Category Archives: Tips and Advice

Planning For Hurricane Season

hurricaneTypically, hurricane season runs from May 15th to November 15th of any given year. Some of the lessons of SuperStorm Sandy are that you don’t have to be on the coast to suffer extensive damage to homes, commercial property and the loss of income associated with business closures and the resulting loss of earnings.

Many people continue to struggle from the effects of this storm and many businesses are nowhere near back to normal functioning. Off Premises Utility Services coverage was one of the limited means of recourse for those suffering damages from Sandy and for the loss of income sustained as a result of losing power. This coverage provided for losses due to lack of incoming electricity caused by damage from a covered cause (such as fire, windstorm or flood if coverage was purchased) to property away from the premises—usually a utility generating station. The coverage is also referred to as “off-premises power coverage.” However, it is important to remember that such coverage is not provided by standard property insurance policies and is only available by endorsement. Utility service interruption coverage endorsements vary widely as to what utility services are included, whether both direct damage (damage to property) and time element loss (loss of earnings) are covered, and whether addition, not all business income coverage is the same.

Damage to property, ensuing power interruptions and road blocks and/or closures can force a business to cease operating. The absence of personnel and suspension of operations can cause overall financial effects not contemplated by traditional coverage. Especially in cases where damages are caused by heavy rains, rising tides, and heavy winds, without the proper coverage, you could find yourself out of luck and out of business quicker than you ever imagined.

The best way to avoid catastrophe is to have a plan. We here at Petschauer followed our Disaster Recovery Plan during “Sandy” and it made all the difference to our customers and to the continuation of our business operations. By a pre-arranged disaster plan, we all knew what was expected of us and how to swing into action. We were able to work from our homes using our cellular telephone to service customers, report claims, counsel our clients and get restoration underway whenever and wherever possible.

Nobody, not even the meteorologists, can predict with complete accuracy the extent of the damages caused by wild weather conditions. They can, however, issue hurricane, tornado, coastal flooding watches, warnings and advisories all of which can help to better prepare us for approaching deleterious weather conditions. However, once the warnings are in place, insurers generally issue moratoriums against binding any new coverage until after the storms have passed. So, the best offense is truly a good defense or in this case a set of sensible, comprehensive planning which includes making sure to purchase those insurance coverages that can actually make a difference in times of disaster.

By Karen Skoler, CPCU

How Much Insurance Do I Need?

calculatorAn interesting question and perhaps the most frequently asked when trying to determine the limit of insurance necessary to protect your property in case of loss. In insurance lingo, this concept is known as “insuring to value.” When trying to determine what this limit should be, most people immediately think of the market value of their property. However, market value has no bearing on the cost to rebuild or repair in case of loss. Frequently, clients insist that their property be insured for the selling price they believe they can get in today’s market, or for the price they paid when they purchased the property. This thinking can inflate the cost of the insurance, or worse yet, leave one improperly (underinsured) insured at the time of a loss. So what standard should be used to determine the correct limit of insurance?

Keep in mind that land doesn’t burn and, therefore, doesn’t need to be repaired or rebuilt. So it follows, that even if you paid separately for the land and the structure, you don’t need to include the value of the land in the limit of insurance you choose. Structures can, and do, burn including both the main structure as well as any “appurtenant structures” such as garages for example. When establishing the value of your property you want to choose a limit of insurance that reflects the cost to repair of rebuild in case of partial loss or total loss. When in doubt a good rule of thumb, used by insurance carriers, is $175 to $200 a square foot. (Keep in mind that this figure is only to be used as guide when trying to determine insurance to value.) Since inflation is often a factor in contracting costs, many insurers include automatic percentage increases in their policies which range from 2% to 8% a year to cover such contingencies.

There is also an 80% rule which is utilized by insurance carriers. This rule, called “Coinsurance,” requires that a homeowner or building owner have a limit of insurance that is equal to at least 80% of the total replacement cost of the structure. A breach of this requirement, results in a penalty that can leave the property owner a participant, or a “coinsurer,” at the time of loss. In short, the insurance company will only pay a loss based on the limit of insurance carried, to the limit which should have been carried to meet the 80% requirement. Often clients think that they can save money by choosing an arbitrary building limit, until they encounter this situation at the time of loss and then it is too late!

For example, I own a home with a replacement cost of $300,000. (Some of my neighbors have recently sold similar homes on my block for upwards of $450,000. Remember, however, that the price I can sell my home for has nothing to do with the limit of insurance I need. If I were to build an exact duplicate of my home on some exotic island it might sell for over $5 million, but the replacement cost is still that same $300,000.) 80% of $300,000 is $240,000 which is the limit of insurance I need to meet the 80% requirement. Any lesser amount will generate a penalty. As a consequence, I won’t be paid in full at the time of loss. Let’s say that I decide to insure my property for $200,000. Subsequently, I have a loss and the damages are approximately $100,000. Even though this is not a total loss, undoubtedly, I will suffer a coinsurance penalty. Here is how this works: $200,000/$240,000 = 91.67% and the carrier will only pay me 91.67% of the loss or $91,670. The remaining $8,330 is my portion of this loss, and on top of this, the carrier will further reduce my payment to reflect the deductible I chose when I took out my policy.

Remember, any renovations or major changes to structure such as adding a room or extending the property will change this requirement, so it is imperative that you review your policy limits with your agent on, at least, an annual basis!

– Karen Skoler, CPCU

Under What Conditions Would You Cancel Your Personal Auto Insurance?

cancelledRecently, one of our clients called to ask us if they could cancel their personal auto policy. The answer to this question is “yes” provided that they turn in their license plates to the motor vehicle department, obtain a receipt (an FS-6) and send it in to us, their insurance agent, to cancel their policy. Without this receipt, we can’t cancel the policy. That is the law!

This prompted me to think about what conditions might lead someone to want to cancel their auto insurance policy. Here is a list of some possible reasons:

Getting rid of your automobile via sale, gift to another, making a decision to stop driving;

Receiving a suspension or revocation of your license in the State of NY. It is against the law to drive a motor vehicle in New York State with a suspended or a revoked license punishable by jail time, probation, loss of your vehicle as well as fines the imposition of fines which can be levied up to $5,000. As for driving in states other than New York, with a suspended/revoked license, most states participate in the National Driver Register (NDR) which has a database that includes and shares driver info regarding suspensions and revocations in most states. This protects other DMV’s from issuing licenses to such drivers who are at risk or whose records have been tagged with an alert. In addition, there is also a Driver’s License Compact (DLC) between most states which helps each state monitor suspension and revocations while their resident drivers are out of state. This measure helps the “home state” as well as the “guest state” put their own terms on whether or not someone is allowed to drive with a suspended or revoked license regardless if they are a resident or non-resident;

Your car is stolen and you have no intention of replacing it;

You have too many accidents and/or tickets on your record making the cost of your insurance prohibitively expensive.

Interestingly enough, having to turn in your license plates is an excellent requirement and one that absolves you of any financial responsibility once the plates are turned in. The motor vehicle department actually destroys the plates so that they can no longer be used by anyone else. This protects you from any ongoing financial responsibility.

So should you decide that you no longer have a need for your automobile, remember that without the FS-6 we can not cancel your policy. And, please, we implore that you do not let your automobile policy cancel for non-payment of premium as the insurance company, by law, must notify the Motor Vehicle Department. This can result in major fines and/or suspension of your driver’s license. If you have any other questions, we suggest you notify your insurance immediately.

– Karen Skoler, CPCU

The Importance of an Independent Insurance Agent

Heidi & ErwinFor the last two weeks we have been discussing different elements of a policy that affects a premium. We stressed that not all policies are written the same way even if the Dollar amount of coverage is the same and this, of course, will affect the premium. Therefore, we determined that it was extremely important to review the details or fine print of each coverage provided in the policy. However, how can busy consumers be expected to know and understand all the finer points of an insurance policy? You have enough on your plate without having to become an insurance expert too!

This is where a good insurance agent or broker comes in. Imagine if you woke up with a high fever, nausea, an ugly rash, and a nose bleed. While you might look your symptoms up on the Internet to get an idea of what you had, would you go all the way to finding out what medicine you should take and then go to the pharmacy and buy it without ever seeing a trained physician? Common sense screams “No!” A visit to your trusted doctor is a foregone conclusion. Likewise, you obviously should do your homework before you purchase any insurance policy, but to do so without the advice and counsel of a trained insurance professional could lead to much heartache in the future.

Remember that your independent insurance agent or broker is like your real estate agent or attorney. They work for YOU. Just like a real estate agent is the go-between between you, the buyer of real estate, and someone selling property, insurance agents and brokers are the go-between, between you and the various insurance companies to which they have access. Anybody can sell you a policy, but GOOD insurance agents and brokers are not there to merely sell you an insurance policy. They should also provide you with sound advice about which of the many options is best for you and make sure that no gaps are left in your overall risk protection program. So when discussing insurance quotes with your agent or broker, discuss the entire quote including the details, not just the price. Always ask questions. Make sure you totally understand what you are buying before you buy it. Believe it or not, there is nothing more professionally rewarding than to obtain the best coverage for a client and still have that client save a lot of money!

So, how do you find a GOOD insurance agent or broker? Well, how do you find a good doctor, dentist, lawyer, contractor, or almost any other service provider? Referrals. Speak with your friends, co-workers, family members, and other people you trust and ask them who they use and if they would make a recommendation. Also ask WHY they would make the recommendation. Ask about the advice the agent or broker gives, the problems they helped avoid, and the satisfaction or dissatisfaction felt after submitting a claim. This will give you a good idea of who to use as your agent or broker too! Find someone with whom you can partner and trust so that you not only get insurance you can afford, but also insurance that protects you, your family, and your hard-earned assets.

– Ray Alvarez

Insurance Match Game #3


Another batch of questions for you Insurance “experts”. Let’s see how many you can guess this time!

Homeowners Policy
Fiduciary Liability
Directors & Officers Liability
Cyber Liability
Personal Auto Policy

11.) My neighbor loves to practice his golf swing in the backyard. So far he has broken our picture window three times. What a relief to know that he has this policy in force.

12.) When my son turned 18 he was licensed to drive. Now that means the family car is never idle. In case of an accident, this policy would respond.

13.) My business information is on my computer. If such information was to be accessed by an unauthorized person, this policy would help pay costs associated with such a breach.

14.) I sure hope that the person in my company in charge of making decisions as to how we invest our 401K money knows what he is doing. If not, this policy might be needed to set him and us straight.

15.) Even those at the top of the “food chain” are not exempt from being held responsible for making errors, leaving out information, or making misleading statements in the course of their jobs. A claim against one of these very important executives could be handled by one of these policies.

See how well you did, find out the answers here!

Insurance Match Game #2

insurancequestionsAnother batch of questions for you Insurance “experts”. Let’s see how many you can guess this time!

Business Owners Policy
Workers’ Compensation Policy
Commercial Package Policy
Crime Bond
Professional Liability

6.) When one of our workers complained of having ruptured a spinal disc as a result of installing a huge boiler in a downtown office building, we were glad that this policy was available.

7.) When we discovered that our bookkeeper, Isabelle, was embezzling money and paying herself and her friends out of our company’s profits, you had best believe that we made a claim under this policy.

8.) My dentist, my doctor, the local deli, my barber and my beauty shop all have this form of insurance policy. If you are starting a new, small business, one way to obtain good fire and liability coverage and still save money is to purchase this policy.

9.) My Uncle Byron thinks he is the greatest accountant in the world, but if he makes a mistake and I am called into the IRS, you better believe that I will make a claim against his policy.

10.) My business is multi-faceted. I ship goods to and from China, I manufacture a lot of products here and abroad. My products are sold in stores, at flea markets, from door to door and in major department stores. If someone says that my product caused them injury, I had better be prepared to have the claim defended. This policy says that the duty to defend is greater than the duty to pay.

Find out the answers here!

Insurance Match Game #1

We are all purchasers of insurance policies whether it’s a Commercial policy or a Personal policy, but do we really know what we are buying and which policy would respond to a claim? Take this 5 question quiz and test your insurance IQ:

Umbrella Policy | New York State Disability | Travel Accident Policy | Employment Practice Liability | Business Auto Policy

1.) Last year my daughter flew to Africa nine times in connection with her job. On the last trip her plane had an accident on the ground and a number of people in her company were injured. It is a good thing that her company had this policy in force.

2.) In the era of allegations against firms for wrongful hiring practices, gender discrimination and sexual harassment, every business should consider this coverage as part of their insurance program.

3.) There is no doubt that we live in a very litigious society. When we receive a claim against us personally or professionally, and the claimant is asking for a $5 million settlement, this is surely the policy to have.

4.) We send our drivers for defensive driving courses and check their motor vehicle records prior to hiring them. However, now and then they do get into accidents and that is when we are very glad to have this insurance in place

5.) My husband loves to play softball on the weekends. However, when he broke his leg and had to be out of work for six weeks, we were grateful that his employer provided this insurance.

Click Here For the Answers!