WHAT INSURANCE SHOULD MY BUSINESS HAVE? Part 3 - Business Vehicle Insurance
Most businesses need to purchase at least the following four types of insurance:
Business Vehicle Insurance – If you use your own car for business purposes, discuss this with your agent. Many personal auto insurance policies exclude coverage if the vehicle involved in an accident is used mainly for business. A business auto policy provides coverage for autos owned by a business. The insurance pays any costs to third parties resulting from bodily injury or property damage for which your business is legally liable, up to the policy limits. Depending on what kind of coverage you buy, the insurance may pay to repair or replace your vehicle because of damage resulting from accidents, theft, flooding and other events.
When I rent a car, do I need to buy insurance sold by the rental company?
Regardless of the rental car option, the Insurance Information Institute suggests making two phone calls:
The first, to your insurance company, to find out how much coverage you currently have on your own car. In most cases, whatever coverage and deductibles you have on your own car would apply when you rent a car (providing you are using the rental car for recreation and not for business).
If you have dropped either collision or comprehensive on your own car as a way to reduce costs, you may not be covered if your rental car is stolen or damaged. Insurance rules vary by state, so it is best to check with your insurance professional for the specifics of your policy.
Check to see whether your insurance company pays for—or provides a rider for—administrative fees, loss of use or towing charges.
The second, to your credit card company. Insurance benefits offered by credit card companies differ depending on the company and/or the bank that issues the card, and the level of credit card used (a platinum card may offer more insurance coverage than a gold card). However, most credit card only provide limited coverage, such as covering the deductible if there is a claim.
To know exactly the type and amount of insurance that is included, call the toll-free number on the back of the credit card you will be using to rent the car. If you are depending on a credit card for insurance protection, ask the credit card company or bank to send you their coverage information in writing.
In most cases, credit card benefits are secondary to either your personal insurance policy or the insurance coverage offered by the rental car company.
How much insurance coverage should I buy for my house?
How much homeowners insurance do I need?
You need enough insurance to cover the following:
The structure of your home.
Your personal possessions.
The cost of additional living expenses if your home is damaged and you have to live elsewhere during repairs.
Your liability to others.
You need enough insurance to cover the cost of rebuilding your home at current construction costs. Don't include the cost of the land. And don't base your rebuilding costs on the price you paid for your home. The cost of rebuilding could be more or less than the price you paid or could sell it for today.
Some banks require you to buy homeowners insurance to cover the amount of your mortgage. If the limit of your insurance policy is based on your mortgage, make sure it's enough to cover the cost of rebuilding. (If your mortgage is paid off, don't cancel your homeowners policy. Homeowners insurance protects your investment in your home.)
For a quick estimate of the amount of insurance you need, multiply the total square footage of your home by local building costs per square foot. To find out construction costs in your community, call your local real estate agent, builders association or insurance agent.
Factors that will determine the cost of rebuilding your home:
Local construction costs
The square footage of the structure
The type of exterior wall construction–frame, masonry (brick or stone) or veneer
The style of the house (ranch, colonial)
The number of bathrooms and other rooms
The type of roof and materials used
Other structures on the premises such as garages, sheds
Fireplaces, exterior trim and other special features like arched windows
Whether the house, or parts of it like the kitchen, was custom built
Improvement to your home–adding a second bathroom, enlarging the kitchen or other additions that have added value to your home
Standard homeowners policies provide coverage for disasters such as damage due to fire, lightning, hail, explosions and theft. They do not cover floods, earthquakes or damage caused by lack of routine maintenance.
Flood insurance is available from the National Flood Insurance Program - NFIP and from some private insurers. Earthquake coverage is available from private insurance companies or, in California, also through the California Earthquake Authority.
Replacement cost policies
Most policies cover replacement cost for damage to the structure. A replacement cost policy pays for the repair or replacement of damaged property with materials of similar kind and quality. There is no deduction for depreciation–the decrease in value due to age, wear and tear, and other factors.
Is my son’s property covered while he’s away at college?
Some parents’ homeowners and/or renters policies include protection for a college student’s personal possessions (e.g., a TV, clothing and furniture) away from home, if they live on-campus and the student’s property is stolen or damaged. Other policies may limit the amount of coverage for a college student’s belongings to 10 percent of the total amount of a policy’s overall coverage for personal possessions. So if parents have $100,000 worth of personal possessions insurance for the family’s primary residence, for example, only $10,000 would be applicable to possessions in their youngster’s dorm room. In both cases, the student’s possessions would be covered for the same disasters that are in a standard homeowners or renters insurance policy. These perils would include, fire, theft, vandalism and natural disasters such as a hurricane. The student would not be covered for typical college type mishaps such as accidently spilling coffee on an expensive electronic device.
Items such as jewelry and musical instruments may be subject to dollar limits under a standard homeowners or renters policy. If these limits are too low, parents may want to consider buying a personal property floater or an endorsement to their homeowners or renters policy. This provides a higher amount of insurance and broader coverage. Most jewelry floaters, for instance, include additional coverage for “mysterious disappearance.”
It may make sense for students to leave expensive jewelry at home or store it in a safe deposit box. Floaters for storing jewelry in a safe deposit box are generally less costly and many insurers will let you take jewelry out and wear it if you let them know in advance.
Parents may want to look into acquiring stand-alone policies for desktop computers, laptops, tablets and iPads, and other electronic devices as they may provide coverage against accidental damage, liquid spills and other events not included under a standard homeowners or renters policy. Keep in mind that if you are using a credit card to buy such items, some insurance protection may also be available through the card itself.
Students who live off-campus may not be covered under their parents’ homeowners or renters policy and may need to purchase their own renters insurance coverage.
Do I need liability insurance for my business?
Good liability risk management can reduce the chances that your business will be sued, but it can never eliminate the risk entirely. You or a member of your organization can make a mistake that injures someone or damages property. Your mistake could harm the reputation or interfere with the privacy of a customer, client, competitor or member of the general public. When such injuries occur, you may be legally liable to pay damages to someone who suffers a loss due to your actions or inaction.
Depending on the degree of harm and the number of people injured and/or value of property damaged, a lawsuit could bankrupt your business. Even if your organization is ultimately cleared of any wrongdoing, a determined plaintiff can keep you tied up in legal proceedings for a long time, entailing significant cost to defend yourself. Liability insurance pays the cost of your defense and protects your assets.
How much life insurance do I need?
In most cases, if you have no dependents and have enough money to pay your final expenses, you don’t need any life insurance.
If you want to create an inheritance or make a charitable contribution, buy enough life insurance to achieve those goals.
If you have dependents, buy enough life insurance so that, when combined with other sources of income, it will replace the income you now generate for them, plus enough to offset any additional expenses they will incur to replace services you provide (for a simple example, if you do your own taxes, the survivors might have to hire a professional tax preparer). Also, your family might need extra money to make some changes after you die. For example, they may want to relocate, or your spouse may need to go back to school to be in a better position to help support the family.
You should also plan to replace “hidden income” that would be lost at death. Hidden income is income that you receive through your employment but that isn’t part of your gross wages. It includes things like your employer’s subsidy of your health insurance premium, the matching contribution to your 401(k) plan, and many other “perks,” large and small. This is an often-overlooked insurance need: the cost of replacing just your health insurance and retirement contributions could be the equivalent of $2,000 per month or more.Of course, you should also plan for expenses that arise at death. These include the funeral costs, taxes and administrative costs associated with “winding up” an estate and passing property to heirs. At a minimum, plan for $15,000.
Frequently Asked Questions
(Courtesy of the Insurance Information Institute www.iii.org)