Hot Topics

April 2010

The rains came and we thought “Wow - that was a once-in-a-life time event” but then it happened again and again. Basements that had been dry for 50 years now had water in them and everyone asked “Does my insurance cover this?”

The answer, unfortunately, is not simple. All property policies include exclusions for water damage and go on to define exactly what they mean by water damage which includes not only flood, but also water that backs up through sewers and drains, water that overflows sump pumps and water that seeps or leaks into the property.

Can you buy coverage to get rid of this exclusion? The answer is partially yes. Most companies offer an endorsement that provides coverage specifically for backup of sewers and drains and/or overflow of the sump pump. It is generally offered for a specified limit ($2500 or $5000). This limit is the only coverage for damage to both the building and personal property. This endorsement can usually be purchased at any time. However, several companies only offer it when the policy is initially written and at renewal.

If you do not have a sump pump and the water was simply a high ground water level that seeped in around the foundation, there is no coverage available.

What about Flood Insurance? Some think flood insurance is only available to those that live near bodies of water. This is not true. There are only 18 communities in Massachusetts that do not participate in the Federal Flood program and they are primarily in the western part of the state. A flood is defined by the Federal Program as “ a general and temporary condition of partial or complete inundation of 2 or more acres of normally dry land area OR of 2 or more properties from overflow of inland or tidal waters, unusual and rapid accumulation or runoff of surface waters from any source, mudflow or collapse of land along the shore as a result of erosion.”

What about flood coverage for the damage in your basement? Flood insurance does not cover basement improvements such as finished walls, floors or ceilings or personal belongings kept in a basement. It does cover structural elements and essential equipment. Furnaces, hot water heaters, oil tanks, stairs, unpainted drywall, including fiberglass insulation and cleanup are covered under Flood building coverage. With a Flood policy, contents coverage is purchased separately. Again contents coverage for items in a basement is very limited. However, it would cover clothes washers and dryers and food freezers and the food in them.

Let’s hope this April the showers are few and the flowers are plentiful!

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Credit History and Insurance

October 2009

What does credit history have to do with Insurance?

Over the last few years, many insurance companies have started using credit information to help determine what a customer pays for an insurance policy. In fact, over 90% of insurance companies use insurance scores, according to a study by Conning Research and Consulting Inc., a Hartford, CO - based research firm.

To help you better understand how your credit-based insurance score is calculated and how that "score" impacts what you pay for your policy, we have developed the following list of frequently asked questions. Please note that the use of insurance scores varies by state.

FAQ

1. What is an insurance score?
2. Why do companies use insurance scores?
3. What information affects my insurance score?
4. What if there is an isolated problem on my credit report?
5. The information in my credit history is personal and sensitive. What protection do I have against misuse?
6. How can I improve my insurance score?

What is an insurance score?

An insurance score is determined by reviewing a consumer's credit history. A carefully developed and tested computer model performs this analysis, and looks at information such as payment history, whether you have filed for bankruptcy, if you have bills with a collection agent, any outstanding debts you may have, and the length of your credit history.

Unlike a "credit score", which is typically used when you are seeking a loan, an insurance score is used to help insurance companies accurately assign the best price available for your policy.

When calculating your insurance rate, insurers typically group consumers into categories. For example, driving record and age are the most often used categories to help calculate the cost of a customer's auto insurance policy. Insurance scores are just another method insurance companies use to determine what you pay for your policy.

According to extensive industry and independent research, people with certain patterns in their credit history that result in a lower insurance score are more likely to have claims that need to be paid by their insurer. For instance, keeping your credit card balances below the maximum limit and making regular, on-time payments will result in a higher score. On the other hand, if you have a history of "maxing-out" your credit cards to their limits and submitting payments late, your score will be negatively impacted, meaning a lower score.

An insurance score DOES NOT take into account income, race, gender, religion, marital status, national origin, or geographic location. It only reviews your credit history.

Why do companies use insurance scores?

Since insurance scores have been proven to be highly predictive of the potential for future losses, they help insurance companies determine the likelihood that a customer will file a claim, and thus allow carriers to set rates that are accurate and appropriate for each customer. This enables carriers to offer insurance coverage to a broader range of customers. What's more, many of these customers benefit from the use of insurance scores in the form of lower prices.

Insurance scores are used in the same way as other traditional underwriting factors. As a group, people with certain patterns in their credit history receive lower insurance scores and are more likely to experience a loss and file a claim. They are charged a higher premium to reflect that risk. This allows Lehrer and Madden to give better rates to consumers with higher insurance scores, who are less likely to file a claim.

Credit history helps predict the potential for future losses, but it is not the sole factor in determining the cost of your policy. It is one of several factors used to arrive at the best rate possible. The age of a drive and prior claim history are two other important factors that are also used to determine your rate.

What information affects my insurance score?

In determining your insurance score, the following information is used:

• Payment history (Do you generally pay your bills on time or are you more than 60 days late?)
• Bankruptcy, foreclosures and collection activity
• Length of credit history
• Amount of outstanding debt in relation to credit limits (Are you "maxed-out" or are you well within your limits?)
• Types of credit in use (e.g. mortgages, installment loans)
• New applications for credit you have requested

What if there is an isolated problem on my credit report?

Lehrer and Madden recognizes that sometimes people face difficult circumstances, such as medical collections, divorce, or job loss. Many of our carriers will take these situations into account when determining how much weight to give the insurance score in underwriting the policy. In most cases, an isolated instance of a late payment will not have a significant impact on your insurance score if you otherwise have an established pattern of responsible credit use.

The information in my credit history is personal and sensitive. What protection do I have against misuse?

Numerous federal and state laws and regulations are in place to protect you.

Under federal law, if the information in your credit history results in an "adverse action", by a company, that company must notify you and inform you about how to obtain a free copy of your credit report. You will also be provided with a description of your right to dispute the accuracy or completeness of your c credit history.

Will my agent have access to my credit report?

No. Your agent will be informed of your overall score when the policy proposal is created, but will not have access to the underlying information used to calculate that score.

How can I improve my insurance score?

One of the best things you can do is to make sure you pay your bills on time. That will help little by little with your credit history. You can also review how much credit you have. Are you up to your limit on a credit card? If so, that may also be considered an unfavorable factor. Consider how to reduce your debt without creating additional credit activity. Also, review your credit report regularly. Resources such as the American Insurance Association (www.aiadc.org) provide additional information about how to improve your credit history. Click here for a list of some ways to improve your insurance score.

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Financial Tips for Navigating through difficult times

April 2009

WHAT DO I DO NOW?

As Kipling wrote: "Keep your head about you as everyone is losing theirs."

If history shows us anything, things do eventually improve.

The stimulus plan will start to kick in later this year, creating jobs and perhaps helping soothe some of the enormous fears in the marketplace.

Five things you should definitely do.

1. Reduce your expensive debt. Devote some money to reducing credit card debt.

2. Get on a budget.

Budgeting is a lost discipline and one that should be rediscovered. There are several free websites: Mint.com, Quicken.com, and Wasabe.com that can help you sort out your spending and help save money.

3. Guard against inflation.

Currently inflation is a non-issue, but all the making for growth and inflation could come roaring back to life. For that reason, it's smart a portion of your fixed income investments in Treasury Inflation- Protected Securitas or TIPS. Commodities such as, oil and copper should be looked at as the demand will rise. Given the volatility of this market, keep a small percentage in this sector.

4. Have a stock market strategy.

Consider some stocks first through your retirement account for many of us that account has longer time horizon and built-in tax efficiencies. Diversify- A good rule of thumb is to use your age as the percentage of assets in safer bonds the rest in stocks or mutual funds.

5. Preserve what you have.

One of the lessons of the past few years is that the stock market and your home are not an ATM. They are assets that can rise and fall. Lesson is to be diversified and lean a bit more conservatively.

SO WHAT SHOULD YOU DEFINITELY NOT DO?

1. Don't bury your money in the backyard.

With things the way they are, it's tempting to simply opt out altogether. Fear of financial system failure has people thinking under the mattress or in a can is smarter. But it really isn’t. So at least keep your cash in CDs.

2. Don't chase returns.

This is a great temptation. Look at it this way, in the past few years, the temptation to chase returns lead people to buy too many houses, invest too heavily in soaring stock market and aggressively bid up oil. All of it ended badly.

3. Don't abandon diversification.

Rebalance your holding every year to reduce your exposure to high-fliers.

4. Don't stop saving for retirement.

We tend to focus on what’s right in front of us, current bills etc., rather than ignoring your account statements, as many of us have done, take a look to make sure they are diversified and balanced.

5. Don't ignore common sense.

Much heartbreak in the recent past has come from ignoring common sense. Common sense tells you you have to eliminate your big cost debt and get on a budget.

Excerpts from the Wall Street Journal.

Lehrer & Madden has been doing business for almost 75 years. We realize that servicing our clients is most important through good times and bad. We hope that by staying current with issues that affect all of us, we will start to see our way out the recessionary gloom to a brighter future.

Very best,

John F. Doherty

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Massachusetts Auto News

March 2008

We have stayed current with the changes to the Massachusetts Personal Auto System.

On April 1st, 2008, our existing fixed and established rating system gives way to a "Managed Competition" system.

Lehrer & Madden's goal as your Independent Agent is to help you understand how the new system works and provide you with the service and markets you have come to expect from Lehrer & Madden.

First of all, all companies in Massachusetts have filed the rates they will charge for personal auto. As you can imagine, there are hundreds of factors that go into these rates. Most companies will be providing Massachusetts drivers a rate reduction - somewhere between 6 - 8 %.

What we are doing is identifying many of the other factors that benefit you. These include: loyalty, combined homeowner and auto policies, driving record, multicar, to name a few. In many cases we are able to apply these credits directly to your policies.

In this system we will likely be able to offer even greater credits if we insure both your home and your auto. If we are insuring only one, please call us so we can provide you additional savings on your whole insurance program.

Lehrer & Madden represents Commerce, Travelers, Safety, Fireman's Fund, and soon Peerless. We can also access virtually all other companies through our partnership with ISNE (Insurance Services of New England).

You can count on us. If you have a question, please don't hesitate to call or e-mail us.

We have committed many resources and worked with our companies to provide us with the tools to help you feel secure in your coverage, price, and choice of an Independent Agent.

John F. Doherty, President
3/17/08

Additional information as well as answers to frequently asked questions can be found at http://www.massauto.com/

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What is a Hold Harmless Agreement?

November 2007

A hold harmless agreement is the transfer of liability from one party to another by written contract. Generally there are two parties, the indemnitor - the party who takes on the financial burden of another and the indemnitee - the party who transfers the liability.

Often while reviewing a contact their will be an area where one party will agree to assume the liability of another. The question then becomes how much risk are you willing to assume?

Limited: Indemnitor is responsible to the Indemnitee for negligence caused by the Indemnitor.

Intermediate: Indemnitor assumes responsibility for Indemnitee, in whole or in part, as agreed upon in a written contract regardless of negligence.

Broad: Indemnitor assumes responsibility regardless of fault for all parties within the contract.

So, how much risk are you willing to assume and how much can be transferred to your insurance policy? First things first, read the entire contract and review with your attorney before you sign. Negotiate wording within the contract, coverage and limits of coverage requested before you enter into the agreement, begin work or provide services. Don't forget to send a copy of the contract to our office for review, your policy may need to be endorsed to extend coverage.

Regardless of your operations, at some point you may be asked to assume liability for another. When this does occur please contact office so we may assist you in protecting your business.

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