Interesting Insurance Tidbits...

 

   INTERESTING INSURANCE "TIDBITS"

• Jewelry
• Jet Ski Rental
   

   HIGHER INSURANCE PREMIUMS (May 2002)

Insurance premiums have been rising recently on both commercial and personal insurance policies. There are very definite reasons for these increases that affect almost all of us.

Generally speaking, the years 2000 and 2001 were very unprofitable for the insurance industry. Premiums had been artificially low, particularly on property insurance such as primary homes and commercial buildings such as offices. Intense competition was the cause. Unexpected lawsuits like the Black Mold cases in Texas cost the insurance industry millions of dollars to settle claims that were never anticipated. Natural disasters around the world are another factor. We generally think of insurance in terms of the United States. However, as the third world countries become more modernized, the insurance industry has become a worldwide player affected by typhoons in the Far East and earthquakes in the Middle East.

Insurance companies often do not make their profits from the premiums they collect. Payments of claims and expenses of doing business usually offset premium income. The profits of an insurance company come from investing premium dollars in the stock market prior to the time the dollars are paid out as claims or expenses. The falling and sluggish stock market eliminated much of this source of income in the 2001- 2003 era.

In mid-2001, insurance premiums began to rise as insurance companies began to recoup their losses. Then came September 11. The terrorists attacks on the United States were certainly unforeseen and unpredicted by the insurance industry. This national tragedy cost the insurance industry upwards of $40 Billion. This man-made catastrophe affected almost all insurance companies - standard companies, the excess markets, the reinsurance companies, life insurance companies. Hardly a company was untouched but it is a tribute to the strength of the insurance industry that the companies were able to pay the claims and remain solvent.

Put very simply, this $40 Billion had to be recouped by the industry and recouped fairly rapidly. Many companies fully expected to offset their 9/11 losses by December 31, 2002. The dramatic rise in insurance premiums was the result.

Another factor causing higher premiums for those of us who live along South Carolina's beautiful coastline is the threat of hurricanes. Hurricane Hugo in 1989 and Hurricane Andrew in 1992 were the first major storms to strike the East Coast since the rapid development of the coast began. When these hurricanes hit, insurance companies had little idea of the amount of insurance they had in place in hurricane-prone areas. Insurance companies with large amounts of exposure in South Carolina and Florida were hit hard and, in some cases, were forced out of business due to the large payout of claims. Other companies insuring along the coast took a long, hard look at their exposure. They were able to use computers to determine their exact exposure and used computer models of potential hurricanes losses to examine their ability to absorb the loss.

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TIPS ON INSURING JEWELRY

Is your jewelry properly insured? The standard homeowners policy provides coverage on your jewelry for the perils insured against as described in the policy, such as fire, vandalism, theft, wind, etc. The policy does restrict coverage to only $2,500 when theft is involved.

The best way to insure your jewelry is by adding a schedule of items to your homeowners policy. Each item of jewelry is specifically described on the schedule and a value and amount of insurance established. This schedule is added to the policy by an endorsement that expands coverage from named perils of the basic policy to an all risk (subject to exclusions) form.

Many times, the stone (diamond, for example) is just lost from the setting of the item of jewelry. This type of loss would be covered if the item was listed on a schedule. It would NOT be covered by the basic policy since “lost” is not a covered peril.

Insurance companies may require an appraisal or a bill of sale to verify the amount of insurance.

Commonly worn pieces of jewelry such as an engagement ring should be insured on a schedule. The cost is usually about $10 for every $1000 of insurance.

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THINK TWICE BEFORE RENTING A JET SKI

     Warm weather is coming and a popular recreational activity involves the rental and use of jet skis. Perhaps a member of your family will rent a jet ski some time during this summer. Have you thought about the liability exposure you are assuming in the event of an accident that causes injury to a third party? For example, your teenage daughter rents a jet ski and hits a swimmer, knocking out his teeth and causing many years of reconstructive surgery for facial injuries.

Do your existing insurance policies provide coverage? Surprisingly, neither your personal automobile nor your homeowners policy provide coverage.

Coverage for the above accident is provided under a personal umbrella policy. Do you have such a policy? The cost is usually low, less than $200 per year for $1,000,000 insurance and the policy is usually issued by the insurance company that handles your personal automobile policy. The personal umbrella policy does require your homeowners and automobile policies to have certain limits of liability. A deductible, or retained limit, usually applies.

Interestingly, or oddly, your homeowners policy would provide coverage in such an accident described above if the jet ski was borrowed instead of being rented. For example, your son borrows your neighbor's jet ski and injures someone while operating the jet ski. You have coverage under you homeowners policy.

In neither event, rented or borrowed, does the homeowners policy provide physical damage coverage on the jet ski itself if the jet ski sustains damage while your child is operating it.

 

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