Phelps Insurance answers your most frequently asked questions.
While the information provided below is not meant to replace the personalized guidance of our knowledgeable insurance agents, it is an excellent reference guide that you can return to again and again, whenever you need to. Please don’t hesitate to contact us if you need further explanation or have additional questions. It is our pleasure to assist you.
Q: What exactly does a homeowners policy cover?A: “Exact” coverage is impossible to define because there are different policies and about 900 insurance companies writing property/casualty business in the United States. However, 80% of homeowners policies are based on a standard form. All homeowners policies cover two important areas: property and liability. Property insurance covers your structures and possessions. Personal liability, as its name implies, means you're legally obligated to pay money to another person for actions caused by you, your family, or your property. That liability extends to medical payments to others for injuries caused by you or your family.
Q: What do I need to know when purchasing homeowners insurance?A: This is a three-part answer:
- Get the amount and type of insurance that you need.
- Determine the amount of personal property insurance and personal liability coverage that you need.
- Select any additional endorsements you want to add to your policy. For example, do you want the personal property replacement cost endorsement?
Q: What is "actual cash value"?A: When "actual cash value" is used in a policy, a policy owner is entitled to the depreciated value of the damaged property.
Q: What is “replacement cost"?A: When "replacement cost" coverage is used in a policy, a policy owner is reimbursed an amount necessary to replace the article with one of similar type and quality at current prices.
Q: Where and when is my personal property covered?A: Coverage C of a homeowners policy provides named perils coverage. This applies to all your personal property (except property that is specifically excluded). Personal property is covered anywhere in the world.
Q: Are floods, earthquakes, and other natural disasters covered?A: Most catastrophes are covered. Flood and earthquake damage, however, are not covered by a standard policy and both perils are more common than many people realize. We can advise you on such normally excluded conditions as floods and earthquakes and arrange coverage as needed.
Q: I recently purchased a $3,000.00 piece of jewelry. Is it covered under my homeowners policy?A: The homeowners policy does provide coverage, but with a limit of $1,000.00 and only for theft. To insure the item for its full value and all risk coverage, it is necessary to provide an up-to-date appraisal. Scheduled items are not subject to the homeowners deductible.
Q: Am I protected from Identity Theft?A: Identity fraud expense coverage is available for an additional yearly premium of approximately $35.00. Identity fraud is the fastest growing white-collar crime and this coverage will cover expenses incurred as a direct result of identity fraud during the policy period. We strongly recommend this coverage.
Q: Are there exclusions I should know about?A: Exclusions listed and defined in your policy might include neglect, intentional loss, “earth movement,” general power failure, and even damage caused by war. If you fail to take care of your property (e.g., a leaky roof), you might not be covered. Obviously, if you intend to lose an object or damage your property, there's no coverage. One other exclusion that can be costly is the Ordinance or Law exclusion. Building codes established by governmental bodies that drive up the cost of rebuilding or repairing after a loss occurs might not be covered by your insurance policy. Thus, if you discover when replacing damaged property that current law demands higher grade or more expensive materials than those you're replacing, the new materials might not be covered fully.
Q: How expensive is renters insurance?A: Renters insurance is typically available for as little as $150.00 a year, but the cost is directly related to the amount of insurance protection that you need.
Q: Does my landlord's insurance protect me?A: Generally, no. The property owner's insurance covers the building itself and seldom a tenant's possessions or liability. Clarify this with your landlord before signing a lease.
Q: When purchasing auto insurance what should I consider?A: There are several things you should consider when purchasing auto insurance that your independent agent will help you with. Here are a few:
- Purchase the amount of liability coverage that makes sense for you
- Select the optional coverages you want
- Decide which company to purchase insurance from
- Don't base your decision solely on price; other factors like service and claim response are extremely important in selecting the right insurance
Q: What is collision physical damage coverage?A: Collision is the loss you incur when your auto collides with another vehicle or object like a telephone pole.
Q: What is comprehensive physical damage coverage?A: Comprehensive provides coverage for direct physical damage losses you might incur to your car, truck or other vehicle from something like a hailstorm.
Q: What happens when I loan my car to someone? Is that person covered by my policy? Am I still covered?A: Yes. Liability and coverage for physical damage (i.e. Comprehensive and Collision) always follow your car if permission to use the vehicle was given. Plus, if the driver of your car is insured, his/her policy will also be available to cover the cost of damages and injuries. The same rules apply when you borrow someone else's vehicle; your own insurance follows you no matter whose car you're driving. However, this only applies if it is a substitute vehicle, not one you use regularly. The vehicle owner's policy is the key coverage in the event of an accident and your policy would be excess.
Q: My child received a learner's permit to drive today. Can I add him or her as a new driver on my auto policy?A: No, the insurance company will not add a driver to a policy until they have an actual driver's license. However, your child will be covered while driving on a permit as long as he or she is driving with an operator who has been licensed for over one year.
Q: I recently moved to Massachusetts and obtained a new driver's license. Will I get credit for my good driving record from my previous license?A: If you have been driving for more than six years you can get credit for your good driving record. You must provide your insurance agent with your driving record (in English) from your previous residence (either state or country). The insurance company will then adjust your SDIP rating accordingly.
Q: While on vacation in Florida, I will be renting a car. Does my auto insurance policy provide coverage?A: Yes, as long as you are in the United States, their territories, and Canada. However, you are limited to the coverage (liability and physical damage) of your own vehicle, not the vehicle you are renting. For example, if you own a 1990 Ford Escort and you rent a Porsche, you will be covered for the value of your Escort, not the Porsche in the event of a collision or comprehensive loss. Please note that you are not covered while renting a vehicle in a location other than stated above.
Q: How does where I live affect my premium?A: Where you keep your car directly affects your chances of having an accident or becoming a victim of theft or vandalism. The likelihood of encountering these problems increases in larger, more densely populated cities, while such incidents remain relatively low in rural areas. Additionally, the time and efficiency of police response and law enforcement, local road and traffic conditions, and the quality of local medical services can affect regional insurance rates. Some insurers even factor in the litigation rates in a given area (how many lawsuits are filed, go to trial, out of court settlements, and their amounts).
Q: Am I covered for natural disasters or “Acts of God”?A: Comprehensive insurance, which covers you for fire and theft, generally covers you against damage by flood, earthquake, hail, and other natural perils, except when your car is overturned (which is technically considered a collision). If you have specific concerns about the safety of your vehicle in natural disasters, contact us for information on catastrophic coverage.
Q: How can I challenge my insurers if they refuse to cover a claim?A: Usually, insurers that refuse to cover a claim have a strong legal reason for doing so — even if you disagree. First, contact us if you feel you're being treated unfairly. Your agent is your strongest advocate in insurance matters. But if it's a legal problem, you might have to hire a lawyer.
Q: How much life insurance should an individual own?A: Rough "rules of thumb" suggest an amount of life insurance equal to 6 to 8 times annual earnings. However, many factors should be taken into account in determining a more precise estimate of the amount of life insurance needed. Important factors include:
- Income sources (and amounts) other than salary/earnings
- Whether or not the individual is married and, if so, what is the spouse's earning capacity
- The number of individuals who are financially dependent on the insured
- The amount of death benefits payable from Social Security and from an employer sponsored life insurance plan
- Whether any special life insurance needs exist (e.g., mortgage repayment, education fund, estate planning need, etc.)
Q: What about purchasing life insurance on a spouse and on children?A: In certain circumstances, it may be advisable to purchase life insurance on children; generally, however, such purchases should not be made in lieu of purchasing appropriate amounts of life insurance on the family breadwinner(s). It is of utmost importance that the income earning capacity of the primary breadwinner be fully protected, if possible, through the purchase of the required amount of life insurance before contemplating the purchase of life insurance on children or on a non-wage earning spouse. In a dual-earning household, it is important to protect the income earning capacity of both spouses. Life insurance on a non-wage earning spouse is often recommended for the purpose of paying for household services lost at this individual's death.
Q: Should term insurance or cash value life insurance be purchased?A: Although a difficult question – one whose answer will vary depending on circumstances – several principles should be followed in addressing this issue. It must first be recognized that in any life insurance purchasing decision, there are at least two basic questions that must be answered:
- "How much life insurance should I buy?" and
- "What type of life insurance policy should I buy?"