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What is Actual Cash Value?

This is a question all too often asked by those following a loss. Quite regularly the amount being offered by the insurance carrier is lower than what the insured expects. The insured’s quandary is that they may have stated a value at the inception of the policy but the amount paid is less, even on a complete loss. This obviously leads to frustration and even anger.

This is usually where Actual Cash Value or ACV comes into play. In essence when a policy or part of a policy is written as an ACV the amount that is being insured is subject to depreciation which then becomes the amount to be paid at the time of a loss. This is most regularly seen on auto policies and inland marine policies.

The ACV value is determined by what the object of insurance would have sold for at the time of loss. This takes into consideration the condition, age and any other relevant factors that would influence the price. This then in short becomes the Actual Cash Value and what is offered to the insured minus any deductibles that may apply.

If ACV was not in place on auto and inland marine policies the door for abuse would be great for those looking to make money. For example a car that is purchased for thirty thousand dollars depreciates the moment it is driven off the dealer’s lot. And, in five years the car’s value is probably half of what it was purchased for. If ACV wasn’t in force the insurance would have to pay the full value of thirty five thousand dollars at the time of a loss. This then would become more of a investment strategy than insurance which the purpose of is to indemnify. In other words the carrier insures “investment” values instead of objects.

Although ACV is used on various types of risk such as in Auto Coverage and Inland Marine or Floater policies it is not limited to such. And in other cases Replacement Cost Value (RCV) can be purchased, however this will be discussed in a later blog. It is important to note that insurance carriers at the time of rating always takes into consideration the actual age and value of any item and rates the item accordingly. So if the original purchase price on two autos costing thirty thousand dollars each, one that is one year old and one that is seven years old, even though the purchase price is the same the rate will be lower on the seven year old vehicle because the current value is obviously lower.

In closing when it comes to ACV it is important to know how your policy is written and if there are parts that are RCV and if there are parts that are ACV and understand how both work in different loss scenarios.

What is an AOR?

An AOR (Agent of Record) is a letter from the insured appointing a new agent or agency as their agent or agency. This letter ultimately fires the incumbent and appoints the agent chosen by the insured as the exclusive agent in relation to the insurance company. This then gives the new agent all the rights and responsibilities of the original agent. The AOR is in essence the same as a BOR (Broker of Record).

Typically an insured will sign a AOR when the incumbent fails to meet the expectations of the insured or has somehow diminished the role of being a “trusted advisor”. At this point the insured has determined to find someone else to provide insurance and this can certainly be done during any point in a policy.

Although requirements may differ from one insurance company to another they all generally require the letter in writing and signed by the insured. There is then a period of time the incumbent has to rescind the letter although the insured would have to approve. However if the insured does not approve the incumbent is helpless in retaining the insurance account.

What is an additional insured?

This is a question often asked by business owners when another business asks to be listed as an “additional insured” on their insurance policy. What this means is that the other business is going to use the insurance policy of the business owner as their primary insurance in case a loss occurs. This scenario plays out usually when the skills or services of another business is needed to complete or fulfill a business obligation of the owner and he therefore complies with the request to list the other business as an “additional insured” in order to get the job completed.

In essence the owner’s commercial insurance becomes the insurance for the trade, sub-contractor or other business that is required by the owner to do a job for him/her. Although insurance companies don’t prefer doing this they normally will do it for extra premium since they are assuming a greater amount of risk. Therefore this is typically not recommended unless necessary due to no other options being available.

The main thing is to be sure that the commercial insurance carrier is notified and the policy is endorsed to reflect the “additional insured” prior to any work with the other party commencing. This will protect the named insured from a denied claim should something happen prior to the commercial insurance policy being endorsed.

Discounted Health Insurance

Discounted Health Insurance is really only available in some instances. Unfortunately these instances are not always easy to come by. Because Discounted Health Insurance carriers are always looking for the most profitable risks the restrictions or qualifications for maximum discounted health insurance can be somewhat of a challenge.

Typically health insurance carriers offer better rates for those in large groups such as medium sized corporations and larger where typically the employees are more than three hundred or more. Obviously the larger the better.

The age groups and genders also make a difference due to the fact that younger people rarely bother seeing the doctor. Gender comes into play as pregnancies tend to be a matter of when and not if.

Overall health of the group is very important to the carrier offering discounts on health insurance for obvious reasons. Things they will typically consider are the number of smokers, obesity, pre-existing conditions and other health issues. The healthier the group the better the rating.

Interestingly enough the type of employment doesn’t seem to come into play as much here as one would assume. Regardless if the employer is a dynamite factory, roofer, hazardous waste remover or whatever, discounted health insurance doesn’t seem to be affected as much. The reason seems to be because Worker’s Compensation would have to address any work related life and health issues that are caused within the scope of employment. This is of course not to say that carriers could possibly not deny applications for any reason they deem reasonable.

Overall discounted health insurance is available although difficult to obtain due to all the criteria involved. However, for those in the job market it is wise to research different companies and see how they rate in regards to benefits for employees. Throughout the country there are some businesses and corporations that seem to take better care of their workers.

For individual coverage the only discounts really available have to do with age, gender, health, medical history and pre-exisiting conditions. Although there are some savings to be had by falling into the “preferred” category or whatever rating system is being used by the discounted health carrier the real savings tend to be through a good employer benefits program.

In the end by shopping around individuals can at least compare pricing and coverage to determine who will offer the deepest discounts for health insurance.

Flood Insurance

Flood Insurance is written through FEMA and the NFIP typically and coverage is often limited. However, for many there really is no other option as most carriers will exclude flood coverage from their property policy. This then only leaves FEMA and the NFIP.

Even though limits are normally limited to a certain amount it is in many cases sufficient as floods usually damage the ground floors and below. Therefore covering the total value of contents and building is not always required.

It is very important to realize that flood coverage has a thirty day waiting period before coverage is active. This of course is to prevent a flood, no pun intended, of submissions when impending flooding is threatening. For this reason it is crucial to purchase flood insurnance every year as floods tend to happen on their own schedule and without much warning.

Remember that Traveler’s, Hartford, State Farm, All State, Nationwide, Farmer’s and the vast majority of insurance carrier’s typically do not cover flooding therefore it is important to purchase this coverage in addition to your home owners policy. Normally the agent or carrier that handles your insurnance can write a flood policy but be sure to confirm this or request it specifically.