Insurance can be difficult to understand. When it comes down to it, we just want to know we are protected if anything happens to our families, property or business. But why does it have to be confusing? Let us help you!
At IBC we have professionals ready to serve you and answer your questions, anytime. Here are some answers to your most common insurance questions.
Why do I have to insure the property for X amount when it’s only worth Y?
The biggest misconception policyholders make when evaluating if their property has proper insurance coverage is using market value as a cost basis.
Reconstruction cost is the cost to hire a contractor to replace the property as it is, using materials and design of similar quality. This amount isn’t the same as market value, which is the value that comparable homes are selling for. Reconstruction costs are usually much higher. There are many factors that play into the cost of reconstruction, including:
- Custom features: The materials in the building/home can be repurchased at a local retail store or do they require a specific contractor to replace them? For example, ornate moldings, custom window treatments and built in cabinetry.
- Age of the building or home: Older buildings tend to have materials that are not standardized and require special orders, for example, doors and windows. The older the home, the greater the cost to reproduce the unique features given the difficulty in sourcing some of the materials. As well as the specialized craftsman necessary to rebuild the home.
- Site accessibility: New properties are typically built on empty lots that large machinery can easily access. The time involved in reconstructing existing homes with landscaping, other buildings, neighboring properties, and community restrictions can increase the cost.
- Time: Many property owners want to be involved in the reconstruction process. While understandable, the time needed to research and consult eligible contracts can increase the cost.
- Demolition and debris removal: After a loss there may be significant cost for clean up. These costs are often not considered by the policyholder.
- Build codes: Buildings being rebuilt have to be updated to meet current building codes, which may not have been in effect when the building or home was built and can result in increased cost.
If I rent a vehicle, does my auto insurance cover me?
If your regular auto insurance covers collision damage to your insured car, it also covers damage to a short-term rental. But this coverage is generally limited to driving in the U.S. and maybe Canada. Even if coverage is provided, it doesn’t necessarily mean every exposure is included.
For example: Uninsured/underinsured motorists coverage and emergency roadside assistance may not be available. If an accident occurs in a rental car, the value of the vehicle may be reduced even after being repaired. This is referred to as diminished value and is not covered by all policies.
Rental car companies may charge for “loss of use” which is the potential revenue lost while the car is out of service being repaired, regardless of how many other vehicles the rental company may have. This “loss of use” is typically calculated at the full retail rate of the car, which could become a significant exposure.
Many credit cards provide collision coverage for car rentals, provided the client uses the card to secure the rental. However, note that this typical credit card benefit does not cover diminished value or administrative costs. Coverage on most cards is secondary, meaning the card picks up only what a policyholder can’t first recover from their own insurance. Also, the insured still has to pay the rental company up front, then file for reimbursement from the card issuer.
What is a copayment or coinsurance and how does it work?
Copayment or a Copay is a fixed or flat dollar amount you pay per type of service. Some copayments don’t require a deductible to be met or paid first, and some copayments DO require your deductible to be paid first. It’s important to know what services require you to meet a deductible first and which you only have to pay a copayment.
Coinsurance is the percentage of costs that you must pay after paying your deductible. For example, a plan that has 80/20 coinsurance means you pay 20% of the covered cost while the insurance plan pays 80% of the cost after you pay the deductible.
Contact your local Sioux City insurance experts
At IBC, we are here to serve you at the highest level. If you have an insurance question, reach out to us, we are happy to help. And like us on Facebook for more information and answers to our frequently asked questions.