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Frequently Asked Questions

When I rent a car, do I need to buy insurance sold by the rental company?

Whether you need to buy insurance offered by the car rental company depends on your auto insurance policy and the insurance company that is insuring you.  For some insurance companies and its policies, the coverage of your primary auto insurance may be extended to cover the car that you rent. However, there may be some insurance companies that will not extend the coverage.  

In some cases that the coverage can be extended, only one vehicle can be insured at a time.  For example, if you are using the rental car and it is insured, your car must not be used.  If both the rental car is used by you and your car is used by someone else simultaneously, the rental car may not be insured.  

Since insurance policies and companies varies, it's best to consult with your insurance company or agent.  To be comfortable, request that the agent provide you something in writing.  

If you are a customer of Erie, follow this link to get more information: Erie FAQ

How much insurance coverage should I buy for my house?

The idea of insurance is to help you recover the house that you've loss in the accident.  The insurance coverage for the house should be at least the replacement costs of the house.  

Do I need liability insurance for my business?

Yes.  Liability is one of the most important coverage to ensure that the business can compensate for losses as a result to the accidental damages to other parties.  

How much life insurance do I need?

The general idea of life insurance is to ensure that your family continues to live a normal life even after your departure.  With this in mind, the life insurance benefit should be at least your annual income for the number of years that your family will be dependent on you.  For example, if your annual income is $50,000 and your family will depend on you in the next 10 years, the life insurance benefit should be $500,000.  

What Are Coinsurance Clauses and Do Courts Enforce Them?

Many insurance policies contain coinsurance clauses which require policyholders to purchase an amount of insurance that accurately reflects the value of their insured property.   If less than a certain percentage of the accurate value is purchased, policyholders may not be able to fully recover in the event of a loss..

Coinsurance clauses can be confusing and often leave policyholders in distress. The good news for policyholders is that a little education can go a long way in this area of insurance law. If you understand the basic principle that you must maintain insurance on a certain percentage of the value of your property, then you will be fully insured when disaster strikes.

What is Coinsurance?

Coinsurance is a property insurance provision that penalizes the insured's loss recovery if the limit of insurance purchased by the insured is not at least equal to a specified percentage (commonly 80 percent) of the value of the insured property.. For example, if a building valued at $250,000 is insured with a policy containing an 80% coinsurance clause, the policyholder must purchase at least $200,000 in coverage. If the policyholder purchased less than $200,000, he or she would be responsible for a proportionate share of the loss.

How Does Coinsurance work?

The basic formula for determining whether you have enough coverage is:

Actual Amount of Insurance divided by the Required Amount of Insurance then multiplied by the Amount of Loss. This equals the amount the insurance company will pay, less any applicable deductible.

More plainly, let's assume we have a building valued at $100,000. Under an 80% coinsurance clause, an insured would be expected to insure 80% of these values, or $80,000.

Now, let's consider two scenarios, the amount of the loss in each case is $30,000:

First, the policyholder only carries $50,000 in coverage:

($50,000/$80,000) x $30,000 = $18,750 (less deductible). The policyholder is forced to pay, or self-insure, the shortfall of $11,250.

Second, the policyholder carries the full $80,000 required under his policy:

($80,000/$80,000) x $30,000 = $30,000 (less deductible). In this example, the policyholder would receive full benefits.

Some policyholders choose to self-insure and rely on savings. However, most policyholders purchase insurance with the intent to be fully covered. As the examples illustrate, the unknowing policyholder can suffer great financial hardship by not purchasing the amount of insurance required by the coinsurance provision.

It is important that all policyholders know whether their policies contain a coinsurance clause and, if so, whether they have purchased the amount of insurance required to receive the full benefits they expect. Regular appraisals can ensure that property values, inflation, and depreciation are taken into account in your insurance limits. An evaluation or appraisal once every three years is a good rule of thumb, but may or may not be sufficient depending on the circumstances.