Do You Have Sufficient Auto Insurance Coverage?

Imagine getting ready to leave your house and you open your door and the rain is pouring down. Now you start to frantically look for your umbrella…. ah, there it is! You step outside, open your umbrella, and you are now protected from that pouring rain. If it were a bright sunny day with no rain in sight you probably would not even care about where your umbrella is or if you even had one! The same is true about insurance. Until you need it, do you really care about it? Unfortunately, too many people realize that they have insufficient coverage only when an unexpected incident occurs and they have to place a claim with their insurance company.

So, a logical starting point to determine if you have proper insurance coverage is to understand the basics. To ensure that you do have the proper coverage, you first need to acquire a good understanding of the basics of auto, home, personal umbrella, and life insurance coverage. For this article, we will focus on auto insurance coverage.

Auto Insurance basically covers you for liability and property damage as it relates to your motor vehicle. There are other optional areas of coverage as well, but for our discussion let’s stay focused on the basics, which are the most important anyway. Your auto insurance policy’s first and/or second pages are the declaration pages of your auto insurance policy. The declarations pages describe your auto coverage limits in numeric dollar values.

Here is a sample of what you may see on your auto insurance policy’s declaration pages:

-Bodily Injury/Property (BIPD) 250/500/100

-Limited or Unlimited

-Medical (Med) $5,000

-Personal Injury Protection (PIP) 250 w/250 Ded

-Uninsured/Underinsured (UM/UIM) 250/500/100

-Collision $500 (Coll) Deductible

-Comprehensive (Comp) $500 Deductible

-Rental Insurance (RI) 80%/1500

Let’s take a look at each of these coverage definitions and amounts in more detail.

The BIPD represents Bodily Injury (BI) / Property Damage (PD). Basically, in the example above, this individual policyholder has liability protection for $250,000 per individual or $500,000 maximum per incident, plus $100,000 in property damage to the other party’s vehicle in a collision. Liability coverage is protection for times when you have been deemed and proven negligent in an auto accident and you therefore become legally liable for the resulting compensatory and/or punitive damages to the other party or parties. The BI, of the BIPD, will cover you for negligence on your part that resulted in bodily injury to the other party or parties. BI also covers the cost of attorney fees associated with any litigation brought against you by the other party. In the above example, this person has $250,000 in coverage for all inclusive liability and attorney fees per individual injured or $500,000 for the entire incident.

The PD, of the BIPD, covers the damage to the other party’s vehicle as a result of your negligence; thus, in the above example, up to $100,000 in property damage to the other party’s vehicle or property. Now, being cognizant of the litigious society that we live in, we ask if $250,000 per person or $500,000 per incident is enough BI coverage? This is a personal decision for every individual to make depending upon their current assets and net worth, and their knowledge of recent jury decisions and awards on BI cases. A major factor affecting this decision is an understanding that you are self-insured for any amounts awarded in excess of your BI coverage amount, should the jury award compensatory and punitive damages greater than your BI coverage amount. So, in this example, should the jury award $750,000 to the individual driving the other vehicle who suffered bodily injury because you collided with them as a result of your negligence, then you are self-insured for the amount in excess of $250,000 which in this case would be $500,000. If you do not have the $500,000 to settle the award, then the judge has many other options to ensure restitution to the injured party such as: garnishing your wages, selling off some of your assets, placing a lien on your property, etc. Now, you can get an umbrella policy to cover you up to a certain amount in excess of your underlying auto BI coverage. We will look at how an umbrella policy works in more detail in an upcoming article.

Next, we have “limited right to sue” versus “unlimited right to sue” coverage. Basically, under the “limited” right to sue lawsuit option, you agree not to sue the person who caused the auto accident for your pain and suffering unless you sustain one of the permanent injuries listed below:

-Loss of body part

-Significant disfigurement or scarring

-A displaced fracture

-Loss of a fetus

-Permanent injury

-Death

Please note that choosing this option does not waive your right to sue for economic damages such as medical expenses and lost wages.

Under the “Unlimited” right to sue lawsuit option, you retain the right to sue the person who caused an auto accident for pain and suffering for any injury. Most people will choose the “limited” option because it is far less costly and it provides the ability to sue the negligent party for most major and permanent injuries. However, many attorneys will usually choose the “unlimited option” for their own personal coverage and pay the significant extra cost because they want the right to sue for any injury.

PIP coverage stands for Personal Injury Protection coverage. PIP is paid from your own policy. PIP covers medical expenses, and possibly lost wages and other damages. PIP is sometimes referred to as “no-fault” coverage, because the statutes that enacted it are generally known as no-fault laws. PIP is designed to be paid without regard to “fault,” or more properly, without regard to legal liability. PIP is also called “no-fault” because, by definition, a claimant’s, or insured’s, insurance premium should not increase due to a PIP claim. A PIP claim may be subrogated by your insurance against the other party’s insurance company if the other party was determined to be the neglligent party in the accident. PIP is a mandatory coverage in some states.

Uninsured/Underinsured (UM/UIM) is coverage from your policy that may pay for injuries to you and your passengers, and possibly damage to your property, when as a result of an auto accident the other driver is both legally responsible for the accident and determined to be “uninsured” or “underinsured.”

An uninsured driver is a person who has no auto insurance coverage, or had insurance that did not meet state-mandated minimum liability requirements, or whose insurance company denied their claim or was not financially able to pay it. In most states, a hit-and-run driver is also considered an uninsured driver as it pertains to paying for injuries to you or your passengers.

An underinsured driver is a person who had insurance that met minimum legal requirements, but did not have high enough coverage limits to pay for the damage caused by the accident. In these situations, UIM coverage can pay you for your damages. It is important to note that uninsured and underinsured is separate coverage, although in many states they can or must be purchased together. Some states mandate purchase of UM/UIM, but many do not.

Collision coverage insures you for damage to your vehicle. No matter if it is a collision between your car and another car, or your car and a stone wall. You are covered if your car sustains damage as a result of colliding into something or something colliding into it, whether you are at fault or not. Your deductible will usually apply. If you collide with another vehicle and the other party is at fault, then your insurance company may subrogate the claim against the at fault party’s insurance company to recover the claim amount.

Comprehensive (Comp) basically covers what collision coverage does not. When your car sustains damage that did not result from colliding with another motor vehicle or object, the comprehensive portion of your policy will pay for the damages. If you do not have comprehensive coverage then you would have to pay out of your own pocket for any damage to your vehicle not related to a collision. Here are the perils typically covered by comprehensive auto insurance coverage: fire, theft, vandalism, broken or damaged glass, animal inflicted damage, falling objects, storms (hail, wind, etc.), and water damage. Your deductible will usually apply.

Rental Insurance (RI) is coverage for you to rent a car while your vehicle is being repaired because of a covered incident. In the above example of declaration page values, the 80%/1500 means that you have coverage for $80 per day and $1,500 maximum total cost to rent a car while your vehicle is being repaired. This is an optional coverage that many people take, but some do not.

Well, that is it! That is the basics of understanding your auto insurance coverage. Not so bad, right? Now that you understand the basics of auto insurance coverage you can review and analyze your personal auto insurance policy’s declaration page coverage information while taking into consideration your personal financials to determine whether or not you have sufficient coverage.

Stay tuned for future articles that will explain the basics of understanding homeowner’s, personal umbrella, and life insurance coverage. You never know when it is going to rain!

Joseph Rubino, Agent

NJ Licensed Property & Casualty, Health, and Life

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The Importance of a Balance Sheet

An individual has two primary tools for managing personal finances. The Personal Balance Sheet is ignored and the Budget is the darling of Financial Consultants and the media. The key to understanding personal finances is that you have to understand your Budget and Balance Sheet individually and also how they work in combination to give you a complete snapshot of your personal finances.

Your balance sheet is extremely important because it shows you where the gold is. It is your personal Fort Knox. It is also extremely important because you need to have a stash of gold in your personal financial picture. The gold in your Balance Sheet is not the Assets. They are the positive side of your Balance Sheet but the real picture of how much gold you have in your Fort Knox is your Net Worth. So just as important to your Balance sheet is your Liabilities. The total of your Liabilities is subtracted from the total of your Assets to give you your Net Worth.

You fill out your Balance Sheet and total up your Assets and Liabilities. You subtract the total of your Liabilities from your Assets. That number, your Net Worth will come out to either a negative amount, an amount of or near zero, or it will be substantially positive. These are the only 3 scenarios possible.

• If your net worth is a minus number, you are not managing your financial resources properly. Your Balance sheet is your report card and you are failing. It is that simple. If you are managing your money to deal with life's challenges and planning your personal finances with your retirement in mind, your Net Worth should be positive and growing. If your net Worth is positive, you can ride out financial storms like the current situation. At the time of your retirement, your Net Worth must be substantially positive so that you will be able to keep costs down and have investment income to replace your working income. During your working years, your Net Worth should be growing steadily because a retirement nest egg does not grow without years of nurturing.

• There are circumstances where where it is acceptable to have a Net Worth of Zero or near Zero. The first is when you are just starting out. It just makes sense that it would be zero. You may have student loans but that is offset by some form of education that will allow you to make more money in the course of your lifetime. The key is that this is the best time to start building your net worth. It allows the principal of compounding value to work its magic on your assets for decades. That saves you a lot of work later in life. However, most of us are not that wise and we find ourselves in our 30s and 40s with little or no Net Worth. This means you have less time for compounding to work. So you have to work harder and especially manage your money smarter to prepare for the financial challenges you face going forward. The nice thing is that you have probably made some mistakes that have made you much wiser. You should be able to recover much faster than you would have in your undisciplined youth.

• If you have a positive net worth that means that you are building assets. Just as important is that you are controlling your debt. This is the key that has probably gotten you to this situation. The key to a positive Balance Sheet is that debt offsets the value of your assets when you look at your personal finances as a complete picture so your debt / equity ratio should be less than one and get smaller and smaller. Debt servicing saps cash flow on your budget that could have been used to build assets that can be used to produce income in your retirement years. Clear title ownership of assets such as your home reduce cash draw and this is incredibly important as you approach retirement.

The financial crisis we are in now is described as a Balance Sheet crisis. We are in this crisis because nobody was paying attention to their Balance Sheets, not even at the rising heights of our financial infrastructure. The symptoms were everywhere. While researching I found that the top sites on the internet for Balance Sheet are those who want to sell you something so that they can gain access to any assets on your balance sheet that might be left after this disaster. Before the disaster, the only thing that had any importance was whether a potential buyer of anything could afford to make the payments on whatever he was buying assuming he made 120% of his declared income. The most outrageous symptom was that people would take appreciating home equity and borrow against it to buy depreciating assets and consumer goods. They overbooked their budgets and now they have gutted their balance sheet.

The resulting loss of home values ​​is the disaster we have now where people have either a zero or minus Net Worth. The other aspect is that we are now wiser. For the good of our society and our financial infrastructure we had better be. Going forward we must pay attention to our Balance Sheets and recognize that is where the gold is. You must save and protect your gold. Net Worth is where financial power is and that is the Importance of a Balance Sheet.

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How to Properly Insure Your Concrete Pumps

The business of concrete pumping comes with many challenges, one of them being being perfectly insured when something goes wrong. Many concrete pumping companies have pumps and assume they're automatically insured under their general liability policy, unfortunately they are not.

Trailer concrete pumps should be insured under what is called an inland marine floatater. This type of insurance policy provides comprehensive coverage for your pump, insuring it from perils such as theft, vandalism, and damage you may cause it in the event of a car accident. This is similar to the coverage you may have on your car.

Just like any other trailer, liability coverage is automatically extended from the vehicle to the trailer it's towing. For example: If your trailer sideswipes another vehicle, your auto policy will provide liability coverage to repair the vehicle you damaged. Repairs will only be provided up to your policy limits. Keep in mind if the auto policy your truck has not include business coverage the insurance company will most likely deny your claim. Make sure you have a proper commercial auto policy before you toward anything for business use.

What about concrete pumps you can drive, how are they insured? Because these type of pumps are self-propelled they would need to be insured under a standard commercial auto policy. Make sure to mention any custom equipment you have to your agent. Just like on any auto policy custom equipment should be stated as such and approved into the coverage limits. Custom equipment can include any aftermarket stereo systems, hose reels, ladder racks, etc.

Always provide the replacement cost you'd like if your pump is stolen and ask for it to be stated in your policy. This way you'll be sure you have enough to replace the pump in the event of a loss. Some carriers provide the actual cash value for your pumps without otherwise requested. This means you'll get the replacement cost minus depreciation to compensate you on your pump. Actual cash value may not be enough for you to buy another pump if yours is damaged, this option is not recommended.

Always consult your insurance agent before making any final decisions on your insurance policy. Each concrete pump is different and may have specific needs. Keep these points in mind when shopping for your insurance policy and you'll be well on your way to protecting your business in the event of a loss.

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