Murphy & Jordan LLC

Insuring the future

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We know you have questions , and we would love to answer them for you .

Below is a brief description of each coverage and policy that M&J offers .You may also refer to the contact us page to speak with a representative.



Personal Lines


Products Summary:  


Homeowners insurance provides property coverage for your house and personal belongings and also protects the owners and residents from liability claims.


The Personal Auto policy protects the vehicle owner and /or driver for legal liability arising out of the operation of the vehicle. The policy can also cover physical damage to the insured vehicle.


Personal Umbrella insurance provides additional limits in excess of the liability limits on the Homeowners and Personal Auto policies.



What's Covered?

The Homeowners property insurance section covers your dwelling, garage, and personal belongings. Generally, the property coverage is valued on replacement cost basis. Typical covered perils include fire, lightning, windstorm, hail, explosion, vandalism, and theft. High-value and/or unique items, such as jewelry and musical instruments, are often insured for a specific stated value (generally based on an appraisal).



The Personal Liability section of a Homeowners policy covers the payment of damages and defense costs for which the homeowner (and household residents) is legally liable because of bodily injury or property damage arising out of the insured premises or personal activities. The Medical Payments to Others section of the policy covers medical expenses incurred by persons (other than the insured) for injuries caused by the premises or an insured?s actions, regardless of legal liability.



The Personal Auto policy covers the liabilities arising from an accident that causes bodily injury or property damage to a third party. Physical damage to the insured vehicle is covered by the Comprehensive and Collision coverages, subject to deductibles. The policy also provides Medical Payments coverage for a third party injuries for which the insured has no legal liability.

A Personal Umbrella policy limit applies excess of the liability limits of the Homeowners and/or Personal Auto policies. If a covered liability loss exceeds the primary auto limit, the Umbrella policy will pay the balance of the loss, up to the Umbrella limit.



What Affects the Cost of the Policy?

The replacement cost value, type of construction, and geographic location of your home greatly impacts the Homeowners policy premium. You can qualify for Homeowners premium discounts by having a fire alarm, smoke detectors, etc.


More expensive vehicles will cost more to insure. Also, vehicles that are popular with auto thieves will carry a premium surcharge. Higher deductibles will lower the premium cost.


Workers' compensation insurance pays for medical care and rehabilitation for employees who are injured on the job or contract a work-related illness. Workers' compensation also covers a portion of an employee's lost wages, disability benefits and death benefits for the dependents of employees killed in work-related accidents.


Workers' compensation covers all of the employees of a business except independent contractors. Special provisions must be made if employees work out-of-state.


Workers' compensation is a no-fault system. This means that injured employees do not have to sue their employers to receive compensation. Compensation is automatic for covered benefits. Except in cases of extreme negligence, employers are generally protected from liability due to work-related injuries and illnesses.

For example, if an employee is hurt on the job, the injury is immediately reported to the workers' compensation insurer. The employee receives whatever medical care is needed and the insurer pays the bills.

If the employee cannot work for a limited period of time because of the injury, the insurer pays the employee a portion of his or her lost wages. If the employee cannot return to work because of a permanent injury, the insurer pays to train the employee for another job. If the employee dies because of the injury, the insurer pays death benefits to the worker's dependents.


Who Needs Workers' Compensation?

Employers in all states except Texas and New Jersey are required by law to have workers' compensation insurance. And in New Jersey, employers that do not have workers' compensation coverage can suffer penalties so severe that the obligation is optional in theory only.

Each state sets its own benefit levels, so coverage does not differ among various workers' compensation insurers within a state.

In North Dakota, Washington, Wyoming and Ohio only the state can sell workers' compensation coverage.

Several states operate a worker's compensation fund that serves as a workers' compensation insurance company for employers in the state. These funds are available to ensure that workers' compensation insurance is available to all employers in the state, even those that may have difficulty buying coverage from a commercial carrier.

What Affects the Cost of the Policy?

A company's payroll is one of the factors used to calculate an employer's premium. The higher your payroll, the higher your premium will be.

The kind of work your employees do also affects your premium cost. Employers must report to a workers' compensation insurer the job classification of each of their employees. Generally, premiums are more costly for employees with jobs that involve a greater amount of risk.

Auto Product Summary

Commercial auto insurance provides coverage for company-owned vehicles in the event of an accident that causes bodily injury or physical damage. Coverage can be for company-owned cars, trucks, buses and other types of vehicles.

A common endorsement to commercial auto coverage is non-owned and hired auto liability insurance. This endorsement covers vehicles your employees use or that you rent or borrow but the business doesn't own.

What's Covered?
Commercial auto insurance covers physical damage to a company-owned vehicle if it hits another object, overturns, burns or is damaged as a result of vandalism or theft.

A commercial auto policy also covers medical expenses for those involved in an accident, regardless of who caused it.

If your company is sued because of an automobile accident, the coverage generally includes attorney fees, court costs and payment to the injured person up to the policy limit.

For example, if one of your employees is driving a company-owned car to a business lunch and gets into a car wreck, commercial auto insurance will pay for the costs of repairing all vehicles involved in the wreck. The policy also will pay for medical bills for anyone injured in the accident.

Some commercial auto policies also pay for the cost of renting a replacement vehicle while the damaged one is being repaired.

What Affects the Cost of the Policy?
Insurers use many factors to determine the policy premium. The number and kind of vehicles insured and the location of the business are key factors.

Insurance rates vary by state and region. For example, costs tend to be lowest in rural communities and highest in cities where there is more traffic.

Also, some cars are more expensive to insure than others. Vehicles with expensive repair costs and those that are more attractive to thieves are costlier to insure.

 

Umbrella Product Summary
Umbrella insurance is also known as ?excess liability? insurance. Umbrella Liability applies excess over primary liability policies and provides additional limits of liability in a cost effective fashion. The primary policies are called ?underlying? policies and are specifically scheduled, along with their limits, on the Umbrella policy.

The underlying policies are typically the primary General Liability and Auto Liability policies. The Employer?s Liability section of the Workers? Compensation policy is also a common underlying coverage.

Primary General and Auto Liability policies commonly have limits ranging from $500,000 to $2,000,000. In the litigious climate of the U.S., those limits are often insufficient to adequately protect a business from a serious premises claim, product liability lawsuit, or auto accident.

What's Covered?
Umbrella policies are intended to cover a variety of liability losses that are also covered by the primary policies. The Umbrella coverage attaches at a predetermined level of liability limit, i.e., when a covered loss exhausts the primary policy per occurrence limit.

For example, assume the primary General Liability per occurrence limit is $1,000,000 and the Umbrella liability policy limit is $5,000,000 excess $1,000,000. There is a covered loss of $3,000,000. The primary General Liability policy will pay the first $1,000,000 (the policy limit) and the Umbrella policy will pay the remaining $2,000,000.

Some Umbrella policies will also drop down and apply on a primary basis, excess of a Retained Limit (deductible), for claims not covered by the primary policies. This is called Coverage B on the Umbrella policy. However, generally speaking, most Umbrellas will respond only to claims that are covered by the primary policies.

 

What Isn't Covered?
An Umbrella policy is strictly third-party liability coverage; it does not apply excess of property, crime, or other first-party coverages. Most Umbrella policies will exclude Employment Practices Liability, Professional Liability, Product Recall, Asbestos, Pollution, War and Terrorism. All Umbrella policies exclude Workers Compensation.

What Affects the Cost of the Policy?
Underwriting for Umbrella Liability insurance is customized for each individual policyholder. As with primary General Liability, the more hazardous the Insured operations, the higher the Umbrella premium

GL Product Summary

Commercial General Liability (GL) coverage can be either a stand-alone monoline policy or combined with other coverages to form a Business Owners Policy (BOP) or a Commercial Package Policy. The basic areas covered by a General Liability policy are premises liability, Products and Completed Operations Liability, Personal and Advertising Injury, Fire Legal Liability and Medical Expenses.

What's Covered?
A GL policy covers occurrences of bodily injury and property damages that the insured is legally obligated to pay. Liability insurance covers the business if it is sued for something the business did or failed to do that caused injury or property damage to someone else. Liability insurance covers damages and settlements stemming from a lawsuit, up to the policy limits. General Liability policies also cover attorney fees and other costs associated with defending against a lawsuit.

GL policies generally cover the insured ownership or use of the premises, operations, contractual agreements, products made, sold or distributed, completed operations, personal and advertising injury and medical payments. Medical Payments cover reasonable medical expenses, regardless of fault, for bodily injury.

What Isn't Covered?
Workers' Compensation is not included in a GL policy. Liability resulting from manufacturing, selling, distributing or serving liquor is excluded. The GL policy covers Host Liquor Liability for insured who are not in the business of manufacturing, selling, distributing or serving liquor. Other common exclusions on GL policies include pollution, aircraft, automobiles, watercraft and product recall.

What Affects the Cost of the Policy?
The premium is based on a variety of factors, depending on the types of coverage forms included in the policy. The size of the insured operations and the inherent risk of the products will affect the premium

Property Product Summary


Property coverage can be purchased either as a stand-alone "monoline" policy or combined with other coverages to form a Business Owners Policy ("BOP") or a Commercial Package policy.

What's Covered?

A property policy pays for direct physical loss or damage to certain types of property. Covered property typically includes buildings, business personal property, signs, property off-premises, valuable papers, newly acquired properties, and personal property of others. Some of the coverages are subject to sublimits that can be increased for an additional premium. Property insurance can be bought on replacement cost or actual cash value basis. A coinsurance provision might apply.

There are separate coverage forms available for business income and extra expense, equipment breakdown, accounts receivable, crime, and other coverages.


What Isn't Covered?
Examples of property generally not covered by a property policy are animals, land, vehicles, foundations and piers. Perils that are often excluded include wear and tear, flood, earthquake and fungus.

What Affects the Cost of the Policy?
The premium is based on a variety of factors, depending on the types of coverage forms included in the policy. For property insurance, the age and construction of the building and the value of the building and contents will greatly impact the premium. Fire protection issues, such as sprinklers and fire rating protection class, are also important.

 

Crime Product Summary
Crime coverage protects against the loss of money, securities and other property due to theft, forgery and other criminal acts.

What's Covered?
A Crime policy can have several insuring agreements for specific coverage sections. Employee Theft covers losses to money, securities and other property unlawfully taken by an employee(s). Forgery and

Alteration coverage applies to the forgery or alteration of checks by outsiders (i.e., not an employee or named insured). Theft of Money and Securities coverage pays for the loss of money and securities from inside the insured premises. Robbery or Safe Burglary of Other Property coverage is for property other than money and securities having intrinsic value; the act must occur inside the premises.

Outside the Premises coverage is for the theft, disappearance and destruction of money and securities while outside the premises and in the custody of a messenger or armored car service. Computer Fraud covers money, securities and other property fraudulently transferred by computer from the insured premises or banking premises. Funds Transfer Fraud provides coverage for the loss of funds resulting directly from a fraudulent instruction directing a financial institution to transfer, pay or deliver funds from the insured account. Money Orders and Counterfeit Money covers counterfeit money accepted in good faith in exchange for purchases.


What Isn't Covered?
Any theft or dishonest act of the Named Insured, either committed alone or with an employee, is not covered. Other typical exclusions include inventory shortages, mathematical/accounting errors, loss of income as a result of not being able to use money, securities or other property.

 

What Affects the Cost of the Policy?
The premium is based on a variety of factors, including the number of employees and number of premises.

Prof. Liability Product Summary
A Professional Liability Insurance Policy is specialized for each of the professionals. The policies are written on a Claims made Basis and often will have a deductible/retention. These policies will have, in addition to the "Policy Period" a "Retroactive Date"

Example of Professional: Lawyers, Accountants/CPA, Consultants

 

What's Covered?
The coverage protects your firm for damages arising out of the firm's profession for acts, errors or omissions when performing these duties for another party. Always make sure that your professional liability policy applies to your employees within your firm's profession, as well as to you.

 

What Isn't Covered?
The Professional Liability insurance is not designed to cover Workers Compensation, General Liability or any employees that fall outside the profession of the Firm. There are specific policies that are designed to better cover the general liability, products liability and workers compensation exposures.

 

What Affects the Cost of the Policy?
How to save money on your policy?

The Insurer uses a rating formula to determine the annual premium. Example: The lawyer will be rated on the number of attorneys/area of practice and the Consultant, Accountant/CPA will be rated on the annual gross receipts/area of practice. In addition, the rate will be charged accordingly for the Retroactive Date. If prior acts coverage applies, proof will need to be provided to the insurer that "no coverage has been interrupted" on an active policy with your current insurer. This proof is provided by way of a copy of your declaration page.

 

D&O Product Summary
Directors' and Officers' Liability insurance protects the individual directors and officers from personal financial loss arising out of alleged or actual wrongful acts committed in their capacity as directors and officers. D&O policies are written on a Claims Made coverage form basis. Specialized policy forms are available for not-for-profit organizations, small private companies, and large public companies.

 

What's Covered?
For private companies and non-profit organizations, coverage is often extended to employees, in addition to the directors and officers. Some insurers offer Employment Practices Liability as an additional coverage section on the D&O policy. Many policies will also cover the corporate entity for claims involving the sale or purchase of the company's securities.

 

What Isn't Covered?
A D&O policy will not cover exposures more properly covered under other policies, i.e., bodily injury or property damage (covered under General Liability) or Employers' Liability (covered under Workers' Compensation). Dishonest or fraudulent acts committed by the directors or officers are excluded from a D&O policy.

 

What Affects the Cost of the Policy?
Certain types of industry are more susceptible to D&O claims: telecommunications, health care, biotechnology. Large publicly held companies, in any industry, are typically frequent targets. A weak financial condition makes a company a ripe target for a D&O lawsuit.

  
EPLI Product Summary

Employment Practices Liability Insurance provides coverage for employment-related claims. The policies are written on a Claims Made basis and typically have a retention rather than a deductible.

What's Covered?

The coverage protects the employer against claims alleging violation of federal, state or local anti-discrimination laws, harassment, wrongful termination, negligent supervision or hiring, and intentional infliction of emotional distress. Many EPL policies will also provide Punitive Damages and Third Party coverages, sometimes at an additional premium.

What Isn't Covered?

An EPLI policy does not eliminate all employment-related financial concerns. Claims seeking non-monetary relief, e.g., job reinstatement, are not covered.

Optional coverages you may need:

The policy will not cover the costs of accommodating any disabled person pursuant to the ADA of 1990.

What Affects the Cost of the Policy?

How to minimize your risks?

How to save money on your policy?

Several factors outside of an employer?s control affect the cost of EPLI, including the type of business, number of employees, and state of domicile. However, an employer can make his or her company more attractive to an underwriter by having sound risk management policies in place. The employee handbook should contain strong anti-discrimination and anti-harassment statements and there should be written procedures for the investigation and resolution of an employee?s complaint.


 
Fiduciary Product Summary

The Employee Retirement Income Security Act of 1974 (ERISA) prescribes federal standards for the funding, participation, vesting, termination, disclosure and fiduciary responsibility of private pension and benefit welfare plans. ERISA is intended to ensure that employees participating in pension and benefit plans are able to collect those benefits. The types of plans covered by ERISA include pensions, profit-sharing plans, 401(k) plans, ESOPs, and welfare benefit plans, such as life, health and dental. As a result of ERISA, Fiduciary Liability insurance was created to protect the individuals who are considered to be fiduciaries of the employee benefit plans.

 

What's Covered?
ERISA designates the people who administer and manage pension and benefit plans as fiduciaries. Fiduciaries are personally liable for breaches of duty, as defined by ERISA, while administering the plans. An example of a breach of fiduciary duty is failing to prudently invest the plan assets, resulting in financial loss to the plan beneficiaries. A Fiduciary Liability policy protects the individual fiduciaries' personal assets from claims alleging a breach of duty.

Fiduciary Liability policies generally include Employee Benefits Liability coverage which protects the business from losses arising from the administration of employee benefit plans, such as not properly enrolling a new employee in a health plan. Employee Benefits Liability coverage is sometimes endorsed onto a General Liability policy. Employee Benefits Liability coverage does not cover the liabilities imposed by ERISA on the benefit plans' fiduciaries.

Fiduciary Liability is written on a Claims-Made coverage basis.

 

What Isn't Covered?
A Fiduciary Liability policy typically excludes criminal acts, contractual liability, bodily injury, libel and slander.

 

What Affects the Cost of the Policy?
The premium is based on a variety of factors, including the size of the plan assets, number of fiduciaries and policy limit and deductible.


Flood Product Summary
Property and/or contents coverage can be purchased for Personal or Commercial exposures as a result of a declared flood. Coverage is underwritten by the National Flood Insurance Program and is available directly through NFIP or various other carriers approved by NFIP.

 

What's Covered?
A Flood Policy pays for direct physical loss caused by declared flood waters. Covered property typically includes residences, commercial buildings and contents in the amounts listed on the coverage summary. Coverages are subject to elected deductibles.

The maximum coverage available for a residential building is $250,000 and $100,000 for contents. For a commercial building the maximum coverage is $500,000 for the building and $500,000 for contents.

A furnace, washer, dryer, hot water heater and other equipment used in the maintenance of the building are considered covered contents.

 

What Isn't Covered?
Contents such as furniture, clothing and finished materials used in basement area would be excluded from coverage.

The standard waiting period is thrity days unless the policy is being required by a lender for a loan closing.

 

What Affects the Cost of the Policy?
Flood Zone assigned by the National Flood Association, occupancy, construction type, building elevation and finished or unfinished basement along with limits and deductible elections would be determining factors in regard to policy premium.

Prior Federal Disaster Relief payments and/or flood losses would be a determining factor in placing the coverage.


Surety Bond Product Summary

Surety bonds are agreements between three parties:

The first party is the issuer of a bond, which is called the surety (usually an insurance company);
The second party is the buyer of the bond (you), which is called the principal;
The third party is the entity covered by the bond (your client), which is called the obligee.

Under a surety bond agreement, a surety company guarantees that the bond buyer will fulfill a certain obligation he or she has made to a third party.

Unlike other forms of insurance, the entity protected by the bond is the third party, not the buyer; the surety bond buyer is the one doing the work that is guaranteed.

For example, contract bonds guarantee that a written contract between two parties will be fulfilled.

Construction contracts can be guaranteed by these bonds. Some common types of contract bonds include bid, performance and payment bonds.

If you're a contractor on a construction project, you can buy a performance contract bond that will ensure your compliance with the terms and conditions of your contract. As a result, the project owner is confident that the work will get done even if you default on the project and the surety bond company has to assume your responsibilities.

What Kinds of Surety Bonds Are There?

There are many kinds of commercial, contract and fidelity bonds that guarantee a certain behavior or the fulfillment of an obligation. Other common commercial bonds include court judicial, court fiduciary, public official, license and permit bonds.

Do I need a separate bond for each project?

Court judicial and court fiduciary bonds are required in some cases by law. A fiduciary is a person appointed by a court to act in the best interests of another person who is unable to handle something himself. Fiduciaries often must provide a bond to guarantee the faithful performance of their duties.

For example, the executor of an estate may be required to post a fiduciary bond that guarantees the executor will dispose of the estate honestly and to the best of his or her ability.

Fidelity bonds guarantee the honesty of employees. Fidelity bonds cover losses arising from employee dishonesty.

What Affects the Cost of the Policy?

Surety bond companies take several factors into account when making underwriting decisions.

For example, an insurer will evaluate whether a contractor has the skills and abilities to do the promised work. Also, a contractor's track record of fulfilling previous obligations will be considered. The financial condition of the company is another factor in the decision-making process.

Liquor Liability Product Summary
A Liquor Liability policy covers the legal liability imposed on a business that sells, distributes or serves alcoholic beverages. General Liability policies exclude Liquor Liability for establishments that sell, distribute or serve liquor, so those businesses need a separate Liquor Liability policy or coverage form.

The types of businesses that should carry Liquor Liability include bars, restaurants, hotels, motels, liquor stores, convenience and grocery stores that sell liquor. The coverage is available on either an "Occurrence" form or a "Claims-Made" form.

 

What's Covered?
A Liquor Liability policy covers claims involving bodily injury and property damages that the insured is legally obligated to pay. The policy covers only injuries or damages an insured has caused due to serving, selling or distributing alcoholic beverages, so a General Liability policy is also required to cover the other exposures of the business. The policy covers attorneys' fees and other costs associated with defending against a lawsuit. An important optional coverage to consider on a Liquor Liability policy is Assault and Battery coverage.

What Isn't Covered?
If a liquor license is required and is not in effect at the time of an otherwise covered liquor liability exposure, there is no coverage. Common exclusions on a Liquor Liability policy include Workers'

Compensation and Products Liability from any product other than liquor (e.g., food).

 

What Affects the Cost of the Policy?
The premium is based on a variety of factors, depending on the types of coverage forms included in the policy. A tavern that is open past midnight will generally have a higher premium than a restaurant that sells only a small amount of liquor.

Special Events Product Summary
Special Events Liability coverage is a commercial general liability designed to provide liability insurance for the organization hosting an individual special event. Examples of special events are concerts, arts and crafts shows, fund raisers, carnivals, golf tournaments, conferences/conventions, festivals, etc.

 

What's Covered?
For organizations hosting special events, coverage is provided for the organization if it is sued for something the organization did or failed to do that caused injury or property damage to someone else. Liability insurance covers damages and settlements stemming from a lawsuit, up to the policy limits.

 

What Affects the Cost of the Policy?
The nature of the event, duration, expected attendance, the state in which the event is being held, and the limits selected all affect the premium.

A&H Product Summary
Many organizations and clubs purchase a type of Accident & Health coverage called a Group Accident Medical policy. This policy provides medical expense coverage for members of a group who are injured by an accident while participating in group-sponsored activities.

When an organization sponsors a group activity, there is always the possibility that a participant may suffer an injury, perhaps something serious. If an accident occurs, the organization may want to help pay the medical expenses. In the case of a serious accident, the medical expenses could be substantial.

Buying an Accident Medical policy can be a prudent decision for the organization. Injured parties are less likely to bring suit against the organization if their medical bills are taken care of. Medical bills from heath care providers are paid quickly and easily. The coverage fosters good public relations for the organization.

The Accident Medical policy automatically includes Accidental Death & Dismemberment coverage.

Annual policies are available for youth and adult clubs, associations, and organizations. Policies can also be purchased on a short-term basis for an event, such as a fundraising drive, convention, or walkathon.

 

What's Covered?
Accident Medical Expense Coverage
Accident medical expenses are covered while participating in scheduled, sponsored and supervised activities of the insured group. Injuries sustained during direct travel to and from the covered activity are also covered. Covered expenses can include physician treatments, hospital services, LPN or RN services, use of an ambulance, ambulatory surgical or medical center services, home health care expenses, prescription medicines, and dentist visits. Expenses incurred within 52 weeks of the date of the accident are covered.

All participants / members of the insured group must be covered. New participants who join the group after the effective date are automatically included, without additional charge. No premium refunds are made for members who leave the group before the policy expires.

Coverage is available on either a primary or excess basis. Primary coverage responds to covered expenses regardless of other available insurance the individual may have. The expenses are subject to a small deductible. Excess coverage pays last. The medical bills must be first submitted to the individual?s other insurance plan, and then the excess Accident Medical policy will consider the unpaid balances, after a small deductible, up to the benefit limit.

Benefit limit options of $5,000, $10,000 and $25,000 are available. The benefit limit applies on a per accident basis. The policy has an aggregate limit of $250,000 per occurrence.


Accidental Death & Dismemberment (AD&D) Coverage
AD&D coverage pays a lump sum benefit for accidental loss of life, limb or sight. A limit of $5,000 is available.

 

What Isn't Covered?
A
ny injury or sickness covered by Workers? Compensation or any occupational disease law is not covered. Occupational accidents are not covered. This is not disability insurance. Sporting activities are not covered unless specifically noted on the policy. This coverage is not to be considered a substitute for any type of health, medical or disability insurance.

 

What Affects the Cost of the Policy?
The premium is based on the number of participants in the group and the nature of the organization or event. Short-term policies are rated on a per day, per participant basis.


What is Life Insurance?

Life involves a series of risks. Life insurance can help to protect against the risk of loss due to an early death. Life insurance promises to pay money through death benefits when you die, or living benefits if you need a loan or income at retirement. Families use it to protect loved ones who might die unexpectedly.

 

Life insurance is unique. The very event that causes a need for money, death, creates the money.

How do the promises work? Its pretty simple, really. If the insured pays the premiums, i.e., the cost for the insurance policy, the company promises to pay the beneficiary the death benefit.

What some people often miss is that life insurance can have living benefits, too! You don?t have to die to receive benefits from your policy! Here is a list of some living benefits in a life insurance policy:

low cost policy loans for emergencies (policy loans reduce the death benefit)
income for life at retirement through one of several policy settlement options
extra coverage by add-on riders (at an additional cost)

People use life insurance in many ways, but the main reason to buy it is out of love ? and responsibility. Someone loves another person enough to want to protect that person.

 

How is life insurance used?
A brief discussion of five uses for life insurance follows.

1. To replace income. The number one reason to buy as much life insurance as you can afford is to protect your earning power, which stops when you die. Death benefit proceeds can replace the income lost upon death when a wage earner dies. The funds go to the surviving family to help pay the normal ongoing bills: rent or mortgage payments, food, clothing, electricity and heat, loans, other insurances, etc.

2. To pay off final expenses. Final Expenses add up to more than most people realize. Besides the costs of a funeral and burial, upon your death certain debts must be paid off right away. Examples are credit card debt, personal loans, expenses of a last illness, and income taxes. Depending on the amount of your assets when you die, there could also be fees to do a final settling of your affairs, such as executor?s fees, attorney?s fees, real estate appraisals and probate court costs. Finally, last expenses may include state and federal taxes, which are taxes on the right of your heirs to receive your property.

3. To accumulate money in a tax-favored account. Not counting term insurance policies, which usually do not build up any money inside the policies, most life insurance develops a savings portion called the cash value. These cash values grow without current income taxes. For this reason, many people like to use life insurance as another way to build savings. Think of the cash values as much like the equity that builds up when you pay off a home mortgage. As you continue paying premiums over the years, your cash value account builds up more and more.

4. To provide benefits (in businesses). Companies want to hire the best people in leadership positions. To keep these employees happy so they will stay for a long time, business owners offer to pay for large amounts of life insurance on their lives to provide family protection and to build another way to put money aside for retirement income.

5. To transfer wealth smoothly to the next generation. Life insurance could be said to be the pennies paid today (premiums) to deliver dollars in the future at the exact time they are needed, at death. Wealthy people may need hundreds of thousands of dollars in cash at death to pay estate settlement costs and taxes. For example, a business owner or farmer may have a lot of wealth tied up in land, buildings or equipment. Much of that could be lost if the estate?s executor was forced to sell these valuable assets to pay estate settlement costs. Life insurance bought on the owner provides an easy and inexpensive way to raise the money to settle the estate so the heirs can receive and keep the business or farm. That is one of the reasons why very wealthy people buy very large amounts of life insurance.

Life insurance has many uses because of its price ? pennies paid today for dollars paid tomorrow ? and many tax advantages. No other financial asset can do so many things. Take a close look at how you can use it to give your family a safety net and as another means to save some money for future use.

 

What are the main tax advantages?
Some types of life insurance have more tax advantages than other types, but the main tax advantages are these:

Policy cash values grow without current income taxes, or tax-deferred.
If a policy is surrendered, only the gain over and above the premiums that were paid is subject to tax.

Death benefits are paid to the beneficiary free of income taxes.
Policy loans may be received by a policy owner in an emergency, income tax free.

 

What are the main types of life insurance?

Monumental Life offers two main types of life insurance: term (temporary) and whole life (permanent) coverage.

Term life insurance is well known, popular protection bought for a short duration or ?term.? Think of term insurance like renting an apartment ? you pay premiums, it is there while you need it, but when your need for protection is no longer there, there is no value.

The death benefits are level or decreasing, and in many policies, the premiums are guaranteed to be level for the duration.


One feature policy owners value is the ability to renew their term policy. At the end of the term policy duration, an insured can renew many term policies for another period.

For a certain length of time, or to a specified age, term policies may be converted into lifetime coverage, without having to prove you are a good risk. So, if an insured person?s health turns bad, they can at least

be guaranteed that they can get some lifetime (whole life) coverage.

Term policies typically do not build cash values. Thus, while they may be inexpensive to buy, in the long run they are very expensive to keep.

Whole life insurance is permanent or lifetime protection, built on three guarantees: level premiums that cannot be increased, level death benefit and cash values (or policy owner equity).

To understand whole life insurance more clearly, its useful to compare it to a home mortgage. The mortgage amount in life insurance is for the length of time from your current age to age 121. There is an at risk portion (the unpaid amount of mortgage) and a cash value portion (equity based on amount of mortgage paid up).

At age 121, the mortgage or at risk portion ends, and the policy is all cash value (equity). With nothing at risk, the cash value is given to you  your life mortgage is all paid up! Today, the maturity date of when the mortgage is fully paid up may go on beyond age 100, reflecting the fact that people are living longer.

Whole life policies are more expensive to buy . the premiums are higher than for term insurance -- but because you can get back portions of your premiums and interest through the cash value, they are much less expensive than term insurance to keep.



How much life insurance do I need?

The answer to that question depends on your individual situation. For example, it might depend on who and how many people depend on your ability to earn a living, what types of property and savings you have, and what types of debts you have outstanding.

Also, how much life insurance you should own depends on what your goals are for your future financial security in retirement. Finally, it depends on your age and the life stage you are in.

Some people should own life insurance equal to six to eight times their income, with separate funds provided to pay off a home mortgage and final expenses. Yet, others may need life insurance of at least 10 times their income.

Your Monumental Life agent is well-trained to help you take a careful look at your current situation and your future goals. Our goal is to help you buy the proper type and amount of life insurance to meet your needs and your budget. Ask your Monumental Agent for a Personal Financial Plan needs analysis.

(See When do you need Life Insurance for more discussion of life insurance at various stages in life.)

 

What is E&O insurance?
Errors and omissions (E&O) is the insurance that covers your company, or you individually, in the event that a client holds you responsible for a service you provided, or failed to provide, that did not have the expected or promised results. For doctors, dentists, chiropractors, etc., it is often called malpractice insurance. For lawyers, accountants, architects or engineers, it may be called professional liability. Whatever you call it, it covers you for errors (or omissions) that you have made or that the client perceives you have made.

 

Most E&O policies cover judgments, settlements and defense costs. Even if the allegations are found to be groundless, thousands of dollars may be needed to defend the lawsuit. They can bankrupt a smaller company or individual and have a lasting effect on the bottom line of larger companies.

In short, E&O coverage provides protection for you in the event that an error or omission on your part has caused a financial loss for your client.

 

Who needs E&O insurance?
The best-known professionals who need E&O insurance are doctors, lawyers, accountants, architects, engineers, etc. However, less thought about individuals range from advertising agencies to commercial printers, Web hosting companies to wedding planners. If you are in the business of providing a service to your client for a fee, you have an E&O exposure. You may want to consider what will happen if the service is not done correctly or on time, and it costs your client money or harms their reputation.


Why does my company need coverage?

To put it very simply, everyone makes mistakes. Even with the best employees and the best risk management practices in place, mistakes will be made. No one is perfect.


If a freight forwarder sends a shipment to South America instead of South Africa and it is a time sensitive shipment and their client loses a sale and, therefore, hundreds of thousands of dollars, who will pay the loss?


If a wedding planner reserves the reception hall, the band, the caterers, etc., for May 22 instead of May 29 and everyone shows up except the wedding party and guests, who pays? And imagine the emotional distress caused to the bride if this were to happen!

 

There is also the less tangible loss of reputation for both the professional and his client. What will the cost be to the business that now has equipment in South America instead of South Africa? Will they lose future contracts with their current client as well as future clients?

 

By not purchasing E&O a company can be taking a serious financial risk. These types of losses are not covered under a general liability policy. And, as stated earlier, even if you are not at fault, litigation is both time consuming and expensive.

 

When should you buy E&O insurance?
As with any insurance, the best time to buy an E&O policy is before the risk is taken. If you are in the service industry and you know you will have the exposure, make E&O insurance a part of your insurance portfolio. Many contracts with clients will require insurance to be in place. In some cases, it is a selling point with your clients. It gives them the peace of mind of knowing they will be compensated if there is an error or omission.