A.

Coverage E - Personal Liability

This section of the homeowners policy will provide coverage in the event you or a resident of your household are legally responsible for injury to others. Coverage E normally provides a defense and will pay damages, as the insurance company deems appropriate. There are some exceptions. The liability coverage will not protect you in all situations, such as an intentional act. All of the exclusions and specific language can be found in your policy.

Coverage F - Medical Payments to Others

This coverage pays for reasonable medical expenses for persons accidentally injured on your property. For example, if a neighbor's child is injured while playing in your home, the medical payments portion of your homeowner's policy may pay for necessary medical expenses. medical payments coverage does not apply to your injuries or injuries of those who reside in your household. It is not a substitute for health insurance. Business activities are also excluded. All of the exclusions and specific language can be found in your policy.

Perils Generally Covered by a Homeowners Policy if Damage is caused by:

• Fire or lighting
• Windstorm or hail
• Explosion
• Riot or civil commotion
• Aircraft
• Vehicles
• Smoke
• Vandalism & malicious mischief
• Theft
• Volcanic eruption
• Falling objects
• Weight of ice, snow, sleet
• Sudden & accidental water damage
• Breakage of glass

Perils Generally not covered by a Homeowners Policy if Damage is caused by:

• Flood
• Earthquake
• Earth movement
• Termites
• Insects, rats or mice
• Water damage cause by seepage or leaks
• Losses to house vacant for 60 days or more
• Mold
• Wear and tear or maintenance
• War
• Insurrection
• Tidal wave
• Neglect
• Nuclear hazard

Important: Read exclusions in your insurance contract.

Earthquake, flood, mold, earth movement, and "wear and tear" are some of the perils that are usually excluded. When an insurer writes your homeowners coverage, the insurer is legally obligated to offer you earthquake coverage for an additional premium. The earthquake coverage may be written directly by the homeowner's insurer, by a separate insurer, or through the California Earthquake Authority (CEA).

You may elect to buy specialized homeowners coverage that provides additional protection for your dwelling and contents beyond the standard coverage limitations in most homeowner's policies. Ask your insurance agent or broker about available endorsements to extend coverage. Endorsements to coverage such as building code upgrade can greatly add to your protection in a loss.

Earthquake Coverage

Every offer of earthquake insurance must provide coverage for your dwelling, for your personal property (not less than $5,000 or 10% of the covered dwelling loss), and for any additional living expense (ALE) of at least $1,500. You may waive ALE coverage if you or your family do not occupy the dwelling you wish to insure. CIC Section 10089(b) states that the maximum deductible that can be charged is 15% of the policy dwelling limit. It is common for the deductible to be the maximum 15%. If you desire earthquake insurance offering more than the minimum limits and a deductible less than the maximum established by law, then you may contact your current residential property insurer or earthquake insurer to see if higher limits or lower deductibles are available. (Please see the "California Earthquake Authority" section of this brochure.) Also, you may want to contact a broker-agent to assist you with securing a monoline "stand-alone" policy. Stand-alone policies are offered by a few specialty insurance companies who do not require you to purchase your homeowners insurance from them in order to offer you earthquake coverage. They offer a stand-alone policy, which is referred to as a monoline policy (one line of insurance) by the insurance industry.

ALE coverage is designed to pay for the cost associated with living somewhere else while repairs are being made to your home. Typically your insurer will cover increases in your normal living expenses to help you maintain the standard of living you had before an earthquake damaged your home and personal property. ALE coverage can include costs for the following:

• Temporary rental home, apartment, or hotel room
• Restaurant meals
• Telephone or utility installation in a temporary residence
• Relocation and storage
• Furniture Rental
• Laundry

Payment on ALE coverage is limited to the reasonable time required to repair or rebuild your home, or for you to permanently settle in another residence. It is important to note that ALE only covers the extra amount you have to pay in order to maintain your normal standard of living while outside your home. ALE coverage can also pay costs you may incur due to the police or other civil authority denying access to your home in the event of an evacuation

Earthquake Insurance Offer and Response
Many property owners utilize earthquake insurance to help defray the expense of costly earthquake repairs. Residential property insurers (insurance companies that sell homeowners policies and policies for qualifying condominiums and apartments) are required under California Insurance Code (CIC) Section 10081 to offer earthquake coverage for the peril of earthquake. The mandatory earthquake offer must:

• Be made in writing
• Describe coverage amounts
• List the deductible offered
• State the policy premium

You have 30 days from the date of mailing from the insurance company to accept the offer of earthquake coverage. If your homeowners insurance company does not receive a response from you, then they consider the offer rejected. Your insurance company is only required to make the offer of earthquake coverage every other year. The law prohibits an insurer from canceling, rejecting, or refusing to renew a residential property policy solely because the policyholder has accepted the offer of earthquake coverage.