A California Insurance Broker protecting businesses and personal property throughout Thousand Oaks, Westlake Village and Calabasas

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Thursday, 03 May 2012

Two-thirds of homeowners are underinsured

Nearly two-thirds of homeowners are underinsured. Make sure you're not one of them.

Hunkered down at home in Great Falls, Va., during the blizzard of 2010, Doug Colley and his wife, Christina, discovered a sparking surge protector that quickly set their bedroom on fire. Engulfing smoke drove the couple out into the cold with only their coats and Christina's purse. Fire trucks from several area firehouses responded, but they couldn't reach the house because 3 feet of snow covered the couple's half-mile-long driveway. The Colleys watched as the fire consumed their home of 32 years and, along with it, a lifetime of belongings.

Within days, the Colleys received a check for $225,000 from their insurer, Virginia Farm Bureau -- enough to rebuild their house (although they plan to build a slightly larger home with a first-floor master suite). As it turns out, the Colleys were fortunate: Their insurance agent had visited them the previous summer and helped them update their homeowners coverage. Had the fire occurred a year earlier, their check might have been smaller.

The take-away: When you get your annual insurance-renewal notice, don't just toss it into the to-file pile. Instead, review your policy and beef up your coverage if necessary. Insurance carriers recommend customers review their coverage every three to five years, and with good reason. Almost two-thirds of U.S. homeowners are underinsured, by an average of 18%, according to Marshall & Swift, which provides building-cost data to the insurance industry.

Without adequate coverage, you may not have enough insurance to rebuild your home and replace its contents in the event of a fire, tornado or other disaster that leads to a total loss. If you let your coverage fall to less than 80% of the insurer-estimated cost to rebuild your home, your insurer may either reduce the amount it will pay to rebuild (for example, it will pay 75% of the cost on 75% coverage) or it might pay only for your home's actual cash value. Many insurers also require that you notify them within a certain time limit if the cost of an improvement to your home exceeds $5,000; if you don't, they may not cover the full cost to rebuild.

Build a Good Policy

Keep in mind that you're not insuring the market value of your land, just the cost to rebuild your home, garage and any other buildings. Your policy should include an inflation guard that is keyed to regional costs and, ideally, adjusts your coverage every year. Building costs can change not only with the economy but also after a disaster, when contractors and materials may be in short supply, says Don Soss, a vice-president of Fireman's Fund. That's one reason it's also smart to purchase extended-replacement coverage, which covers the difference if the price to rebuild exceeds your dwelling limit. Your policy probably already has 25% extra coverage built in, but you can buy more in 25% increments -- usually for $30 a year -- up to another 100%, says Michelle Rupp, an independent agent in Seattle.

New building codes often create a discrepancy between the limits of coverage and the actual cost to rebuild, says Kathleen Stalter, risk-services manager at Fireman's Fund. After a disaster, municipalities may quickly tighten their codes. Some insurers include full building-code coverage, but most include either an extra 10% of the dwelling limit or a flat $25,000, which may also have to go toward removal of debris. You can beef up your coverage by buying an endorsement -- often called a building-code upgrade. It will cost about $50 to $75 a year to double your protection to 20% of the dwelling limit.

Take Stock of Your Stuff

In the event of a total loss, you usually have 180 days to provide your insurer with a list of everything you owned, from sofas to soup spoons. Before the fire at their home, the Colleys had begun an inventory but hadn't finished it -- and it went up in smoke, too. "Think about having to imagine yourself in every room of your home, trying to remember everything in it," says Doug.

You can create a detailed listing or just take photos or make a video. Open cupboards, closets, drawers and storage boxes and shoot those, too. Not only will the images jog your memory, they will also assure insurance adjusters that your furniture really was high-end or antique, and not just starter stuff from Ikea. The Colleys have asked family members for holiday photographs taken in their home that show heirloom antiques in the background.

Get appraisals of valuables and, if necessary, purchase a personal-articles floater to cover them beyond the normal limits of your policy. Such coverage typically costs $17 per $1,000 of property value annually. Fireman's Fund even offers a "collections" endorsement that would cover the contents of a wine cellar.

Focus on the Fine Points

Rebuilding almost always takes longer than you anticipate, so look for a policy that provides 24 months of coverage for comparable housing and related expenses (called loss of use coverage). If your insurance company offers a fixed dollar amount with no time limit, divide that amount by 24 months to compare the coverage with that of other policies.

You'll need liability coverage in case you (or a family member) are legally responsible for causing injury to someone else at home or elsewhere. Given that medical (and legal) expenses can quickly mount, Rupp urges clients to buy as much liability coverage as they can afford. To increase the standard limit of $300,000 to $500,000 would cost about $20 annually, says Rupp.

Overlay your homeowners coverage with an umbrella policy providing at least another $1 million of liability protection. To determine your premium, insurers will assess your exposure to risk, including the number of homes you own (and their location), as well as your vehicles and whether you have young drivers in your family. The deeper your pockets and the higher your profile -- are you likely to be quoted in the media or do you sit on a nonprofit board? -- the greater your need for coverage.

You can get a $1-million umbrella policy for about $150 to $300 annually. The next $1 million of coverage will cost about $75; each $1 million after that, about $50. Before insurers sell you an umbrella policy, most will want you to have a minimum of $250,000 of liability coverage on your auto policy and $300,000 on your homeowners insurance, and they may require you to buy both policies from them.

POSTED BY: Boitano Insurance AT 12:15 pm | Permalink | 0 Comments | E-mail this

Friday, 13 April 2012

How Will You Survive a Data Security Breach?

Why cyber insurance might not be optional anymore.

When it comes to a data security breach, it isn't as much a matter of if it will happen as when.

So when a breach happens, you'll need comprehensive protection from an insurer that specializes in handling cyber risks, offers a full suite of integrated insurance solutions to help minimize gaps in coverage, and understands how to tailor coverage to your business.

Technology is a double-edged sword

The technology your company relies upon to conduct its business can also significantly increase its vulnerability to cyber security threats- any of which can result in significant out-of-pocket and reputational costs that can devastate its bottom line.

How prepared is your company for:

Identity theft resulting from lost or stolen Social Security numbers or credit card, driver's license, or financial information?
Hacker malfeasance resulting in theft or confidential information or costly e-vandalism?
A lawsuit stemming from a security failure or alleged technology error or omission that results in damages to customers?
A lawsuit alleging intellectual property, trademark, or copyright infringement?
A lawsuit alleging invasion of privacy, libel, slander, defamation, or product disparagement involving information residing as email; on laptops, PDAs, flash drives, or servers; or on the Internet?
An e-business interruption resulting from a security failure or Internet virus?
A cyber extortion threat?
Costs related to privacy notification, crisis management, and disaster recovery?

What every business needs to know about data breaches:

The culprit is often someone close to your business. A surprisingly large proportion of data breaches are carried out by insiders- over half by some estimates - or by business partners. A trusted employee could be the culprit.
The perpetrator could live halfway around the globe. To vandalize your building, a criminal must be on site. But a hacker can operate from anywhere in the world. Organized cyber crime rings operate worldwide 24/7.
Size doesn't matter. Half of all companies that suffer data breaches have fewer than 1,000 employees.
Any company can be hit. Cyber criminals don't care where they steal private information from: retailers, health care institutions, manufacturers, professional service providers, media and entertainment companies, and financial institutions are all likely to be targeted.
A breach can result from a simple mistake. An employee might misplace a laptop, Blackberry, or computer tapes or leave these in an unsecured location, such as an unlocked car.
Cyber risk is steadily increasing. Data breaches affect hundreds of millions of records a year and reports of breaches continue to rise at a dramatic rate.

The costs of data security breaches can be significant

Many states require companies to notify all of their customers if a breach is even suspected and to take necessary steps to correct the situation - a cost estimated at up to $30 or more per customer. Multiply these costs times your company's total number of customers, and you'll see how they can quickly add up.
Often overlooked is the potential loss of confidence in your organization by your customers and potential customers when a security breach occurs. The fact is that a cyber security failure can significantly impact shareholder value, as well as corporate stability, reputation, and financial performance.
Until a data breach occurs, there's really no way to know the extent of the leak or the financial devastation it can cause. Maybe that's why businesses often underestimate their data security breach risks. Even if your business uses state-of-the-art security controls, your customers, shareholders, and corporate assets are still at risk from a determined criminal element that can bring operations to a grinding halt.

When you stack up the potential costs brought on by a data security breach, risk mitigation - through insurance coverage and loss prevention - is more than a smart investment. It's business critical.

POSTED BY: Rob Boitano AT 10:00 am | Permalink | 0 Comments | E-mail this

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