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What is RCV?
This is a great question to ask before deciding on the insurance that you are going to purchase. Whether you are needing car insurance, home insurance or commercial insurance, Replacement Cost Value (RCV) is critical in the settlement phase as this plays a very large roll in the amount that will be offered from the insurance companies.
So why is RCV so important? Simply put it’s the difference between replacing your insured items with new versus used. With RCV the insurance carrier will indemnify the policy holder with the amount of money necessary to replace the insured items at the new price. Without RCV or Replacement Cost Value, the items would be paid out at what it would cost if were to be bought on Ebay or at an Estate Sale.
The settlement dollar amount offered in most cases in a loss is significantly greater, as a result the premium for RCV is greater than ACV or Actual Cash Value. However the premium difference isn’t so much more where it is unaffordable in comparison to an ACV policy. Therefore RCV is typically more desirable when insuring anything if it is offered and affordable to the potential policy holder.
Be sure to check out the article on “What is ACV”.
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.
What are “Loss Runs”?
Every insurance carrier guards their bottom line by attempting to insure only the best risks by understanding the exposure in detail. When a prospect applies for insurance the obvious reasoning is that there is some sort of risk of loss that the prospect doesn’t want to be on the hook for. Therefore, the insurance carrier assumes risk for their insureds in turn for premium. By doing this they share the cost of risk over many.
For this reason “Loss Runs” are tracked. In essence “Loss Runs” is an insured’s insurance history at a glance. This report talks about past losses as well as open case losses. This report will state the time and the carrier along with other pertinent information. By having loss runs available an insurance company can then analyze the chance of risk with the prospective client.
Typically prospective insurance carriers will require anywhere from three to five years of Loss Runs before deciding to issue a proposal for business. Because all insurance carriers require loss runs all insurance carriers will provide loss runs as an industry standard of practice. Obviously the least amount of losses the better the insurance rates and the greater the amount of losses the higher the rates.
What this means for individuals and/or businesses alike is that it is always best to avoid or reduce risk as much as possible as a means of keeping insurance costs down. This is a direct strategy that has a direct impact on your bottom line.
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.
Hurricane Insurance
Hurricane Insurance may be the obvious insurance for those who live in the Gulf Coast region of the United States. However there really is no official coverage termed as such. When people ask or refer to Hurricane Insurance usually what they are referring to in essence is their Wind Coverage.
Wind Coverage will address the exposure of wind damage on an insured’s buildings and contents. Although the limits are negotiable what most find difficult or inflexible is negotiating their deductible. For those in the Gulf Coast regions deductibles are typically a percentage of the building and/or contents value. For example their wind deductible may be either 1%, 2% or even as high as 5%. In years gone by wind deductibles were the flat $1,000, $2,000 or $5,000 deductible.
Regardless of the deductible “Hurricane Insurance” is a must in the Gulf Coast states as those who experienced Katrina and Ike are all so familiar with. Although wind coverage is a large part of protecting your valuables flood insurance must be a part of your “Hurricane Insurance” protection as well. Once again this coverage is often overlooked and this topic will be discussed in another blog.
By having wind and flood coverage the basics of “Hurricane Insurance” is covered. Of course this is just a brief summary of what many term as “Hurricane Insurance” and not meant to be a complete insurance prescription for catastrophe type coverage.
Disability Insurance
Disability Insurance is a must have for any working person who’s income is necessary for everyday living. Especially for those in one income families disability insurance is critical to their financial survival. By having disability insurance the family is protected from unforeseen accidents that would incapacitate a worker from earning a paycheck.
With disability insurance the employee will be able to draw an income that is based upon their current income and is understood when the policy is bound. This will safeguard a family from a sudden loss of income and thus jeopardizing their financial future. For this reason disability insurance is key to any financial planning.
Disability Insurance has two types of coverage. One is for short term disability and the other for long-term disability. Both have specific roles and many employees will in essence have both to further guard against temporary and long term set-backs.
Without a question disability insurance is important to have possibly only second to health insurance when it comes to life and health insurance policies. For these reasons it is advisable to either purchase one on your own or sign up for your employer’s program if it is offered. One note to consider is that if you purchase a policy outside of your employer then it is easily transferred to your next job.
Worker’s Compensation Texas
Worker’s Compensation in Texas is very different from all the other states in that it is a voluntary coverage that employers can choose to sign up for. Both Texas and New Jersey are voluntary states for this coverage therefore employers can choose to use Worker’s Compensation as their solution for workplace injuries or not.
By enrolling into a worker’s compensation program employers protect themselves from potential medical claims and employee litigation as a result from workplace injury. For those who choose to be exempt they often place themselves at risk and are on the hook for all injuries to employees while on the job.
Very rarely does it ever make sense to opt out of Worker’s Compensation as the value for the premium is well worth it. Although many small employers feel that it is too expensive it typically only takes one accident at work to realize how cheap worker’s compensation really is. Important to note is that the Worker’s Compensation policy also pays for defense costs should an employee file a law suit.
Because Worker’s Compensation is sold by many different carrier’s throughout the United States it is always best to shop around and compare pricing and coverage. In Texas there are many good carrier’s in which Texas Mutual is only one of many but highly rated in the national market. Others include Utica, Hanover and Service Lloyds just to mention a few.
Regardless of what an employer chooses to do the reality is that if you own a business the old adage of “not if but when” really is true concerning a workplace injury. For this reason it is crucial for every business owner to be prepared on how to address the medical and legal costs that can and often does occur.
Be sure to check out different carriers before deciding and be informed before making your final decision as to whom you will go with if you choose Worker’s Compensation.
