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Are All Personal Umbrella Policies Alike?

Careful comparisons reveal striking differences.
(Fall 2002 Agents Market Source By Jim Griffith)

Every day the newspaper has stories about lawsuits filed for every possible reason. They range from serious injuries resulting from tragic accidents to seemingly silly disputes. Statistics show that millions of lawsuits are filed in the United States each year, at an estimated cost of $150 billion, or 2.5 percent of the Gross national Product. The chances of one of these lawsuits being directed at you grow each year.

With many companies offering personal umbrella coverage it is important that consumers understand the difference between the policies available.

Make sure the policy provides true umbrella coverage. Some umbrellas are referred to as following form or excess liability, which means they contain the same coverages and exclusions as the underlying policy. A true umbrella "drops down" and provides coverages that can be considerably broader. It is important to remember that umbrella coverage varies greatly and in some instances is more restrictive than the coverage provided by an underlying policy.

The wording in policy definitions can differ. In recent comparisons of various umbrella policies, significant differences were noted in how insured, business, and pollution were defined. Examples of these differences include policy language that could exclude coverage for some family members under 21, certain voluntary director and officer situations, and in-home business and pollution liability for common situations such as burning leaves and fuel tanks with capacities in excess of 100 gallons (beware those heating with oil or propane!). A careful review of policy definitions is crucial to ensure that gaps in coverage are avoided.

One of the common benefits of purchasing a personal umbrella is enhanced personal injury coverage. Unfortunately some umbrella policies actually restrict coverage in the event of a personal injury claim. Side by side comparisons show that certain personal injury elements involving discrimination, humiliation, mental anguish, shock, or mental injury can be excluded from some policies.

Also, there can be important differences in how various personal umbrellas treat the "care custody and control" exclusions found in most underlying policies.

Finally, there can be important differences in how various personal umbrellas treat the "care custody and control" exclusions found in most underlying policies. Certain umbrellas can exclude liability for damage to rental vehicles, watercraft, snowmobiles, and recreational vehicles.

Disability Income Insurance: Your Partner in Need
Do I Really Need Disability Income Insurance?

Taken from Financial Monitor vol 18, no. 1 The possibility of sustaining a long-term disability from an accident or illness is something most of us would rather not contemplate. However, there is a way to protect you and your family should you lose your ability to earn income. Disability income insurance can be a key component of your overall financial plan, providing a benefit to replace a portion of your income in the event of a total disability.

Do I Really Need Disability Income Insurance?

While most people understand the necessity and value of life insurance, it's unfortunate that disability income insurance is not always thought of with the same amount of importance. Social Security cannot be relied on to replace your lost wages in case of a serious illness or accident. You must be severely disabled to qualify for Social Security disability benefits and, even then, you will have to wait at least six months for payments to begin. Also, Social Security payments may not sustain you and your family at your current standard of living.

You may be able to "get by" for a few months on your savings, but if the disability is prolonged, you may run through some or all of your savings. You may miss mortgage, car, and other credit payments. Utility bills, tuition, grocery bills, and business/professional expenses will also continue despite disability and loss of income.

The bottom line is that if you lose your ability to earn and income, it may be harder to make ends meet. Disability income insurance can be a sensible solution to help protect a portion of your income in the event you become totally disabled.

Types of Coverage Available

Depending on your income, the maximum coverage you can buy will replace 45% to 75% of your pre-disability earnings. The higher your income, the lower the benefit that will be available for purchase. The cost of the coverage will depend on such factors as the risk level of your occupation, your age, your health history, and the scope of coverage. Professionally employed individuals are typically in the lower risk category than those engaged in more physically demanding work.

It should also be noted that when you pay the premiums (vs. an employer-provided policy), the income from personal disability income policies is tax free. If your employer has a salary continuance plan, you should know the dollar amount of coverage, the waiting period, and then length of payments so you can coordinate your personal coverage with your employer-provided benefits.

When examining the contract provisions outlined in a potential disability income insurance policy, consider these items:

Definition of total disability - Definitions can include coverage in the event that you cannot perform any duties of your own occupation, or any duties of any occupation. The "own occupation" definition offers better protection, particularly if you are a highly skilled professional. A noncancelable clause - Before age 65, the insurance company cannot cancel or change your policy or increase premiums. Residual disability payments - If you return to work at a less demanding job for a fraction of your former salary, the policy will pay benefits in proportion to your loss of earnings. Future insurability -- This benefit allows the purchase of future medical coverage without regard to medical insurability. Benefits payable until age 65 or for life. A reasonable waiting period - Waiting periods in disability income insurance policies vary. Typical waiting periods are 90 or 180 days. Shorter waiting periods are more expensive than longer waiting periods. Consider your liquidity, say pay, and any money owed to you so you can decide how long a waiting period you could reasonably afford. It is important to note that there may be additional premium charged for adding any of the above riders to a disability income insurance policy.

Disability income insurance can protect your most important asset - you and your ability to earn an income. Consult with your insurance professional to determine the type of disability protection that would best help protect you and your family.

Mistakes People Make When Buying Auto Insurance

Filling in the gaps on car insurance
By: Donna Halvorsen Minneapolis St. Paul Star Tribune

You're late for work. You barrel through an intersection, broad-siding a car. The driver is seriously injured. He spends a month in the hospital and two years in rehabilitation. He loses two years of work.

You were at fault, so you will pay.

How much you'll pay depends on whom you hit.

If the driver is a teacher, you could owe $460, 000 for medical bills, lost wages and pain and suffering. If a doctor, it could be $620,000. A baseball player? Perhaps $22 million.

Got cash? Probably not.

Got insurance? Yup, but probably not enough.

Got big financial troubles? You bet.

Jack Hungelmann uses that accident scenario in his book, Insurance for Dummies, to point out that most drivers are "ridiculously" underinsured.

But is anybody listening? For most people, auto insurance is a big yawn. Mention it at a party and people will flee to the hors d'oeuvres table.

But maybe they should stick around. Carmen Ellingson, assistant education director of the Minnesota Society of Chartered Property and Casualty Underwriters, said many people don't find out that their polices are inadequate until they're in a serious accident. Nancy Eustis considers herself a lucky exception.

Twenty years ago a woman ran a stop sign in Minneapolis and broad-sided Eustis' car. Eustis' neck was broken, her spinal cord severed. She was in the hospital for three months and in outpatient therapy for six months after that. One year after the crash, she went back to work at the Humphrey Institute of Public Affairs, where she teaches social policy.

Although she's now a quadriplegic, Eustis considers herself lucky because her husband, an attorney specializing in personal injury and products liability, had reviewed their auto insurance coverage six months before the crash and had increased their uninsured and underinsured motorist coverage to $500,000 each.

"I also was working, so I had health insurance," Eustis said. "But that car insurance has really made all the difference." With it, she created an annuity "that pays for a lot of the things that health insurance doesn't pay for," including up to three hours of home health care every day, a converted van with hand controls and wheelchair lift, and ramps and special shower in her home.

Hungelmann, a former claims adjuster, has been an agent and a consultant in the insurance business for 32 years. He talked about the mistakes that people, unlike the Eustises, make when they buy auto insurance:

Not having enough liability insurance: This is the big one. Liability is what its name suggests: It's what you and your insurance company pay for another person'' injuries if you cause an accident. For example, $30,000 coverage for any one injured person is way too low. Hungelmann asked, "What will it cover? A week's worth of medical bills?" A lot of people have $100,000 coverage. He said that's too low. Consider this case: Your insurance company sends you a registered letter saying you are being sued for more than your $100,000 liability coverage limit and you should hire a lawyer. You hire a lawyer, who battles to keep the judgment below $100,000. After two years, a jury awards the victim $75,000. You've won, right? Nope. Your attorney's fees could be $100,000, so you're out $75,000.

What if you increase your coverage to $250,000 or $300,000? That, Hungelmann said, "would cover a serious accident but not a really serious accident. It won't cover paraplegia. It won't cover death. It won't cover someone who's going to be out of work for years."

Hungelmann recommends $500,000. And while that seems like a lot, he said increasing coverage from $100,000 to $500,000 costs only $10 more a month. And it will keep people out of the financial pit they could be in if they cause a serious accident.

Not understanding how split coverage works: For example: $100,000/$300,000/$50,000. That means $100,000 per person, $300,000 per accident and $50,000 for property damage. Hungelmann says those numbers give a false sense of security because it's the first number, not the second, that's important in most cases.

Suppose you rear-end a car. One person in the car has $100,000 worth of medical bills. Another has $200,000. Your $100,000/$300,000 coverage will take care of everything, won't it? No. Your policy will pay $100,000 to each person, and you'll be stuck with the extra $100,000 for the second victim.

Buying too little underinsured or uninsured motorist coverage: Policies often have much more liability coverage (for a person you injure) than coverage for you, if the other party doesn't have insurance or it is underinsured. "What that's saying is that anybody I hit is worth two or three times what I'm worth, which, of course, is ridiculous," Hungelmann said. You should be carrying the same (coverage) as liability.

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