Do you have questions about insurance? Rovner & Company has the answers.
CEO Mark Rovner sat down with Charmaine Sample-Hawkins to cover 25 Frequently Asked Questions about insurance.
Here’s a video of the interview.
Here’s a transcript of the video.
Charmaine Sample-Hawkins: Do you offer the cheapest prices?
Marc Rovner: That’s a great question, and one that we hear very often. We offer the most value. Very often, customers confuse cheapness with value. Our view is that once you’re paying for the insurance, you might as well have coverage. We first focus on providing our customers with the insurance that they need in the event of a loss. And then we look to mitigate the cost. Most often, you’ll find that we put together a custom-tailored package that offers really what the customer needs and not what they don’t. As a result of that, we’re able to save them money versus other agents but no we are not the cheapest.
Charmaine: What separates you from the competition?
Marc: There are a variety of things that separate us from the competition. Firstly, we have the ability and we’ve done this over 40,000 times, which is pretty rare. In addition to that, we’re quite relentless in terms of finding the solution that is appropriate for our customers. Really, it’s a matter of pairing what they need with the products that are out there appropriately. And then you are able to get the best value, and protect them the way they need to be protected.
Charmaine: Do I have enough coverage to cover my house?
Marc: That’s a question that we get all the time. And people often times confuse replacement cost with market value. Very often, people do not have enough coverage to replace their home. In terms of how much do they need: a person needs to think about should they have a total loss, a fire, or some sort of loss that would demolish their home completely; do they have enough coverage to rebuild the home from scratch? Very often, the answer is no.
Charmaine: What deductible should I take?
Marc: Another great question. It depends on the individual or the business in terms of their risk tolerance. When I say risk tolerance, I’m not referring to insurance risk. I’m talking about their deductible risk. For example, my personal view is that I do not want to pay to maintain a low deductible. I will take as high of a deductible as I can stomach in the event of a loss and reduce my premium. My threshold is higher than someone else’s. So, someone really needs to think about — are they going to be wiped out if they have to pay that deductible, or is it going to be a real burden to them? If it won’t be, then they probably have too low of a deductible and each decision maker needs to evaluate that for themselves.
Charmaine: What’s the appropriate Workers Compensation class code?
Marc: When talking about Workers Compensation class codes, this is a scenario where many people choose the wrong class codes. There’s a national organization called NCCI — where many states subscribe to — who you can call and they will give it to you free-of-charge. Once you give them a description of what your employees are doing, they’ll give you the class codes you should be using for that state. You should be using the accurate class codes and not assume because you have a policy enforced and the law says so, that the employees are covered. You should not make that assumption that you don’t need to notify the carrier. You should be notifying the carrier using the correct class codes, so you do not get surprised at year end with an audit and a crazy bill.
Charmaine: What drives the General Liability premium? (For example: Revenue, Square Footage, Payroll.)
Marc: That’s a great question. It depends on what type of business. If you think about a traditional retail store, say a supermarket, those traditional businesses have their liability rated by revenue. The concept is that the more business you did is indicative of more traffic. You have other businesses, such as contractors, where that may not be the best rating basis. For example, if you have a contractor who installs marble, they may take a quarter-of-a-million-dollar job to install marble where the actual cost of the materials is a very large component of that $250,000. So, the $250,000 in sales is not really reflecting their exposure and for them. Payroll may be better exposure. You may have a jeweler who is selling million-dollar diamonds. So, if he did $5,000,000 a year in sales, that does not necessarily mean he had a lot of foot traffic. And for him, square footage may be a better rating basis. Again, that’s something that we do. We do any analysis with our customers, review their business, we understand small business, we have an entrepreneurial mindset, and we make sure that the policy that they have appropriately matches their exposure.
Charmaine: Should I list my newly licensed child?
Marc: Great question that we get asked all the time. People have auto policies and they consistently do not notify their carrier of newly licensed children most likely because of the costs associated with it. Insurances usually run by what is called reasonableness — where, if it’s reasonable, then it’ll be covered and if it’s unreasonable, then it won’t be covered. The way I look at it is, if the child is driving and they get into a small accident, their insurance carrier would probably cover it. If it’s a big accident, it would be unreasonable for you not to mention it to them. And you’re giving them an opportunity to deny the claim for material misrepresentation of facts. There are discounts that are available that we can discuss with our customers. But once you’re paying for the insurance, you might as well be covered in the event of a loss. Very often, the greatest exposure is that child. That inexperienced driver can increase exposure from a liability perspective. I would absolutely recommend notifying the carrier of the child.
Charmaine: Should I pay my insurance in full for a discount?
Marc: That’s a fabulous question that we get asked all the time. It depends on the discount associated with it. There are a couple carriers that come to mind that offer a very substantial discount if you pay it in full. If you’ve got the money and you can save 25 percent by paying it in full, that might be an excellent opportunity for you. I am a big believer in not putting everything on installments and everything on a credit card. If there are too many installments, then there’s more opportunity for a premium to be missed and a policy to go into cancellation. I do like when people pay in installments because they make sure that they have the premium and the coverage enforced for the entire policy term. If it won’t be on installments, and there’s no discount associated with it then I encourage people to put things on auto-pay because it protects them.
Charmaine: Is flood included in homeowners insurance?
Marc: Absolutely not. Many people are very confused about this. Flood is excluded off all standard homeowner policies. So, you have no flood coverage on your homeowner’s policy. When we say flood, we are not talking about in layman’s terms. When you say that the toilet overflowed and flooded out the bathroom, that’s not flood from an insurance perspective. We’re talking about tidal waters or seepage or bodies of water that are in places that they shouldn’t be. It is absolutely excluded off your homeowner’s policy. But, it can be purchased through FEMA, and we have other private market solutions for flood. Once we’re on the flood topic, it’s our feeling that if you own a home then you should have flood insurance — regardless of where you’re located. If you’re in a high hazard flood zone then you absolutely need it and if you’re in a low hazard flood zone, the premium is relatively small and you should have it. After Hurricane Harvey and the losses that we’ve had recently, many of those affected by those floods were not in a high hazard flood zone.
Charmaine: If I’m not in a flood zone, do I need flood insurance?
Marc: Again, you don’t need it, and your bank may not require it. But, it’s the prudent thing to do. We believe that it’s best practice today and we’ve seen terrible losses in a variety of different locations. Just a few months ago, we had terrible losses in Baltimore, MD that were not in high hazard flood zones and was in Flood Zone X. Even Hurricane Harvey, I believe 70 percent or 80 percent of those losses by the flood were in low hazard flood zones. I absolutely feel that you should have flood insurance, even in a low hazard flood zone, and we recommend our clients do that.
Charmaine: If I’m in a condo, doesn’t my association cover insurance?
Marc: That’s a question we get asked all the time. You need to review the black book of your condo association — which defines the bylaws — but from a macro perspective, your condo association takes fees out of your monthly dues and they pay for an insurance policy on the structure. This is essentially the exterior of the building. Let’s say that there’s a fire. The condo association would rebuild your condo and give you back what they call a vanilla box. This would not include any of the permanently installed items — like those fancy tiles that you bought, the cabinets to your kitchen, and all those other things that add up quite quickly. So yes, your condo does have their own insurance — but that protects the actual building structure. The finishes, improvements, and betterments that you put into your condo and the contents are not included and personal liability is not included. So, you’ll need your own condo policy.
Charmaine: Why do I need building coverage in a condo?
Marc: Again, that’s related to what we were discussing. The building coverage is really improvements and betterments — so things that were permanently installed into the structure of the condo, like tiles, flooring, cabinetry, and things of that nature. Those sort of things can be insured under the building limit. And most often that carries a lower property rate than the contents. The idea is that nobody is walking away with your tiles, as it would be very difficult to steal them. So, they carry a lower property rate and it would be prudent to insure those sort of things under building coverage.
Charmaine: Is it worth it to get a wind mitigation?
Marc: In CAT states, or states that are exposed to catastrophic storms (like Florida), we get this question all the time from people who are buying properties for the first time. The answer is: Absolutely. The wind mitigation inspection goes through the specifics of the roof of the home, how it’s attached to the structure, the spacing of the roof to wall connection, exterior protections, and so on. Without it, the premium can be exponentially more than with it. So, I say for $75, it’s well worth the investment — especially if we’re able to find credits as a result of it.
Charmaine: Should I take a defensive driving course?
Marc: Great question. In many states — such as New York and New Jersey — by doing even the online course, you can save 10 percent on your auto insurance for as long as three years. So, if you have an expensive auto policy — which often times is a result of having some auto history — it may be an inexpensive and easy way for you to reduce your cost by up to 10 percent. So, sure if you want to save the money.
Charmaine: Why do we need an auto inspection?
Marc: Great question. We get this question all the time. People who have not changed insurance carriers in a long time are surprised by it. The concept is as follows: If you switch insurance companies and you have a late model vehicle, they will want you to do a cargo vehicle inspection — where they take a picture of your car. The concept is that they don’t want you not to maintain auto insurance, to total your car, give somebody like me a call to bind up a policy, and submit a fraudulent claim to the insurance carrier. When the car is not brand new or not very old, they’ll ask you to take a cargo vehicle inspection and take a few photos of the car, and put down a description of the vehicle to make sure there’s no damage to the car and that you’re not trying to do something nefarious.
Charmaine: What do you do differently?
Marc: What we do differently is that we’re relentless. I don’t think that there’s another agent out there who has the stick-to-itiveness we have. When you take that sort of approach and marry it with the level of experience we have and the number of carriers we have, we’re able to custom tailor a robust policy for our clients’ needs. Throughout the marketplace, there are very many insurance agents who offer low-end coverage and also have agents that offer high-end coverage. But they’re giving you boilerplate type of coverage. What we strive to do is to really understand what our clients need, and to craft policies they actually need. In doing so, we are able to offer them robust coverage at an affordable price.
Charmaine: Do you take credit card payments?
Marc: We do. It’s relatively new to the insurance industry — and when I say relatively, I mean probably over the last 10 years. There were many carriers that up until recently took no credit cards. Not every carrier takes American Express. A lot of buyers like to offer American Express because of the point programs and so on. However, we do take credit cards. We’re able to accept credit cards even on agency bill type policies.
Charmaine: What is an umbrella?
Marc: An umbrella is an excess liability policy. So, it extends the underlying insurance coverage. Say the liability limit on your home is $300,000 and you buy a $1,000,000 umbrella. That means you’re extending the underlying liability limit from $300,000 to $1.3 million in total. The reason why they call it an umbrella is that, like an umbrella, it extends on top over multiple underlying liability exposures. So, the $1,000,000 can excess over the home or the auto and your boat and plane — potentially at the same time. On the commercial side, it would work in a similar fashion. You can have an umbrella policy that will go excess over your general liability, your automobile liability, your employers’ liability, etc.
Charmaine: Will a replacement vehicle cost more or less?
Marc: That’s a question we typically get asked when people are trying to figure out what the premium is going to be when they’re evaluating a new vehicle. Usually, when you’re dealing with a newer vehicle, there are some newer safety features. So, that works in your favor. On the other hand, the vehicle costs a bit more, because it hasn’t depreciated yet. If it’s exactly the same model, then it will probably be similarly priced. But we’d need to evaluate it assuming rates haven’t changed. There’s no exact science to it. But in general, there’s an inverse relationship between the property of liability and the newness of the vehicle. The property costs a bit more and the liability less.
Charmaine: Why do I need uninsured motorist coverage?
Marc: If somebody’s involved in an auto accident and the other party was at fault, in an appropriate scenario the other party’s insurance would take care of your medical bills. Unfortunately, there are people who are driving around with no insurance, or that don’t have enough insurance to cover you for your medical needs at the time of that accident. It’s a coverage that you’re able to purchase on your own policy which says, in the event the accident is not your fault and you get injured, you can essentially access that coverage from your own policy. It’s great coverage to have, and everyone should have it. I, personally, years ago was involved in an accident where somebody ran a red light, and they had no insurance. So, I know firsthand what that means.
Charmaine: What is uninsured motorist and underinsured motorist coverage?
Marc: So that’s exactly what we were just discussing. One is when they have no insurance, and one is when they simply don’t have enough. They have state minimum limits, and somebody has substantial costs associated with the medical needs that they have. So, they just don’t have enough. That’s the difference.
Charmaine: Why is my policy canceling?
Marc: That’s a question we get all the time. Usually, the notice of cancellation that the client receives should detail why it’s being canceled. Most often, the reason for that is because of nonpayment of the premium, they miss a premium payment, and so on. Often times it’s a result of carrier recommendation or insurance inspection — where they didn’t meet certain guidelines. Sometimes it can be rectified, so it is important to look as to why the policy is being canceled. Did you pay the bill? Maybe you did, and it was crossed in the mail and it’s going to be rescinded shortly. Or, did they come out to your home? We just had this the other week, and the guy had two windows that were cracked. It just so happens that his son broke those windows playing ball with his friends, and they were in the middle of getting them replaced. As soon as we evidenced that they were secured, the policy notice of cancellation was rescinded. In terms of defining why someone’s policy is being canceled, they need to actually look at the notice of cancellation and it will spell it out for them.
Charmaine: What is additional insurance?
Marc: An additional insured on a certificate is an entity that wants to be named as an additional insured. They’re not named insured — meaning they’re not an owner of the policy, but they’;re being named for various purposes. For example, if you’re a commercial entity, and you’re a business that is going to be selling products to Walmart, then Walmart will require that you provide them with a certificate of insurance from an appropriate insurance carrier with appropriate limits saying that not only will insurance protect you in the event of a loss, but it will also add them as an additional insured. In the event that somebody sues them as a result of something that your product did and harmed them, then they’ll be protected as well. That’s the use of additional insured and typically it comes up with certificates.
Charmaine: What is a waiver of subrogation?
Marc: Let’s first define what subrogation is. Subrogation is where one insurance company sues another company. For example, if you’re involved in a car accident where your car got severely damaged and the other person was at fault and you decided to call up your insurance agency and say to please take care of the claim check, then they will most likely subrogate and go against the responsible party or their insurance company in order to collect. When somebody waives the right to subrogate, they waive the right to go against the third party. It comes into play often on the commercial side. For example, you bid on a job in a building where you want to redo their electrical work. Then, they’ll say OK you’re coming to do electrical work and we have faulty wiring, but we don’t want to get sued by you as a result of the faulty wiring. So, we want you to provide a certificate of insurance with a waiver of subrogation to say that you understand what you’re getting involved in and you waive the right to subrogate against the building for any contributing negligence. In those scenarios, they will often request a waiver of subrogation.
Charmaine: How do I understand what is covered by my policy?
Marc: That’s a great question. Stu Oberman, who was a legend in this business, used to look at a policy backward. He’d go to the back of the policy, because he first looked at the exclusions. The reason why he did that was that most of the policies he sold were broad form or better policies. What that means is that everything is covered, unless it’s specifically excluded. He would first look at the exclusions to see what wasn’t covered to get an idea of what was covered. That’s the way I learned this business and I still recommend that. If somebody wants to get an understanding of what they’ve got, then they can look at the declarations page first. Then go to the back and look at the exclusions, definitions, and so on — because you’ll get lost in the meat of the policy.
Charmaine: How is my jewelry covered?
Marc: That’s a great question. I’m assuming you’re talking about from a personal or a homeowners perspective. You virtually don’t have any jewelry coverage. And if you do, it’s on a very small sublimit. Contents coverage covers everything within the home — which would include furniture and clothing but also things of high value, like jewelry, fine arts, stamp collections, and silverware. If you’ve got jewelry, you really want to insure it separately on a personal articles floater. That’s the appropriate way to insure it. Any other way is not the right way.
Charmaine: Should I own the vehicle personally or commercially?
Marc: We get that question sometimes, usually from entrepreneurs. I usually don’t let the tail wag the dog, so it depends on how it’s being used. If you have a vehicle that’s being used in a business environment, then I would recommend titling and insuring it from a business perspective. Perversely, if it’s the opposite, then do it in a personal lines realm. Sometimes the lines get blurred when somebody leases a vehicle personally and end up using it in a commercial environment. In that scenario, I would have the insurance policy tailored as a commercial policy to have the individual named. You don’t want to let the insurance premium dictate how you’re going to operate your vehicle. It should be the reverse.
Charmaine: What’s a coinsurance penalty and a coinsurance clause?
Marc: Loosely speaking, those two terms are synonymous. But basically, it’s a requirement on very many policies that an insured insures their property up to a percentage — usually 80 — of the value of the property at the time of a loss. If you don’t, then there’s a penalty associated with it — where you take what you had divided by what you should’ve had and multiply it by a loss. For example, if you have $100,000 property, then you need to insure it up to 80 percent at the time of a loss — meaning $80,000. If there’s a $50,000 loss, they’e going to evaluate the total value of the property. And if you were insured up to 80 percent or more, then you’re okay. We do sell some policies with coinsurance clauses when it’s required, but we really don’t like doing it. We like to sell policies that have agreed-on amounts and replacement costs with no coinsurance penalty.
Charmaine: What does guaranteed replacement cost mean?
Marc: Guaranteed replacement cost means the insurance carrier will pay to replace what you’ve got, regardless of the limits set on the policy. If somebody’s got $1,000,000 on the policy for their home and at the time of the loss it costs $3,000,000 to rebuild, then the insurance company would pay $3,000,000 — even if they only had $1,000,000 on their policy. This is usually reserved for very high-end carriers like Chubb. But there are still a select few high-end personal lines markets that offer that.