Tag: Understand Insurance Costs

Homeowners’ Insurance Claims: By the Numbers

Homeowners insurance is designed to protect against losses to your home and its contents, as well as liability for accidents that may occur on the property. Since the United States homeownership rate is nearly 65%, homeowners’ insurance is an important topic for many of us. To get a better understanding about the nature of homeowners’ losses and insurance claims, let’s take a look at some research compiled by the Insurance Information Institute.

  • Approximately 1 in 15 insured homes have a claim each year.
  • Wind and hail claims, which are experienced by approximately 1 in 30 insured homes each year, are the most frequent.
  • Claims related to fire, lightning or debris removal, which are experienced by approximately 1 in 230 insured homes every year, are the costliest.
  • Approximately 1 in 55 insured homes have a damage claim caused by water or freezing each year.
  • Approximately 1 in 190 insured homes have a theft claim each year.
  • Approximately 1 in 830 homeowners have a liability claim related to the cost of lawsuits for the bodily injury or property damage of others.

Loss Claims

Loss claims can be calculated in terms of frequency and severity. Claims frequency is the average number of claims filed per 100 policies. According to the Insurance Services Office (ISO), the most frequent homeowners’ loss claims are:

  • Wind and hail (3.37)
  • Water damage and freezing (1.79)
  • All other property damage (1.04)
  • Theft (.52)
  • Fire, lightning and debris removal (.43)
  • Bodily injury and property damage (.12)

Claims severity is the average amount paid for each claim. According to ISO, the most severe homeowners’ loss claims are:

  • Fire, lightning and debris removal ($34,306)
  • Bodily injury and property damage ($18,804)
  • Wind and hail ($7,307)
  • Water damage and freezing ($7,195)
  • All other property damage ($4,684)
  • Theft ($3,428)

Content Claims

The Content Claims Index shows the top contents categories of homeowners’ claims filed with approximately 300 insurers. The top categories, ranked by dollar value as a percent of total claims, include:

  • Jewelry (16%)
  • Electronics (13%)
  • Apparel (13%)
  • Furniture (10%)
  • Tools (5%)
  • Appliances (4%)
  • Sporting goods (3%)

Injury Claims

According to the National Safety Council (NSC), injuries requiring medical attention occur more often at home than in public places, in the workplace and motor vehicle incidents combined. In 2012, one in 16 people experienced an unintentional injury in the home that required medical attention. The NSC identified the following causes of the 63,000 deaths from unintentional home injuries in 2012:

  • Poisoning (50.5%)
  • Falls (28.1%)
  • Other (12.1%)
  • Fire, flames or smoke (4.1%)
  • Choking (3.7%)
  • Drowning (1.6%)

In addition to showing how claims happen, these statistics show that claims are likely to happen. Adequate homeowners’ or renters’ insurance is the key to recovering after a claim. An experienced and reputable independent insurance agent can help you identify those risks associated with your home and obtain the right insurance coverage to protect it.

If you have any questions or would like to see how Setnor Byer Insurance & Risk can help protect your home, please contact us.

Why Did I Get a Reservation of Rights Letter?

Upon receiving notice of a claim, an insurance company must determine whether it is covered by a policy. If a claim is clearly covered, the insurance company will begin the process of defending or indemnifying the insured. Alternatively, claims that are clearly not covered will be denied. A Reservation of Rights letter is used when the insurance company isn’t sure whether a claim is covered.

Assume a customer files a lawsuit after being injured by a falling box. If the box fell because it was carelessly placed on a high shelf, a general liability policy would likely cover the claim. Coverage would be unlikely, however, if the box was intentionally dropped on the customer.

Though it may take months to find out what happened, the insurance company may only have days to take action. Rather than risk denying a covered claim, the insurance company can send the insured a Reservation of Rights letter, which gives the insurance company time to investigate the claim, and defend it, if necessary, without waiving its right to deny all or part of a claim at a later time if the facts ultimately establish a lack of coverage.

A Reservation of Rights letter also puts the insured on notice that all or part of a claim may not be covered. According to the California Supreme Court, by providing a Reservation of Rights letter, “the insurer gives the insured notice of how it will, or at least may, proceed and thereby provides it an opportunity to take any steps that it may deem reasonable or necessary in response–including whether to accept defense at the insurer’s hands and under the insurer’s control or, instead, to defend itself as it chooses.”

Reservation of Rights letters are used when the facts or the policy language may justify denying coverage for a claim. For example, insurance companies may use a Reservation of Rights letter when:

  • An exclusion in the policy does or may apply
  • The allegations in a lawsuit may be beyond the scope of coverage under a policy
  • Some or all of the damages are not covered by the policy
  • The insured may have failed to satisfy their obligations under the policy

A Reservation of Rights letter will typically:

  • Identify the specific policy covered by the letter
  • Summarize relevant facts
  • Quote relevant policy language
  • Identify and explain coverage and policy defenses

Though a Reservation of Rights letter does not necessarily mean that a claim will be denied, it must still be taken seriously. Depending on the nature of the claim and the potential exposure, professional guidance may be necessary when responding to a Reservation of Rights letter. An experienced and reputable insurance agent can help identify concerns, evaluate options and prepare a response.

If you have any questions or would like to speak with one of our Risk Management Professionals, please contact us.

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Insurance for Tech Companies

Since most businesses rely on technology, providing technology services has become big business. Technology companies provide goods, services and expertise that can increase efficiency, productivity and profitability. These businesses may involve:

  • System / network development and administration
  • Application and website programming and design
  • Hardware installation and repair
  • Website hosting, maintenance and optimization
  • Information Technology consulting, staffing and training
  • Project management
  • Consulting

Technology companies face the same risks as other businesses, so traditional insurance coverages are required, such as general liability, property, automobile and workers compensation insurance. However, additional insurance coverage may also be necessary to address the unique risks facing technology companies.

For example, many technology companies do not believe they need Errors & Omissions (Professional Liability) insurance. The reality is that technology companies, just like doctors and lawyers, can be held liable for errors and omissions committed in the performance of their professional services.

Unfortunately, a traditional E&O policy may not protect against many of the risks unique to technology companies. This is why technology-specific insurance is needed to cover technology-specific risks. To ensure adequate insurance coverage, technology companies should look for an E&O policy that, at a minimum:

  • Broadly defines “Computer Technology Services”
  • Provides coverage for failure to prevent unauthorized access to or use of any electronic system or program of a third party
  • Provides coverage for unauthorized, corrupting or harmful pieces of code, including, computer viruses, worms and Trojan Horses
  • Covers personal injury claims alleging wrongful entry, wrongful eviction, wrongful detention, false arrest, false imprisonment, libel, slander or defamation, advertising injury or violation of any right of privacy
  • Provides sufficient coverage limits

The right E&O policy lets technology companies focus on their business knowing that they are protected in the event of a claim. And, since clients are increasingly requiring proof of E&O insurance from their technology vendors, an E&O policy may also create new opportunities.

Given the complexity of the risks facing technology companies, evaluating insurance needs and options is not always easy. For example, in addition to E&O insurance, technology companies may also need coverage for cyber liability claims, including data security breaches, which are becoming more common.

An experienced insurance agent can guide you through the process of protecting your technology company. If you would like to learn more about insuring a technology company, contact us.

If you would like to learn more about preventing data security breaches, take our online course Information Risk Management: Strategies for Preventing and Mitigating Information Security Breaches.

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Shopping for Insurance: Quality versus Cost

People typically purchase insurance because they have to, not because they want to. For the most part, consumers are happy to obtain the minimum required insurance coverage at the lowest price they can find. That is, until a claim comes along. Only then do they discover that buying the cheapest insurance available wasn’t such a bargain after all.

The quality versus cost argument is nothing new especially when it comes to insurance. Consumers who pay less tend to get less, whether in the form of coverages, limits or financial security. And, when people choose cost over quality, it usually means they are uninformed about what they really need.

As a full-service independent insurance agency, it is our job to help our clients understand their insurance needs. We evaluate, compare and quote various options from multiple insurance companies so that our clients have the right information before making a decision. Though many still choose cost over quality, it is important that they understand what they may be sacrificing.

Low Premiums

Would you rather have automobile insurance that protects you from damage caused by someone who is uninsured or underinsured? Uninsured Motorist Coverage is commonly excluded from a policy to reduce the premium. Rejecting GAP coverage or electing non-stacked coverage are other ways to save money. But these choices come with a risk. When shopping for insurance it’s better to determine what coverage is desired, see how much that coverage would cost, and work with an independent insurance agent to help get the coverage you need at a cost you can afford.

Financial Stability

Although cost is important, the financial strength of an insurance company may be more important. Financially weak insurance companies are more likely to become insolvent or go bankrupt, which means that their policyholders are less likely to get their claims paid. Though purchasing insurance from a financially weak company may be cheaper, how valuable is the money saved on premium if there is no money to pay a claim? An independent insurance agent can help you evaluate the financial stability of the insurance companies you are considering.

Customer Service

Insurance companies don’t typically assign an agent to their customers. Each time you call you speak to a different person which means you have to explain your situation over and over. Look for an agent that offers personalized service. Those are the agents who are willing to go the extra mile to get you what you need. For example, at Setnor Byer Insurance & Risk, our commercial clients enjoy complimentary access to our risk management services to help them manage the risks associated with owning a business.

A solid understanding of your insurance needs is the key to overcoming the quality versus cost argument. An experienced and reputable independent insurance agent can help you purchase insurance that is both economical and effective.

If you would like more information about our insurance products, please contact us.

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