What does it mean to bind a quote?

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“Binding” insurance coverage is an important feature once you find a quote that you like. In the non-insurance world to “bind” is to accept the duty of keeping a commitment. Translated to the insurance industry, when your agent “binds” your quote, it means that you now have coverage in force.

As you may be aware, receiving an insurance quote does not create a policy, nor any legal commitment from the agent or company to provide coverage. The cost quote you receive from your favorite, trusted agent, however, becomes real when your coverage is “bound.”

Many independent agents have the authority from the companies they represent to bind coverage for you. After you select the policy you want, your agent will issue a “binder,” the written evidence of your coverage. You can use a binder as a commitment to issue a policy, which you typically receive around 7 to 14 days after you get coverage via a binder.

Most binders are good for 30 days, giving the company time to issue your policy. Should your insurance company experience an issue that prevents them from creating your actual policy within this period, they may give you a “revised binder” as evidence of in-force coverage.

Agents and companies use standardized (or company-specific) binder forms. Veteran independent agents can bind your coverage immediately after you choose the coverage you want. If you need almost immediate hard copy, many agents can fax or email you copies of your binder.

What is Replacement Cost?

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It does not matter if you live in Allentown, Hanover, Middleton, Center Valley or any of the surrounding areas, your insurance plan may offer something that is referred to as “replacement cost” coverage. So, what exactly is replacement cost?

By definition, replacement cost insurance covered is one of the ways an insurance company calculates the amount of money you will receive in case of a loss, such as damage or theft. The value of the item will be based on how much it will cost to replace the item according to today’s prices. The insurance company will compensate you for the actual cost of replacing the damaged or stolen property and if the exact same item is no longer available, you will be compensated for an item that is similar.

When seeking an insurance policy with replacement cost coverage you will want to ensure you property is fully covered. For example, if you purchased your home for $150,000, it may take more than that amount to actually replace it. Check with you insurance agent to ensure you have enough coverage to rebuild your home.

Keep in mind that replacement cost is different from actual cash value. Actual cash value is when the insurance company will compensate you for the replacement cost minus any depreciation values. Depreciation values are calculated based on the age and category of the property and you are paid the difference from the replacement cost.

What is a Deductible?

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Simply put, a deductible is a pre-set amount that you must pay before your insurance will pay a claim. Once you pay your deductible, the insurance then kicks in and pays the rest. In a sense, when you pay for an insurance plan, the deductible is part of your payment. A plan with low insurance premiums comes with a high deductible and vice versa.

Deductibles come in many different forms. Health insurance plans in Bethlehem and Allentown often come with an annual deductible that must be satisfied before insurance companies can make any payments. These payments usually do not include co-pays or co-insurance, meaning you may be responsible for two separate payments. Deductibles are also common elements of insurance policies for cellular phones, engagement rings and other personal properties.

The highest deductible amounts are found in auto and home insurance, the forms of insurance with the greatest potential for damages. As is the case with other types of insurance, a lower deductible means higher premiums, but given the high cost of auto and home deductibles, this may be a more desirable option. Both auto and homeowners insurance come with $500 deductibles, which can be changed if the policyholder desires. However, doing this may leave the insured with an excessive financial liability in the event of an incident or higher monthly premiums than desired.

Why Woodburners Change a Premium

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Woodburners are comfortable to have around the home, as they give off considerable heat during the cold winter months, and they also double as an affordable alternative to gas and electric stoves as a means to heat and cook meals. Despite the functionality of woodburners, you may see a significant increase in your homeowner’s insurance premiums if you choose to install one in your home.

While not all insurers place a surcharge on insurance policies that cover homes with woodburners in them, many do. This is because woodburners present a high fire hazard in comparison to other types of heating and cooking equipment. In fact, they are responsible for a large percentage of home heating-related fires and deaths every year.

If your home already has a woodburner or you want to install one on your property for affordability or aesthetics, make sure it is installed correctly according to the manufacturer’s recommendations, as well as your city’s ordinances and building codes. Have existing woodburners inspected for corrosion, chimney blockage and improper installation.

By providing your insurer with proof that your woodburner is installed, maintained and working correctly, you may be able to have the woodburner surcharge on your homeowner’s insurance removed. If your insurer still charges extra to have a woodburner, consider shopping around for a more affordable policy.

Remember, however, that regardless of whether or not your insurance costs more for a woodburner in your home, it is important to have it inspected and properly maintained. Your home and family’s safety may depend on it.

How home building material impacts your policy rate

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Homeowner policy premiums reflect many characteristics of the property, but primarily protection class and building materials. Protection class describes how readily the home is accessible to fire fighters and water sources. Building materials appropriate for the perils inherent in the location reduce premiums; more risky construction choices raise premiums.

A frame home may burn down, but it is less likely to sustain earthquake damage than a poured concrete construction. The poured concrete home will sustain little damage in hurricanes compared to frame homes. Premiums are based on the appropriate choice of building materials for the geographic area.

Three modern home constructions dominate the market: frame with siding, frame with masonry veneer, and solid masonry. Because the fire hazard tends to dominate the rates, for the same value homes, the frame sided home will be most expensive premium and solid masonry the least.

Stick built frame homes generally have lower rates than modular homes; however, the values tend to be higher. For equal values, the stick built home will have a lower premium.

Condominiums, particularly high rises, are built from a wider variety of materials and to a more strict building code. Usually, the association insures the exterior structures. The contents coverage premium is not greatly affected by the building materials.

Bolt locks, security systems, smoke detectors and sprinkler systems are considerations in premium calculation.

Why Landlord Insurance is Important

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Most landlords take precautions to rent only to responsible and trustworthy tenants. But even with the best intentions, sometimes accidents happen that cause a landlord to foot a heavy bill due to destruction of their property.

Here are five reasons why landlord insurance is important:

  1. Accidents happen. Fires, water damage from plumbing, and leaky roofs can all cost thousands of dollars to fix. However, landlord insurance will reduce this liability and exposure risk.
  2. Homeowner policy may not cover tenants. In today’s troubled economy, some homeowners look to rent out a room in their home in lieu of a mortgage default, foreclosure, or selling their home. What these homeowners may not realize is that a typical homeowner policy won’t cover this type of tenant-landlord arrangement, particularly if it is more than a short-term situation. Instead, the homeowner needs to purchase landlord insurance to properly protect himself.
  3. Loss of rental income protection. If your rental property is damaged and cannot be rented until the damage is fixed, landlord insurance can help cover the loss in rental income while your property is being repaired and uninhabitable.
  4. Lawsuit protection. Landlord insurance policies may provide protection against litigation claims, which could include the cost of the claim itself as well as the cost to defend against the claim.
  5. Landlord property protection. While landlord insurance doesn’t cover tenant property, it typically covers the property the tenant uses while living in your structure. Examples include carpet, fixtures, and appliances. If the apartment you rent is fully furnished, landlord insurance may also provide coverage for your furniture the tenant uses.

How to Receive Homeowners Insurance Tailored for You

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Homeowners insurance comes in many "flavors." Select the best options that address your protection needs and household budget. "One size fits all" homeowners insurance does not meet the needs of most homeowner protection requirements.

Learning how to tailor your coverage can save you money and properly protect your home. Step one, create a checklist or wish list of the coverage you want. Step two, examine your household budget and estimate the amount you can afford to invest in your homeowners insurance protection. You should now have a "picture" of the combination of coverage and premium cost you want.

Ready, set, compare coverage offers. Instead of checking insurance company websites, you may be better served by visiting independent agent sites, particularly those that offer quotes from multiple companies. Receiving multiple quotes for identical coverage and pricing comparisons may save you time and money.

Pay close attention to a few critical items to tailor your coverage properly. You should decide/determine whether you are covered for natural and environmental losses–the typical "act of God" language. Some policies cover losses from wind, hail, lightning, etc., while others do not. Deductibles are another key feature that influence premium cost and potential future out-of-pocket expenses. Actual cash value (ACV) versus replacement value coverage can result in vastly different claim checks to you depending on the type of loss.

The Differences Between Roofing Material and How It Relates to Insurance

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The roof of your home is one of the most important aspects of your shelter. Roofs are composed of all types of materials, which range widely in cost to install, repair and replace. Although some roofs cost less to install than others, they may be more prone to damage and fire than others. The type of roof you have on your home could affect your homeowner’s insurance premiums.

Asphalt and Wood Shingles

Most homeowners have traditional asphalt shingles on their roofs, which need to be replaced every 15 to 30 years. Asphalt shingles are economical and cost less to install than other types of roofs. Similarly, wood shingle roofs are affordable for homeowners on a budget and typically last a few years longer than composition roofs. However, composition and wood roofs are flammable and easily damaged by impact. Insurers do not offer homeowner’s insurance discounts for having an asphalt or wood roof, and some may even have a premium surcharge to compensate for the increased risk factor that composition and wood roofs present.

Impact-Resistant Roofs

An impact-resistant roof is the preferred roof of home insurers – particularly for insurers who cover homes in states notorious for hailstorms or hurricanes. Impact-resistant roofs are typically made of concrete tiles or advanced metals designed to deflect hail, falling branches and other impact.

Metal roofs are considered the best type of roof by insurers. In addition to being impact-resistant, metals roof have greater fire resistance and durability. Unlike traditional asphalt roofs, a metal roof can last a lifetime without being replaced. If you install a metal roof, you will likely benefit from homeowner’s insurance discounts on your annual premiums, as well as possible state and federal tax credits due to increased energy efficiency.

Should I Buy Vehicle Insurance Because it is the Cheapest?

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One of the most common mistakes consumers make when purchasing an auto insurance policy is choosing coverage based solely on price. Just because cheap, state-minimum coverage meets the coverage requirements of the laws in your state, it doesn’t mean that it is right for you. In fact, it could end up costing you more in the long run if you need to file a claim for damage and find out the insurance company refuses to pay for your car.

As with anything else, you get what you pay for. Sometimes a company advertising the absolute lowest price may not deliver a positive customer experience. After all, lower premiums mean less income, which means less cash flow to pay for claims and customer service.

Choose whether price or reliability is more important to you when selecting an insurer. The cheapest company may have lower premiums, but you may also have more difficulty reaching a customer service representative, agent or claims adjustor should the need arise. To find out your insurance company’s reputation for handling claims, contact the Better Business Bureau. There, you will out the nature of complaints against each insurer and whether or not a particular insurer has a history of denying claims.

Comparison Shopping for Insurance

Instead of purchasing the cheapest policy, try comparison shopping to find the most affordable price for the coverage you need. Insurers use differing algorithms to determine rates. Those algorithms place varying amounts of emphasis on age, gender, vehicle type, driving history, credit rating, and other factors that can affect your premium. That is why the same policy for the same person can cost hundreds of dollars more per year at one insurer in comparison to another.

Ways to keep insurance premium low

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First, let’s discuss insurance premiums and claims so there is a mutual understanding of what they are. Think about premiums as a known loss. You will pay a known amount of money (premium, a loss) to avoid a loss of an unknown amount (claim).

There are three main ways to reduce premium. First, assume responsibility for more of the smaller potential losses yourself through higher deductibles. Second, insure for lower limits and assume the risk of higher losses yourself. Third, insure against fewer perils.

Higher deductibles reduce premium. Ask your agent for a few deductible options and then choose the one that you prefer. As the deductible becomes marginally higher, the difference in premium becomes marginally smaller. Also, paying small claims directly reduces bad experience on your insurance record, thus keeping premiums lower.

Insuring for lower limits and assuming the additional high side risk is a strategy generally used in life insurance and disability. Property insurers discourage this practice through policy requirements of limit to value ratios of 80% or higher. Liability limits, such as automobile, have state or lender requirements restricting lower limits.

Insuring against fewer perils is useful for automobile physical coverage. For example, a car worth $ 2000 may not be worth insuring for collision, that is, damage to the insured car in event of an accident.

Design your insurance policy with your risk tolerance in mind. Cover those perils which you want covered. And, of course, you can always shop around a little to assure your best premium.