Monday, July 24, 2017

4 Wrong Reasons not to have Earthquake Insurance

According to the latest reports, only about 17% of homes in California are covered by earthquake insurance. So what about the remaining 83%? Are they in denial or have they weighed to risk factors and made a rational choice?

It Won’t Happen To Me

To not dwell on the possibility of tragedy striking is human nature. We see images of people whose lives have been destroyed by natural disasters and feel sympathy for them – a sympathy that is tinged with relief that it happened to the other guy. We live in the hope that such things will not happen to us. That is what so many in Northridge thought before the 1994 quake. To know the extent of the risk all that is required is the read the U.S. Geological Survey’s reports on the likelihood of a major temblor hitting California. Optimism, unsupported by fact, is no reason to not have earthquake insurance.

Rational Decisions – The Common Mistakes


  • My home survived the last quake just fine. Every earthquake is different and the next one could be much worse. Also, new fault lines are being discovered and the next one to be found could be under where you live. What happened last time will have no effect on what could happen the next time.
  • My home is bolted to the foundation. This will reduce the risk of damage, not eliminate it. Even bolting cannot offer complete protection. In addition, studies show that bolting is most effective in single storied wood framed structures. Homes that have 2 or more stories or have large picture windows are likely to suffer damage, even if they are bolted to the foundation.  And if the ground gives way below the foundation, bolting will be of no help.
  • State and federal assistance will get me back on my feet. This assistance is meant only to help survivors cope with the aftermath of an earthquake. It is not going to cover the cost of rebuilding a home and the lives of those who lived in it. The low-interest FEMA loans that may be available are just that – loans that have to be paid back and while they are outstanding, they become liabilities on your personal net worth.
  • I’ll just give the keys to the bank and move on. The problem with this course of action is that allowing the bank to foreclose on an earthquake damaged home will mean a complete loss of equity. In addition, your credit rating will be negatively impacted, making it difficult, perhaps even impossible, to arrange financing for a new home.

It Could Happen At Any Time

Thinking about the possibility of losing a home is not scaremongering. It is being realistic. Of all the material possessions, the home is the most difficult to replace. If you do not have earthquake insurance, the right thing to do is to contact an insurance professional to understand in detail the risks, the potential loss, how earthquake insurance can protect you and how much it will cost. To put it simply, your home protects your family and insurance protects your home.

Friday, July 14, 2017

Too Young for Life Insurance?

The young rarely, if ever, think about their mortality. There is too much happening in their lives and so much that lies ahead contemplating the end of life is something that can easily be ignored. A young man or woman entering college has so many demands on their limited income that spending money on life insurance seems a waste when the risk of death seems remote. Insurance is something that can be thought about in the future, when obligations and responsibilities increase.

Delaying Is Expensive

What is often not realized is that while life insurance becomes an important issue as their lives and careers take shape, the longer they wait the more expensive it becomes. One of the most significant factors that affect the cost of life insurance is the age at which a policy is taken. The premium is set at the time a policy is purchased and the lower the age, the lower the premium. The premium will remain the same for the duration of the policy. A delay of a few years in purchasing a policy may not seem to be a major issue, but the typical increase in premium is between 8% and 10% for each additional year of age. In other words, each year of delay could mean increased recurring costs for every year of the policy. For example, a 45 year old who is in good health could purchase a 20 year $1,000,000 term life insurance policy for about $250 less per year than one who is in the same health but is 2 years older. This may not seem to be much (it works out to about $20 a month) but over the term of the policy, that translates into an additional cost of $5,000.

The increase may seem to be unreasonable, but there is a reason behind it. A human being has a finite lifespan and with each passing year the end of life comes closer. And in a time when life can be uncertain and filled with unexpected risk, death could come to anyone at any time.

Health Is another Factor

The cost of life insurance is based on the statistical probability of how likely it is that a policy holder will die and the insurance company will have to pay the claim. With increasing age, there is an increasing chance of having health problems that could affect the likelihood of a policyholder dying. The premium will rise to balance out the increased risk. That is why the older a person is, the greater the number of medical tests that have to be done before a premium is calculated and a policy issued.

The Younger the Better

With no obligations and few if any liabilities, purchasing life insurance may seem to be a needless expense for the millennial. What needs to be taken into account is the fact that life insurance is not for today; it is for the years that lie ahead and the savings of taking a policy when young can mean a substantial saving in later years when the need for insurance has grown manifold. To fully understand the benefits of taking out a policy at a young age, consult an insurance broker who will be able to lay out the benefits and savings as they affect different individuals.

Thursday, June 22, 2017

Cyber Insurance Basics

The WannaCry ransomware attacks last May have shown everyone that there is no such thing a complete cyber security. Hackers are among the most creative of software developers and when they go bad and use their skills to invade and cripple businesses through the internet, security agencies play a game of catch up. If large corporates with dedicated IT departments can’t protect themselves against such occurrences, needless to say about small and medium businesses. The off the shelf anti-virus programs are necessary, but will not help against a targeted attack. That is why cyber insurance is growing at a rapid pace. It cannot prevent cyber-attacks, but it can help to mitigate the often disastrous results of a system being hacked.

What Is Cyber Insurance?

Cyber Insurance (also known as “cyber risk insurance” and “cyber liability insurance”) is meant to help provide a business with the financial resources to recover from a cyber-attack. Although there is no standard policy framework as yet, in general cyber insurance will reimburse:


  • Investigation expenses: A forensic investigation into how the attack happened is essential to plug holes and prevent the same thing happening again. Often private security firms are required to help law enforcement in this and the costs can be high.
  • Business losses: A cyber-attack results in business interruption, data loss, network being down and ancillary costs of managing the crisis.
  • Third party loss: Not only do customers have to be notified of data loss that could affect them, in some cases credit monitoring of affected customers is mandated by law. These could total up to a very substantial cost.
  • Ransom and lawsuits:Cyber extortion such a ransomware can mean huge payouts. A business could also be liable for loss of confidential data, intellectual property and regulatory fines. Lawsuits from affected customers are also very common.

What to Look For In Cyber Coverage?

  • Standalone policies are typically better than extensions to an existing policy. They are usually more comprehensive.
  • Do the deductibles work for you?
  • Are third party service providers covered? This is essential if your service providers do not have coverage.
  • Does the policy cover both generalized attacks and those targeted specifically at your business?
  • Are non-malicious acts by employees covered? This may be part of E&O coverage, but it may not.
  • Are phishing and similar attacks covered?
  • Advanced persistent threats  may take place over an extended period of time. What, if any, are there time frames that limit the coverage?

Contact an Insurance Professional That Understands Cyber Insurance

Cyber insurance is a new and rapidly evolving field. The best way to get the right coverage for your business, at the right cost, is to get in touch with and insurance company that has in-depth knowledge of the issues involved. By understanding the nature of your business, the risk you face and the potential liabilities, a coverage that will protect you can be developed. This is not something that can wait. The businesses that were hit by WannaCry thought these things happen to the other guy, until they discover the other guy was them.

Tuesday, June 13, 2017

Are Drunken Cyclists Dangerous? Maybe!

The exercise benefits and environmental friendliness are among the many reasons why cycling is growing in popularity. But cycling can be dangerous, and not just for the cyclist. According to the Insurance Institute for Highway safety, deaths of intoxicated cyclists are a significant problem. While the fatalities from drunken driving have declined over the years, the same is not true in the case of drunken cyclists. Drivers are often berated for the impatience they show cyclists who they think, are getting in their way and change the flow of traffic.  While that may be true, cyclists pose a danger to motorists, especially if drink or drugs have impaired them.

A Case Study

John was a health fanatic who cycled to work every day. One Friday evening, he and some colleagues went out to celebrate the completion of a major project. After a few drinks, he got on his cycle to head home. At a crossing, he jumped the red light and rode out in front of Karen. She swerved to avoid him and in the process hit another car. Not only were both vehicles severely damaged, she sustained major injuries. She was unable to return to work for several months. Her medical bills quickly exhausted John’s meager insurance coverage leaving her with no choice but to sue him for reimbursement. The legal costs were another huge financial burden on her. Since John did not have any significant assets, he had to declare bankruptcy. Karen was left with nothing, so she too had to declare bankruptcy.

John caused the accident, but Karen paid the price! If she had taken an umbrella insurance policy to cover such situations, she would have been well protected. To put it simply, umbrella insurance is extra liability coverage, which is designed to give you additional protection from lawsuits and claims and to protect your assets. It does this in 2 ways. You get additional liability coverage over the limits of your auto, boat and homeowners policies. The protection starts when the coverage on the other policies has been exhausted. It also provides coverage against claims that may be excluded from other liability policies you may have.

Protect Yourself

A drunken cyclist or other factors beyond your control could get you into an accident to result in serious injury and loss. Your auto insurance coverage may not be adequate to protect you. This is where a personal umbrella policy will fill the gap and give you the coverage you need to take care of medical bills, lost wages and legal expenses. An insurance professional will be able to work with you to determine if there are gaps in your insurance that need to be filled and provide you with the options that best suit your needs and budget.

Sunday, May 21, 2017

Is Your Home Under-Insured?

Recent research shows that 60% of the respondents never shopped around or checked on the adequacy of their homeowner’s insurance when the policy was up for renewal. 75% of them said that cost was a major influence on the amount and type of coverage they had. While the cost of insurance cannot be ignored, it should not be the deciding factor in the amount of coverage that is taken. The coverage should be based on what it will cost to rebuild a home that has been destroyed by natural calamity.

Market Value vs. Replacement Cost

The real estate market is yet to recover from the mortgage crisis of a few years ago. Many homeowner’s look at the current market value of their home and, on finding that the value has dropped over the last few years, reduce their insurance accordingly. However, that is a major mistake. A home’s value may have come down by 30% but if it is destroyed, the cost of rebuilding it may be 30% higher. That is the kind of gap that could ruin a family financially. What you need to do is base your coverage on what it will cost you to rebuild a home that has been lost. There are 2 types of insurance options to consider.


  • Actual Cost Value (ACV):This is the less expensive of the options. It covers the “as is” or depreciated cost of the house. Coverage is limited to what is known as “like kind and like quality.” In other words, if a roof of a 12 year old house has to be replaced, the insurance payout will be for the cost of a 12 year old roof. The difference(the current market cost of a new roof) will have to be paid by the homeowner. Since depreciation happens quickly, it is easy to miscalculate the coverage that is available and find that a major part of the repair or replacement cost is not covered by the policy.
  • Replacement Cost: These policies cover the actual repair or replacement cost at the time the work is to be done. In other words, if the 12 year old roof is to be replaced, the policy will cover the cost that is prevalent today. Obviously, this is more expensive than the ACV coverage, but it offers complete protection.

Finding the Right Coverage

Thinking about worst case scenarios can be depressing. Finding your way through the complexities of insurance can be dull and boring. The cost of insurance can lead to efforts to reduce the premiums.  All these factors conspire to create a situation where it is easy to use ballpark estimates to decide on a policy without considering what you really need. You cannot afford to make mistakes or take risks when it comes to protecting your biggest investment. Balancing the cost of insurance and the coverage that is required requires professional expertise. An insurance broker will be able to guide you to the right choices – those that will not waste money on excessive premiums but at the same time give your family and your home the protection it needs. Procrastinate no longer and contact the insurance broker, today.

Monday, May 15, 2017

Why Don’t Californians Have Enough Earthquake Insurance?

One of the reasons why disaster movies are so popular is that watching something terrible happen while sitting safe and comfortable in a movie theater is that it allows people to see what could happen while they remain secure. The movie San Andreas showed how a massive series of earthquakes wiped out most of California. Yes, there was a lot of exaggeration in the storyline and some questionable science. But it was not complete fiction. The 800 mile long San Andreas Fault runs through the state and is one of the most dangerous fault lines in the world.

The Next Major Earthquake Could Happen Soon

Scientists say that the general rule of plate tectonic movement is that 16 feet of accumulated plate movement is relieved by a quake every 100 years. There has been no stress relief on the San Andreas Fault for over a century. The director of the Southern California Earthquake Center says that the fault is “locked, loaded and ready to roll.”

The science of earthquake is improving but it is still in its infancy. Even if a quake could be predicted, the benefit would be in terms of getting people out of the danger zone, not in saving property. A house cannot be moved overnight. The Bay area has 3 major fault lines – the San Andreas, the Hayward and the Calaveras. The U.S. Geological Survey predicts that a major quake will hit the Bay Area in the next 30 years along any of these faults.

A major quake in the Bay Area sometime in the not too distant future appears to be inevitable. The right insurance coverage is the only way to secure a family’s financial future when (not if) it happens.

Earthquake Insurance Is Not Cheap

A 2016 survey found that less than 15% of Bay Area homes have earthquake coverage. It’s not that people are unaware of the danger – everyone knows that this is an earthquake hot zone. The problem is the high premiums and deductibles that can make the cost of insurance appear to be excessively high. Premiums are determined by a home’s replacement value and how high the risk of quakes are in a specific area. Both of these conspire to push up Bay Area insurance costs. According to the California Earthquake Authority(CEA), the average premium for earthquake insurance in San Francisco County was $2,156 in 2014. That is a major reason why less than only 1 million of the almost 7 million single-family homes in the state have earthquake insurance. The issue that homeowners seem to miss is that the premiums are high because the risk is high. If a home is seriously damaged or destroyed in a quake, the cost of restoring it, could wipe out a family financially. Federal and state emergency assistance is only for survival, not for rebuilding lives. Earthquake insurance is the only way to protect a home and a family’s future.

Contacting an insurance broker to find the right coverage, as that is also essential. An insurance professional can help you to work out the coverage you need within the budget you have. It may not, afterall be as expensive as you think it is.

Friday, April 28, 2017

Floods - California’s Uncertain Future

According to a state report, California is at increasing danger of severe flooding in the future. What happened in San Jose recently could be just a taste of things to come. A report from the nonpartisan Legislative Analyst’s Office (LAO) says that 1 in 5 Californians live in a flood plain. The structures at risk of flood damage are estimated to be $575 billion. The current expenditure on flood reduction is far less than the tens of billions of dollars that will be required to increase the level of protection. In San Jose, 14,000 people had to be evacuated and the damage is estimated to be about $100 million.

Inadequate Funding – A Huge Challenge

According to the LAO, the funding for flood control is both limited and inconsistent. The Public Policy Institute of California estimates that between 2008 and 20011 the state spent $2.2 billion a year on flood control measures. Most of the dams and weirs in the state are a minimum of 60 years old and many of the levees were built 100 or more years ago. These are not to modern design and structural standards. The Department of Water Resources and the U.S. Army Corps of Engineers, in a study released in 2013, says that there are 836 flood management projects in the state that will require $52 billion and an additional $100 billion is required to address the problem of future flood risk.

Climate Change and New Developments Add To the Problem

The effects of climate change are well known and even if the trend is reversed in the foreseeable future, undoing the damage already caused will take decades. Expecting the scope of the problem to increase is not scaremongering – it is scientific fact. Added to this is the population growth that is pushing development into new and often unsafe areas and compounding the problem. One example is the approval given for the construction of apartments in Nordale Avenue in San Jose. This is an area that was inundated by the recent flood.

Flood Insurance Is No Longer Optional
 
The dangers to homes and property are obvious and there is no immediate solution in sight. Flood insurance is no longer an issue that Californians can afford to just think about. It is essential and needed now. Many homeowners think that their homeowner's insurance will cover such calamities and that state and federal flood assistance programs will offer them the additional protection they need. Standard homeowner’s insurance policies do not cover damage and loss caused by floods. State and federal programs are intended to offer immediate relief from the havoc that floods cause, not to help in recovery and rebuilding lives. If you do not have flood insurance, you should contact an insurance broker without delay to get the coverage you need to protect your family’s future. If you do have coverage, are you sure it is enough? Why not talk to an insurance professional to see what kind of protection you really have and if you should increase it?