FAQs
 |
 |
 |
|
1. What are the most important things to remember when purchasing any type of insurance?
N - Notes. Always take careful notes about what you are told by the agent. Save these notes in your insurance file. They can make a big difference in whether a large claim will be honored. If you feel you do not understand the explanation, ask for it in writing and add it to your insurance Notebook. 2. If a policy I am considering contains an arbitration or appraisal provision, what are the most important issues ?
3. What is the difference between an insurance agent and an insurance broker? Generally, an agent is a representative of the company. Therefore the insurance A broker - if paid by you - may be considered your representative, not the company's. In such a situation what the broker says or does may not be the responsibility of the company. If the broker is paid by the insurance company, he or she may be considered its representative. In such a case, the carrier may be liable for statements by the broker. 4. Can an insurance company cancel or refuse to renew a policy? During the policy term the insurer generally cannot cancel except for specific reasons, such as failure to pay premiums, fraud by the policyholder, or a material (important) misrepresentation made in the application. In most situations, insurance companies can refuse to renew a policy at the end of the current term as long as the refusal does not violate the existing contract. For example, some policies are guaranteed renewable or are written for a multi-year term. These types of policies must be renewed. Most others do not have to be renewed. 5. What is the difference between a first party and third party claim? A first party claim is made against your own insurance company for benefits provided by your policy. A third party claim is made against someone else. For example, if someone causes damage to your property and you make a claim against that individual that is a third party claim. The distinction between a first party and third party claim is significant. In a first party claim your rights are determined by the contract. In a third party claim your rights are determined by the laws of the state in which you live. 6. What is ERISA? ERISA stands for the Employee Retirement Income Security Act. ERISA is a federal law that was enacted for the purpose of protecting employee benefits. ERISA applies only to certain classifications of employees who have obtained their policies at their place of employment. If a policy is governed by ERISA you lose important insurance consumer protections provided under the laws of your state. 7. What does an insured have to do to keep coverage limits current? Some policies have provisions which do this automatically. These are called COLAs (Cost Of Living Adjustments). However, with most policies you are required to keep track of your own coverage needs. Due to inflation the value of the dollar can be reduced by as much as 50% or more every five to ten years. In addition, your financial circumstances may change. Therefore, you should monitor your insurance amounts annually. 8. If an insurance policy contains provisions that are difficult to understand. How does one go about interpreting such provisions?
Review the policy carefully and read the definitions section contained within the policy. If the language remains vague and confusing to you, contact your agent with questions. Document his or her explanations in writing, and save your notes from the conversation in your permanent insurance Notebook. If the language in your policy is ambiguous, in most states a disagreement or dispute as to its meaning must be resolved in the policyholder's favor. 9. What do you do if an insurance company offers to settle your claim for less than its value? Calculate your loss carefully and negotiate with the company fairly. Do not exaggerate your claim or understate it. If you do the latter you may be giving up future rights to obtain additional damages. 10. What is meant by the term "Statute of Limitations"? There are limitations on the period of time in which you can file a claim or contest the actions of an insurance company. Once these time periods expire you risk losing your ability to recover for your losses. Sometimes limitations periods are established by law. They can also be established by the terms of your insurance contract. Never risk allowing a limitations period to expire. Be aware of any limitations periods that may apply to your claim. Back to TopWho regulates the insurance industry? Each state has a Department of Insurance responsible for regulating insurance companies doing business within its borders. The duties of each state Insurance department include:
How do I get in touch with my state Department of Insurance (DOI)?
How does one choose between insurance companies?
What is the difference between a "captive" insurance agent and an "independent" insurance agent? Captive agents work for one insurance company. Independent agents work for many insurance companies. All agents are representatives of the insurance company, not you. How should you prepare before meeting with an insurance agent?
There are many questions you will think of if you simply think through the process before walking into a meeting with an insurance company representative. If you want your insurance to provide real security, it is very important that you do this. What is the significance of an insurance application? Insurance applications are very important. You can be held strictly accountable for the information included in the insurance application. You will be asked numerous questions by the company agent. These questions must be answered fully, literally and honestly. Insurance agents should not change the wording of, or paraphrase, application questions. You are the one who is responsible for what is written on the application. Make sure that your responses are absolutely correct and complete. What can happen when the application answers are not complete and correct? After you have completed the application you will be asked to sign it. Usually, right You cannot afford to be casual about signing the application. If the insurance company learns that your answers are incomplete or inaccurate, the insurance company may have a right to deny payment or rescind (cancel) your coverage. What is included in a policy? Each insurance policy has the following elements:
As frustrating as it may be, read the policy carefully BEFORE buying it. You may not understand everything in the policy, but you are required (to try) to read it. If you do not, you may lose important legal rights. Do you have a duty to read your policy? If a brochure, pamphlet or ad used to promote a policy suggests that something is covered but I later learn that it is not, do I have a remedy? Possibly. But there are time and other limitations on your right to raise these issues. This is one reason you should attempt to identify any inconsistencies between the way a policy is marketed and the policy itself.
When does insurance coverage begin? In most cases, your insurance coverage begins after the insurance company has approved your application and you have sent in your first premium payment. When does insurance coverage end? Your coverage should last until the anniversary date of the policy, which is usually six months or one year from the date your coverage began. However, YOU may cancel your insurance coverage at any time without penalty. Simply notify the insurance company that you are canceling your insurance. You are entitled to a refund of any unused premium payment. In addition, the insurance company can usually cancel your policy before the anniversary date if premiums are not paid or if there was a material misrepresentation on the application. Can an insurance company cancel or non-renew a policy? How does that work? In most states, insurance companies cannot cancel a policy in mid-term except under circumstances such as non-payment of the premium or fraud by the policyholder. Some states may also permit the insurance company to cancel the policy for other reasons. Non-renewal is another matter. In most states, insurance companies can refuse to renew your coverage for any reason. An insurance company may decide to stop selling a particular line of insurance or policy, or it may change its underwriting criteria, or it may decide that the policyholder's risk has changed. Regardless, it may decide not to renew your policy as long as you are provided adequate notice. Most states require the insurance company to give you 30 (thirty) to 90 (ninety) days WRITTEN notice. This is intended to give you an opportunity to obtain substitute insurance. What is an Incontestability Clause? An Incontestability Clause is a clause in the insurance policy which states that the insurance company will not deny a claim on the basis that you misrepresented yourself on the application for insurance. Usually, the policy must be in effect for two years before the Incontestability Clause applies. If your policy does not have an Incontestability Clause, then the insurance company can ALWAYS deny a claim if it shows that you misrepresented yourself on the application, EVEN if you have been paying premiums for years. However, the insurance company must reimburse all of your premium payments. What is meant by updating coverage? The limits in your insurance policy may have been fine when you purchased the policy. However, your life circumstances may have changed by the time you file a claim, especially if this occurs years after your initial purchase. Generally speaking, the value of money diminishes by half every seven years to ten years. That means seven to ten years from now your policy limits are only going to be worth half of what they are today. Some lines of insurance rectify this situation through COLA . Other policies are silent on the matter and it is up to you to update your policy to include sufficient limits.
What is a COLA? COLA's are cost of living adjustments provided for certain types of insurance. Usually, they track such things as the Consumer Price Index, which provides data on cost of living increases from year to year. To be effective, COLAs must be compounded every year. Are insurance companies prevented from engaging in unreasonable conduct in claims handling? Yes. In most states, "bad faith" is defined as unreasonable conduct by an insurance company. Examples of bad faith conduct include:
What is meant by the term "documenting losses"? A claimant is required to provide certain documentation for losses that are being What is the difference between an insurance adjuster and an insurance investigator? An adjuster is usually responsible for making an offer to settle a claim. The adjuster does this based on his or her own settlement authority or after receiving the necessary authority from a supervisor or manager on the offer that is being made. An insurance investigator gathers information, data and records. The investigator can take statements from witnesses and engage in other activities that may be necessary in order to provide insight to the company on the claim. Some insurance companies commonly use investigators to film or video the policyholder as part of the claims investigation. What does the claims manager do? The claims manager has more experience and higher settlement authority than the adjuster. The claims manager will often coordinate the information gathering that the company is conducting. What is an insurance "document request"? Insurance companies are allowed to request certain documents in connection with their evaluation or investigation of a claim. These documents often include such things as receipts, photos, medical records, wage or income statements, correspondence between the policyholder and third parties, and other similar documents. Are there any limitations on the kinds of documents that can be requested by an insurance company? Yes. In general, insurance companies are not permitted to require production of documents which constitute an excessive invasion of the policyholder's rights. Similarly, they are not permitted to require policyholders to turn over "privileged" documents. Privileged documents include attorney/client privileged letters or memos, privileged husband/wife records and other similar documents. Are there any rules you should follow in corresponding with an insurance company? Always be precise. Never exaggerate anything. If you communicate something that is in error, immediately notify the insurance company of your mistake in writing. Avoid the use of harsh, demanding or angry language. No matter how frustrated you may become, do not make threats. This is counter-productive. It is all right to send copies of thoughtful and articulate correspondence to the claim supervisor or claim manager of the company. However never send cc's to VIPs such as members of congress, the White House, the President of the UN or other luminaries. This does not work. What is "Alternative Dispute Resolution" (ADR)?
Although many individuals believe ADR is an inexpensive and cost-efficient method for resolving insurance claims, sometimes it doesn't work that way. It depends on whether the type of ADR system called for by the policy provides for the use of formal rules of evidence, opening and closing briefs, the use of expert witnesses and testimony, and so on. Some types of ADR require a long, complicated and expensive process. Others do not. Mediation would not only be good for denied claims, but as a tool to help both sides faciliate a prompt, fair resolution early in the claims process. Following submission of basic claims documentation, the policyholder would simply contact our mediation sponsors to ask him/her to assist in resolving the matter. The mediator will take it from there. What are some of the things to look for in evaluating the type of ADR provision called for in a particular insurance policy?
What is a "Statute of Limitations"? The statute of limitations is the maximum amount of time that you have to file a formal claim, either with your insurance company or, if the claim has been denied, with the court. The statute of limitation depends on the theory of your case. For example, you may claim that the insurance company broke the contract (a contract claim) and/or that the insurance company's conduct was unfair or unreasonable (tort claim). Under state law, contract claims and tort claims may have different statute of limitations. In addition to statute of limitations imposed by state law, many insurance policies may contain contractual limitations provisions, these provisions can impose limitation periods separate and apart from the rights contained under state law. It is very important for you to find out whether or not there is a contractual limitations period set forth in your given policy. When does a "statute of limitations" begin to run? The triggering event that starts the statute of limitations differs between states and policies. The triggering event could be:
You should be familiar with any applicable statutes of limitations in your state or jurisdiction and any time limitation set forth in your policy. What does it mean if the insurance company agrees to defend you under a "reservation of rights"? If the insurance company agrees to defend you under a reservation of rights, the insurance company is not conceding that your policy covers the claim against you. If it is not covered, you will have to reimburse the insurance company for the legal expenses and any settlement or judgment paid. Under these circumstances, the attorney appointed to represent you may have a conflict of interest. It is best to ask the insurance company to hire an independent attorney, rather than an in-house attorney, to represent your interests. This way, the attorney will not be tempted to choose between the insurance company (who is saying that it may not be responsible) and you (who is saying that the insurance company is responsible). What is a "sworn proof of loss"? Insurance companies often request policyholders to file a sworn proof of loss. This document advises the company of your loss, the extent of your loss, and the proof you have regarding your loss. It is an important document that you will sign under penalty of perjury. What do you do if the insurance company's settlement offer is considerably less than the amount of your loss? If the insurance company's offer is substantially less than what you think is fair, negotiate. Review the reasons for the disagreement and understand the insurance company's rationale for its position. Back up your demands with reliable proof. If the adjuster does not agree to settle the claim for a reasonable amount, speak to the supervisor or manager of the claims department. If you are unable to come to an agreement with your insurance company, you should consider mediation services. Mediation, unlike arbitration, is not binding. It is an attempt by another party to facilitate resolution of a disagreement. Should you send letters threatening to sue when the insurance company will not pay your claim? NO! Threatening letters generally do not help get the claim resolved. A better strategy is to send letters to the head of the claims department with an honest recitation of what has occurred on the claim and why the current offer is too low. These letters should be accompanied with reliable documentation of your loss. If you simply must write a threatening letter (for therapeutic reasons), write a second later that you will send to the company. If you file a claim, will your premium increase? This varies from company to company and also depends on the facts and size of the claim. What are the most common mistakes made in purchasing insurance and in making claims? Purchasing mistakes:
|
Remember the acronym - PIN:
company is responsible for whatever the agent says or does. 
Visit our DOI/File a Complaint section for a printable list of state Department of Insurance contact information. 
above your signature, there is provision stating that everything you have written on the application is true and correct. Do not sign it unless everything is true and correct. 
TIP! In any case, be sure to check your coverages regularly to ensure you are fully protected.
ADR (Alternative Dispute Resolution) refers to a method of resolving disputes between policyholders and insurance companies without having to go to court. Insurance policies often contain an ADR provision. The ADR provision spells out the details of how ADR will be conducted under the policy in question.