Personal Lines Q&A

I am renting a car, should I purchase the insurance offered by rental car company?

Answer: As long as it’s a typical car or SUV and not a specialty or commercial vehicle (i.e. UHAUL, Motorhome, high value car, etc), and as long as you are renting it within the United States, both the liability and physical damage coverages on your auto policy will transfer to the rental car. If you’re in an accident in the rental car you’d pay your deductible as you normally would. Situations where it may make sense to purchase the insurance coverage from the rental car company would be if they are offering higher liability limits than what you carry on your own auto policy and you want to have the higher limits while you drive the car, or if you do not carry physical damage coverage (comp and collision) on your own auto policy, since there would be no coverage on your own policy to transfer to the rental car in that case.

I did not have a claim or an accident, so why did my premium go up? 

Answer: Premium increases that are not related to a claim, accident, or moving violation are typically because the carrier had a rate filing approved by the Department of Insurance. All carriers file for rate changes as needed and they don't take effect until approved by the Department of Insurance. The filings are typically fairly long processes between the time they are submitted to the Department of Insurance and the time they are approved.  Answer: Premium increases that are not related to a claim, accident, or moving violation are typically because the carrier had a rate filing approved by the Department of Insurance. All carriers file for rate changes as needed and they don't take effect until approved by the Department of Insurance. The filings are typically fairly long processes between the time they are submitted to the Department of Insurance and the time they are approved. When a carrier wants to increase their rates they have to submit a filing to the Department of Insurance to justify the rate increase. Insurance companies in California can submit a filing for up to a 6.9% increase without it requiring a public hearing. Because of this, many carriers submit their rate filings for a 6.9% overall increase. Even though the overall impact on a carrier’s policies in California would be 6.9% the rate impact can vary wildly between areas, with some people seeing higher than 6.9% increases and some people actually seeing decreases depending on the specifics of the rate filing. Insurance companies that submit rate filings to the Department of Insurance do have to show that the rate increase corresponds to a similar increase in claim dollars they have paid out.

What is Extended Replacement Cost?

This endorsement means that an insurance company will pay a certain percentage above the property insurance coverage if the coverage amount is not enough to rebuild a like-kind structure. Estimating the cost to rebuild a property is in inexact science and has a decent margin for error, so to protect against this insurance companies will typically offer an Extended Replacement Cost endorsement on homeowners policies, and sometimes on policies for commercial buildings as well. Say, for example, you have a home with a dwelling coverage of $500,00 and 150% extended replacement cost. This means that the carrier will pay up to 150% of $500,000 in order to build a like-kind home after a covered claim. In this scenario the total dwelling coverage provided by the policy would be $750,000 ($500k x 150%).

What is Building Ordinance coverage?

This coverage is typically a cap (also called a sub-limit in insurance speak) on the amount an insurance company will pay out related to things required after a claim due to building ordinances. One area this comes into play is things that a new home would have to have that the original home did not due to changes in the building code between the time the home was first built and when it is being rebuilt after a claim. A common of example of this in Southern California is interior fire sprinklers, where most counties are requiring that new homes have interior fire sprinklers. If your prior home did not have interior fire sprinklers, the increased cost to add them to the new home would fall under the Building Ordinance coverage and erode that cap. There are other subtle ways this coverage could come into play as well, but the upgrades due to new building codes are what people commonly associate with this coverage. Having a higher limit on this coverage becomes even more important the older a property is, because there will be more differences in building code requirements from the time the property was originally built.

What do the coverages listed on my auto insurance policy actually mean?

Auto insurance liability coverage follows this structure:
Per Person limit: This is the most that your policy will pay for injuries due to an accident you cause
Per Accident limit: This the most that your policy will pay for injuries to all people due to an accident caused by you
Property Damage limit: This is the most that your will pay for damage to other people’s property or vehicles due to an accident caused by you
Comprehensive are claims that occur other than the car colliding with a car or an object while moving. Examples of these would be if the car gets stolen or vandalized, if a rock breaks a window while you are driving, etc. Your deductible is the amount you would pay for these claims and the insurance company would pay the amount above that.
Collision is claims that occur due to the car hitting another car or object. This would be your typical accident. Your deductible is the amount you would pay for these claims and the insurance company would pay the amount above that

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