Chapter 16

Property and Casualty Insurance

Accidents will occur in the best regulated families.

—Charles Dickens

 

Property insurance covers the risk of loss to property and its consequences (e.g., fire damage to a house and alternative living arrangements while the house is being repaired). Casualty insurance protects against liability to third persons. These coverages are particularly important to you now because the last thing you need is a major financial loss that could be avoided with a minimal cash outlay.

The discussion about each policy is not as detailed as the health insurance section since most of these coverages are standardized and free information is easily available from any insurance broker or insurance company that deals directly with the public (a “direct writing company”). I do point out the types of insurance every prudent person should carry, areas that may be of particular interest because of your health condition, and tips on saving money.

If you have your own business, be sure you work with a reputable broker to determine what insurance is appropriate to protect your business assets.

Section 1. General Considerations When Purchasing Property and Casualty Insurance

Brokers. You can purchase property and casualty insurance either through a broker who works on your behalf (even though she is paid a commission by the insurance carrier), or directly with an insurance company known as a “direct writing carrier.”

Having grown up in a family in the insurance business, I am biased in favor of the broker system, which provides advice about types and amounts of coverage, compares and evaluates different insurance companies, and advocates on your behalf in the event of a claim. Nevertheless, there are perfectly good direct writing companies and the decision is yours as to which route to take.

No matter what your ultimate choice is, after you’ve read the basics described in this chapter, it is worth meeting with a qualified property and casualty insurance broker to discuss your needs and determine appropriate coverages for you, pricing, and information about the claims service of recommended companies. Your meeting with the broker does not cost money, and the expenditure of the few Life Units it takes for a meeting is a good investment. (See chapter 36, section 6, for advice on picking a broker.)

Before you consider which insurance you need and in what amount. You will need an inventory of your assets and copies of your current coverages (if any). The inventory list should include

• a description of the general items (e.g., sofas, chairs).

• description of specific valuable items.

• date of purchase (approximate if you do not have the exact date).

• whether the item was purchased new or used.

• purchase price.

• an approximation of what the item would cost to replace today.

• serial numbers, if any.

• which assets are used for business.

This may seem like a lot of work, but this inventory will be important in the event of a loss. It helps to also have a videotape or photos of the items, as well as the purchase receipts (or at least as many as you can find). Keep this information in your safe-deposit box or a locked fireproof file, preferably away from the insured premises. From now on, also be sure to keep copies of all purchase receipts in the same safe place.

Tip. Review your assets each year when your coverage is renewed to update asset values, add new assets to your list, and subtract any assets that have been disposed of since the beginning of the last policy period. The insurance company won’t refund premiums for property you insure but no longer own.

Shop around. Most people do not shop around when they purchase property and casualty insurance. Once you determine the coverages you need, and in what amounts, compare prices and quality of claims service among various insurance companies. Speak with your friends and associates about the claims experiences they have had or know about with respect to any company you are considering.

Tip. Every few years, at renewal time, obtain price comparisons again. Ask your broker to do it for you, or do it on your own if you use a direct writing company.

Complete file. Make notes of what you are told by the insurance agent or the company concerning the coverage you purchase. Keep the notes together with any promotional material you are given or shown when you buy the policy.

Section 2. Losses

To do immediately in the event of a loss. Photograph or videotape your loss, especially if you have personal injuries. Visuals are much more impressive than descriptions. If the damage is so severe that you must make immediate repairs, take photos, then make only temporary repairs until you contact the insurance company.

Before you contact the company. Review your policy and the notes you have with it before you speak with a company representative. If you aren’t prepared, you may say something that the company may use to deny or limit the claim. If you have a broker, speak with the broker and let the broker make the initial call to the insurance company. In addition to checking the coverage, read the section concerning duties you have after a loss occurs.

Time limits. Be sure to follow the time limits if any, described in the policy for filing a claim. The company may accept the claim after that date, but do not take the chance.

The process. Once the company receives a claim, either one of its employees or an adjuster will contact you to begin negotiations as to whether the loss is covered and if so, in what amount. An adjuster is a claims expert who is experienced in negotiating the amount of a loss.

To maximize the amount of money you receive in the event of a loss.

• If you work with a broker, at each step along the way don’t make a move or speak with the company or the company’s adjuster without first speaking with your broker. The broker will be a major source of information and advice and may even do the negotiating for you.

• Videotape or take pictures of the damage before you clean up or start any work. If items have been totally destroyed, pull out any inventory or other proof of what you owned and its cost or value.

• Don’t throw away any damaged property until after the adjuster has seen it.

• If the loss is due to a burglary or vandalism, the insurance company will want a copy of the police report.

• When you file a claim, take a fair position. The insurance company will tend to be reasonable if it thinks you are as well. Write your claim to fit the wording in your policy. If your loss is to your house, get a repair estimate from a local contractor as soon as possible so that you’ll have a cost guideline when the adjuster arrives.

• If you vastly underestimate your loss up front, and that number is passed on to the insurance company, you will face an uphill battle in seeking reimbursement for your full loss.

• If the loss is large enough (for instance, in excess of $10,000), consider hiring your own public adjuster or an attorney to negotiate for you. For a negotiable fee, which is usually 10 percent of the amount the insured receives, the adjuster reviews the insurance contract to make sure no aspect of coverage is overlooked; will do most of the paperwork; works with engineers, appraisers, and contractors to prepare estimates that reflect the cost of repairs or replacement; and negotiates with the insurer on your behalf, making sure the technical requirements are met. If the technical requirements are not met, courts have ruled that some claims are not permissible.
    Before hiring a public adjuster: Negotiate fees; find out what services will be included and whether there are extra costs; find out whether she is licensed; and ask for and contact references to find out the services the adjuster performed, the timeliness of the services and the repairs, the nature of the settlement, and whether the person would use the adjuster again.
    To locate a public adjuster: Ask your insurance broker if she knows of one or ask friends and neighbors. Adjusters are known to swarm to areas that suffer natural or other disasters, but that does not speak to the quality of their work.

• If you’re being treated unfairly by the insurance company, before you sue, contact your state insurance department.

Section 3. The Coverages

The idea behind property and casualty insurance is to spread the risk of losses that may be too large for an individual to bear among people with similar risks. Insurance should not be used for small claims. Many insurance companies will not renew coverage for an insured who files several small claims, or the rates may increase.

Tip. Save money on your premiums by raising the deductible to between $500 and $1,000 or, depending on your economic circumstances, even higher. Compare the premiums at each different deductible level.

Tip. A canceled check is not proof that a policy exists. Do not assume coverage exists until you obtain a copy of the policy or at least written confirmation from the insurance company that the coverage exists and that the policy will follow.

3.1 Homeowners Insurance

General description. The homeowners policy is a complete package of property and liability insurance designed to cover the average residential and personal exposures of most individuals and families. It protects your home and your belongings against loss, and you from liability for injuries to others and liability for damages to the property of others. Home-based businesses may be included on a limited basis. There are various types of homeowner policies, but together they cover homeowners, condominium and cooperative owners, and tenants.

Coverage. You can purchase homeowners policies that cover specified risks such as fire, lightning, and similar risks. You can also purchase homeowners policies that are all risk coverages. They cover all risk of loss including the ones you would normally consider, except those that are specifically excluded because they are uninsurable or would normally be covered by other insurance policies such as automobile insurance.

In general terms, the policies cover the dwelling and other structures, unscheduled personal property that is anywhere in the world, personal property usually located at a residence of an insured other than the residence described in the policy, and loss of use, including additional living expenses. The policies also cover the insured’s personal liability, medical payments, and damage to property of others, which can be critical to you if health care professionals or friends come to visit. Homeowners insurance does not cover the insured or members of the insured’s household who are hurt on the property since those expenses are typically covered by a health insurance policy. The value of the land is never covered since it is not subject to an insurable loss.

Tip. Purchase the broadest coverage you can. It makes it less likely for a claim to be denied on grounds of noncoverage.

Defining the value of what is covered. Dwelling coverage can (and should) be written on a replacement cost basis, which means you receive money to replace the damaged or destroyed structure without deduction for depreciation. Actual cash value coverage normally only pays for the replacement cost of the property at the time of a loss minus the amount the property has physically depreciated since it was built or was purchased. Property depreciates even though its market value may be rising.

Coinsurance. Coinsurance in property insurance is different from coinsurance in the health field. In property insurance, coinsurance recognizes that most losses are not total, and that insureds can save money by only covering their real risk, rather than the full value of the structure. To provide sufficient premiums to pay losses (and make a profit), the insurance companies generally require that the insured carry at least 80 percent of the replacement cost. If the insured meets the requirement, any losses to the building will be paid to the full extent of the coverage. If the insured carries less than the 80 percent, then in the event of a loss to the building, the insurance company would pay only a part of the loss—i.e., the insured “coinsures” and has to pay for the rest of the loss.

To determine value. To determine replacement value, ask your insurance company to inspect your home and give you an evaluation. If it won’t, your broker has a replacement-cost guide. If your home was custom-built, obtain an independent appraisal. Every year determine the current replacement value of your house and compare it with your insurance coverage. To assess the continuing valuation of your home, determine the square footage of your house and see what comparable houses in your area have recently cost to build.

Tip. Eighty percent coverage pays 100 percent of a small loss, but not all of the loss if the whole house burns down. Purchase 100 percent of replacement cost. The extra cost in premiums is worth the peace of mind.

Increases in value. In most states, you can purchase an inflation guard endorsement, which automatically increases the coverage limits periodically to keep pace with rising real estate values and construction costs. While it is worthwhile to have this endorsement, it is still important to periodically review the value of your property. Your policy limits should also be increased whenever you make substantial improvements.

Tip. If inflation is rapid in your area, ask for an endorsement that increases protection quarterly.

Other matters to consider.

• Standard replacement cost coverage doesn’t cover the cost of meeting new building codes. This is a particular concern if you own an older home. A code and contention endorsement covers the extra costs, which can be substantial.

• To protect against changes in the zoning law, make sure your policy states that you can build your exact house, no matter what the cost, even on a different lot if you are not allowed to rebuild on your own lot due to zoning changes.

• If you live in an area prone to fierce fires or earthquakes, such as California, be sure to cover your foundation. While arguably the foundation shouldn’t burn, it could be destroyed by one of these disasters.

Credit card. Homeowners policies generally cover up to $500 in unauthorized credit card purchases.

Restrictions. There are some common restrictions in homeowners policies of which you should be aware:

• In general, liability coverage is not provided for areas where there are separate coverages, such as automobile, workers’ compensation, or flood.

• If you take a boarder, there is no coverage for loss to the boarder’s property, unless the boarder is related to you.

• Business pursuits in your home are not generally covered, so liability is not covered for business visitors, nor is a computer or computer discs if they’re used primarily for business.

• Bodily injury or property damage that is expected or intended by the insured is of course not covered.

• Items that can be specifically insured under separate policies such as jewelry, furs, securities, stamp collections, artwork, watercraft, money, firearms, and flatware are covered for a low limit or not at all. Full coverage can be added to the policy by listing (scheduling) the items at an agreed value.

Co-op and condominium. If you live in a condominium or cooperative, the association generally pays for the insurance protection on the building as well as liability protection if anyone is injured in the common areas (e.g., hallways). You are still responsible for the interior of your apartment, the contents, and your own liability. These risks can also be covered under a homeowners policy.

The risk that you will be assessed to help pay for damages to the building not covered under the building’s coverage (for example due to a large deductible) can also be covered by adding “assessment coverage” to your policy. The cost for this coverage is minimal, and at least one company includes it at no charge. It is worthwhile to obtain a copy of the condo association’s policy and tailor your coverage to fit.

Tip. Many people with a challenging condition rely on residence employees to help with home upkeep and personal care. They can be covered under your homeowners policy.

To reduce the cost of your homeowners insurance.

• Ask for quotes from at least three insurance companies at the beginning and upon renewal.

• You can usually receive discounts of 5 percent to 15 percent of your premium if

• you buy your home and auto policies (and possibly other policies) from the same insurer.

• you stay with an insurer for several years.

• you install antitheft and/or fire alarm devices.

• you are a member of a Neighborhood Watch program.

• you install a residential fire sprinkler.

• in cold climates, you install a monitoring system that transmits an alarm to a central station when temperatures inside the home drop below freezing (this will generally qualify you for a 2 percent homeowners credit).

• you are retired (retired homeowners are more likely to be home to spot fires or discourage burglaries).

• you live in an area with a high level of protection, such as a gated community.

• Discounts are great, but always look at the bottom line. Some companies with high discounts start with high premiums.

• Consider raising your deductible. For example, if you increase your deductible from $500 to $1,000, you may save 10 percent of your homeowners premium to a maximum of $250.

• Ask what other discounts are available, such as for retirees or people who have taken classes in home safety or for improvements such as fire-retardant shingles.

• Don’t insure the land.

• Find out if you are eligible for any group coverages, such as through an alumni association, employer, or business association.

• Consider purchasing your insurance from a company that pays dividends and has a long history of paying them.

• More and more employers are offering group home and auto insurance. Discounts of up to 10 percent off going rates are typical. However, do not automatically assume that the group rate is the cheapest. Ten percent off a high premium may still be higher than the least expensive coverage you can get on your own.

3.2. Personal Articles Floaters: Jewelry and Fine Arts Coverage

A personal article floater (policy) is a specialized form of insurance that can be used to cover personal property on an itemized and scheduled basis. The floater contains an itemized schedule listing insurable property such as jewelry, furs, cameras, musical instruments, silverware, golf equipment, fine arts, stamps, and coins. For each article covered, an appraisal is needed. This type of policy provides “all risk” coverage for direct physical loss. Uninsurable property includes accounts, bills, currency, deeds, evidences of debt, money, and securities.

Tip. If you do not wear your valuable gems or look at your valuable collections often, put them in your safe-deposit box at your bank and ask your insurance agent for “valuable article coverage for in-vault jewelry.” Losses from a vault are difficult, but not impossible. Banks are generally not liable for loss unless they have been found to be negligent in some way. Check your contract. Always retain proof outside the box of what you store in your safe-deposit box “just in case.”

Adding a “floater” to your homeowners policy to protect these items may cost between $1.90 and $4.00 per $100 of value, while vault coverage can be $.30 per $100, plus a small amount for the few days a year when you take the jewels out of the safe. A few banks offer their own safe-deposit coverage, which is generally cheaper than a homeowners policy.

3.3 Fire Insurance (aka Dwelling Insurance)

The names dwelling insurance or fire insurance are used interchangeably and refer to the same type of policy. The basic fire insurance policy protects against losses in your home in the event of fire or lightning. Fire insurance does not protect you against other losses such as theft or personal liability for injuries to others on the premises. However, separate theft coverage forms and a personal liability supplement may be attached to fire insurance. Generally, you will need to purchase both fire and liability insurance to adequately protect yourself.

3.4 Rental Insurance

Damage to premises that makes them totally or partially unfit for occupancy means the tenant may have to pay rent for an uninhabitable space and the owner may lose rent income. Although basic fire insurance will pay for direct damage to the building or contents, it will not cover loss of rents or rental value. Rent insurance is used to protect the owner or tenant of a building after a fire and can be attached to standard fire policies.

This insurance is advisable for landlords. A tenant should check the lease before deciding if this coverage is needed.

Rental insurance is not to be confused with coverage against “additional living expense” described in the homeowners policy.

3.5 Liability Insurance

Generally, liability insurance covers your liability for bodily injury and property damage occurring to others, except as a result of business activities or while driving your car, watercraft, or piloting an aircraft.

Tip. Especially considering that a number of people may be coming onto your premises if you become sick or disabled, it is critical to have liability coverage if you do not have homeowners coverage.

3.6 Why Purchase Fire and Liability Policies Separately Rather Than a Homeowners Policy?

• If you do not need the full package of homeowners coverage, you may save some expense. For example, if you own two homes, you can extend the homeowners coverage on the first home to cover liability risks for additional premises, in which case you would only need fire insurance for the second property.

• The eligibility rules for fire and homeowners policies are different. A fire policy may be easier to get. Homeowners policies can have more stringent underwriting procedures due to age or condition of the house or neighborhood.

• It may be less expensive to purchase the coverages separately, even compared to a stripped-down homeowners policy. However, this may be a false savings if a homeowners policy would cover risks not included in either a fire or a liability policy.

3.7 Excess Liability and Umbrella Coverage

These policies are designed to increase the limits of your basic liability policy. An excess liability policy does so without broadening the coverage of specified underlying insurance coverage. Umbrella policies not only increase the limits, they also expand the personal coverage beyond policies such as the typical homeowners policies. They are worth the minimal premiums if your assets are near or in excess of the liability limits of your homeowners, personal liability, and/or auto liability policies.

3.8 Automobile Insurance

If you own or lease a car, automobile insurance is an absolute must. It covers loss to the vehicle as well as any liability as the result of an accident. The amount and type of liability coverage may even be mandated by state law.

Automobile insurance—liability coverage. The coverage most critical to avoid total financial ruin is liability coverage. There are two types of automobile liability coverage. The most important is bodily-injury liability, which pays for the other person’s medical treatments, rehabilitation, and other loss if you are found to be at fault in an automobile accident. The second type is property-damage liability, which is coverage against damage to property caused by your auto when the driver is at fault.

Tip. In most states, the minimum requirements do not come close to covering the potential losses for which you should be covered. You will find that the cost is minimal to increase the limits above the basic coverages.

The other components of automobile insurance to consider are collision and comprehensive insurance. Collision insurance covers you when there is an accident, no matter who is at fault. Comprehensive pays after a theft or for the repair of damage caused by other events such as fire, flood, or windstorm. Both pay for repair or replacement of your car, and both come with deductibles.

Tip. If your car is more than five years old and has lost most of its value, consider dropping the collision coverage. The cost of insurance could exceed the value of the car. Don’t drop collision coverage if your car retains its value.

Recommended auto coverage. The larger the deductible, the lower the insurance premium. Generally, deductibles are recommended in the $250 to $500 range, but I recommend considering deductibles of between $500 and $1,000. I also recommend:

• Bodily-injury liability: The minimum required by your state law if you have few assets and a low-paying job. If you have more assets to protect and/or a higher income, consider a minimum of $100,000 per person and $300,000 per accident plus umbrella coverage as noted above, taking your limit to at least $1 million.

• Property-damage liability: Minimum of $50,000 due to the high cost of today’s cars.

Note: Automobile contract coverages usually read as a series of three numbers, called split limits, e.g., $50,000/100,000/50,000. In this example, the first $50,000 is the maximum for bodily injuries to any one person in an accident; $100,000 is the maximum for all bodily injuries, no matter how many people are hurt in the accident; and the last $50,000 is the limit payable for damage to someone else’s property.

Tip. As described above, inexpensive umbrella policies are available to extend the liability coverage of your auto insurance and should definitely be considered.

Price. Price comparisons for auto insurance between companies are published by the insurance departments of many states. Even if your state doesn’t publish a list, it is worth checking to see what complaints have been filed against the company you use or any companies you are considering using.

Some companies offer new clients with a good driving record a standard rate that may be reduced to a preferred rate after you have been with the company several years. Other companies offer the preferred rate from the beginning. Even if you are able to find a price that is better than the one you are currently paying, you should hesitate before leaping to a new company because insurers often reward their longtime customers with discounts and accident-forgiveness-type programs.

Automobile insurance—miscellaneous coverages. Additional coverages to consider are:

• Medical payments coverage: Regardless of fault, covers your household members and passengers who may have insufficient health insurance. It also covers household members injured by a motor vehicle when they are pedestrians and provides for funeral expenses when necessary. This coverage is not important if you have good health coverage for you and your family. If you take this coverage, $5,000 is an acceptable maximum.

• Personal injury protection: Like medical payments coverage, but broader. It covers your household members and pays regardless of who is at fault in an accident. It also includes some lost wages and the costs of assistance in the home. This coverage is required in some no-fault states. (In no-fault states, you are only allowed to sue if the accident involves damages beyond a certain dollar amount or serious injury or death.) Only buy the minimum if you have adequate health, disability, and life coverages.

• Uninsured and underinsured motorist coverage: Covers your household against medical and similar costs resulting from an auto accident caused by an uninsured or underinsured motorist or by a hit-and-run driver. I recommend at least $100,000 per person and $300,000 per accident.

• Glass breakage: Covers when your cracked or broken glass needs replacement. This coverage is worthwhile if the cost is small enough.

• Rental insurance: Covers the cost of renting a car while your car is being fixed after an accident. This is worth purchasing if your car is your only means of transportation and your garage won’t loan you a car while they work on yours.

• Towing: Covers the cost of towing your car after an accident or if the car breaks down. You can usually do better by joining an auto club that offers this service as well as additional perks.

• Uninsured-motorist property damage: Covers damage to your property by someone without insurance, or not enough insurance to pay the costs. If you have collision coverage, this coverage is unnecessary. If you don’t, it is worth considering.

Tip. Before choosing medical-payments or no-fault protection, check with your state’s insurance department for details of no-fault coverage in your state.

Tip. If you are purchasing coverage from a company because you have learned to associate its name with less expensive coverage, be sure you are dealing with that company and not a subsidiary with a similar name that insures higher-risk drivers in exchange for higher premiums.

Automobile insurance—assigned-risk or high-risk pools. Assigned-risk pools are state-sponsored pools that provide a means of obtaining coverage if you have trouble finding automobile insurance because you recently had more than one accident or moving violation. Rates for pool members are high. As soon as your record improves, start shopping for private carriers. The law of your state may even mandate that after a given period without accidents or violations, the private carriers must reconsider you.

Automobile insurance—money-saving tips.

• Quotes: Get quotes from at least three different companies to compare prices and services.

• Discounts: Check to see if you qualify for any of the following discounts (which are not offered in all states or by all insurance companies): more than one vehicle; multiple coverage with the same insurance carrier; good-driver record; mature-driver discount for drivers between fifty and sixty-five; restricted-mileage discount for those who drive less than a certain number of miles each year, such as 7,500; and passive-restraints, antitheft-devices, and antilock-brakes discounts. If your car isn’t equipped with these last safety devices, compare the price of installing them against the discount you could obtain. Of course, do not pay so much attention to discounts that you overlook the bottom-line cost.

• If you have moving-violation points: Check to see if taking a defensive-driving course will entitle you to a discount.

• If you have children under twenty-five: Name them on your coverage as drivers of your least expensive car. It is cheaper to keep children on your policy than to insure them through the assigned-risk pools. The car the teenager drives must be in your name to be covered under your policy. Discounts may be available for driver-education courses and/or a good academic record. The National Safety Council at 800-621-6244 will let you know if a driver’s education course is offered near you. Another discount would apply if the child without a car is enrolled in a school more than one hundred miles away.

• Young singles under thirty: Married males under thirty pay the same rates as older drivers.

• If you are fifty or over: A driver’s education course may entitle you to a discount.

• If you commute: If you merely drive to public transportation or are part of a car pool, you may be entitled to a discount.

• If you are told you have to go into an assigned-risk pool: Check with other brokers or insurance companies to see if their underwriting standards are different.

• Limited damage reports: Think twice before reporting limited-damage accidents and/or accidents that do not involve other people. One at-fault accident can result in several years of substantial surcharges, and more than one can mean nonrenewal of the coverage. If another person is involved in the accident, even though there do not appear to be any personal injuries such as in a fender bender, beware of surprises later. You can drop a note to the insurance company letting them know about the accident, that no one was hurt and no claim is expected. If a claim occurs later, you’re covered. If not, it shouldn’t count against you.

• If you have an accident: Don’t repair the damage without prior approval of the insurance company.

• Deductible: Consider increasing your deductible.

• Changes in status: If there are any changes in your status that might reduce premiums, report them. For example, if you start carpooling or install an alarm system.

• Good Drivers: A good driving record lowers your insurance rates.

Tip. If you are in the market for auto insurance, first contact Comprehensive Loss Underwriting Exchange (C.L.U.E.). C.L.U.E. is a new national database with up to five years’ worth of claims history that many insurers check to help determine whether to insure an applicant, and if so, at what premium. Check to see if it has a record on you, and if so, whether it is correct. Call 800-456-6004 with your driver’s license number, date of birth, Social Security number, and if you already have auto insurance, the name of the carrier and the policy number. If there has been an adverse action within the last thirty days, the report is free. Otherwise the cost is under $10.

Also contact Consumer Reports auto insurance price service (800-807-8050, M–F, 8 A.M. to 11 P.M. ET; Sa, 9 A.M. to 8 P.M. ET). For residents of an ever-growing number of states, for a small fee the service searches a database to create a personal report listing up to twenty-five of the lowest-price policies.

If you are considering purchasing a car. Check the rates that apply to it before buying. Some types of cars carry much higher premiums than others. You can find out about the safety of a car by writing to the Insurance Institute for Highway Safety, 1005 N. Glebe Road, Ste. 800, Arlington, VA 22201, and ask for the Highway Loss Data Chart.

3.9 Insurance When You Rent a Car

Car rental companies have always charged for coverage for collision. However, recently a number of them also started charging for liability coverage, shifting the responsibility for this coverage to the renter.

Collision. Before you rent a car, check to see if you are covered for collision under any of your credit cards (and if so, use that card) or under your own automobile insurance policy. Don’t assume just because you have collision coverage that it covers rentals, particularly if you are renting the car for business travel. If you have coverage under a credit card coverage as well as under your auto policy, the credit card coverage becomes “secondary coverage.” This means that the auto policy pays first, so the credit card company only pays for the deductible. If you have credit card coverage, and not auto, the credit card is primary.

If you will be using the car for business, check to see if your employer insures the trip.

If you have no coverage, or if your policy covers you but you wouldn’t file a claim under it, then consider purchasing collision insurance for business uses.

Liability. Check to see whether your policy covers liability if you rent a car, particularly if you are renting the car for business travel.

Tip. When you rent a car, be sure you are covered for both collision and liability coverage somewhere: your credit card, your own automobile policy, or the rental company’s coverage. If the limits at the rental company are low, ask to increase them. If you rent cars often, consider either a policy known as a nonowner liability policy or an endorsement to your homeowners policy.

3.10 Workers’ Compensation Insurance

If you employ others, and that includes people hired to assist your daily living or to provide nursing care, or even a cleaning person, you need to protect yourself from the possibility that they will be hurt in work-related injuries. Workers’ compensation is a no-fault insurance policy that provides comprehensive benefits regardless of who or what caused the injury. This coverage is probably mandated by your state law, and the penalties can be quite heavy if you are supposed to have it but don’t.

Tip. Just because the people who help you are employed by someone else, such as a home care company, you are not necessarily off the hook. Some states make it your responsibility to find out whether every person who works for you is covered, and to carry your own workers’ compensation insurance if she is not. Ask for proof of this kind of coverage from everyone who works for or helps you at home. If you go to an assisted nursing home or a hospital, the employees are the responsibility of the facility, not yours.

Tip. If you are injured at work, you may be able to use workers’ compensation to take care of your health condition (in addition to your work-related injury) if you don’t have health coverage. In many states, workers’ compensation laws allow the employee to choose the medical care provider, so you can choose a specialist in your condition and see the doctor for both your condition and the injury while your doctor is being paid by the workers’ compensation coverage.

3.11 Travel Insurance

See chapter 37, section 4, if you are planning to travel.

3.12 Other Property and Casualty Coverages

Accidental-death insurance and flight insurance. The chances of dying in a plane crash or even accidentally are extraordinarily slim, which is why these coverages can be purchased cheaply. No medical questions are asked. I don’t recommend this coverage, but if you’ve got the extra money and feel skittish when flying, go for it.

Cancer insurance and other similar policies. These policies pay a fixed amount per day if you are diagnosed with the disease specified in the policy. If you already have the disease, you cannot obtain the coverage. If you know you are predisposed to a certain ailment, it may be worthwhile to obtain this insurance, but otherwise not.

Child support insurance. Covers child support payments if the supporting spouse is thrown out of work. This is expensive insurance and provides limited coverage, since it doesn’t cover if a spouse becomes sick or quits a job. Anyone under twenty-five or over fifty-five is not eligible. Coverage generally only pays for four months. It is not recommended.

Consumer credit insurance. Consumer credit insurance covers your mortgage balance, car loan, or credit card balance. Take all you can get.

Contact lens insurance. If you wear contact lenses, your eye service center probably offered you a service agreement that includes insurance to protect against the loss of your lenses. If your health insurance covers vision care, the cost of servicing and replacing contact lenses is already covered. If not, look at the coverage closely to see if it is worthwhile for you. Generally it is not.

Directors’ and officers’ liability (D&O). This policy covers against liability if you serve as a director or officer of an entity, including a nonprofit organization such as your GuardianOrg. D&O policies cover any wrongful act, which is generally defined as a breach of duty, neglect, error, misstatement, misleading statement, or omission. Since the courts are showing a greater tendency to hold directors and officers liable, and the impact could be devastating on you, if you are already on a board or if you are invited to serve on one, inquire into what protection you are afforded by the organization. Generally, the organization, rather than you, pays for the coverage.

Earthquake and flood insurance. These coverages generally only cover the dwelling, and not the contents or the outbuildings, although contents can be covered. If you have a mortgage, and if you are in an area where either risk is real, you should obtain this coverage even if your lending organization doesn’t require it. If the premium you’re quoted is too high for you, ask what it would be with a higher deductible.

Tip If you’re not sure if you live in a flood zone, call the zoning department of your local or county government. Even if you’re in a moderate to minimal risk area, you should consider flood insurance. About 30 percent of claims come from outside the high risk areas. Likewise, if you’re not sure if you live near a major fault, call your state’s department of geology or look at the National Earthquake Information Center’s Web site at www.neic.cr.usgs.gov.

Pet insurance. Covers veterinary medical treatment and/or hospitalization for injury and illness to pets (not the pet’s life). There is a limitation on the amount of coverage per injury or illness (generally between $1,000 and $2,500), and a deductible for each pet. Pet policies generally exclude preexisting illnesses and conditions, hereditary and congenital conditions, routine checkups, grooming and vaccinations, preventable diseases in animals that have not been vaccinated, and those conditions resulting from lack of vaccination. The policies do not cover animals over a given age, such as ten years old.

Tip. Certain breeds are prone to illnesses and it may be advisable to purchase pet insurance for them. Otherwise these policies are not recommended. Premiums and deductibles are high, and there are too many exclusions.