Dealing with health insurance and how it covers your medical bills can be a complicated and stressful issue. You may have an Indemnity or Preferred Provider Organization (PPO) Plan that pays medical bills after they are incurred. Or you may be covered under one of the many varieties of Health Maintenance Organization (HMO) Plans that “pre-authorize” certain treatments and disallow others. Either way, problems can arise in how the claims are handled, and unless caught early, they can grow into major financial and legal dilemmas.

It’s tempting to ignore the whole medical payment process and assume that the insurance company and the doctors are handling everything satisfactorily. However, a rude awakening will usually occur when you receive a large bill for charges the insurance “denied or disallowed” or your HMO doctor finally admits that some of the treatments she recommended were not approved by the “HMO Committee.”

Whether it is claims payments or treatment authorizations, most billing and precertification communication between a doctor and the insurance company is in codes, and one misplaced digit can make a substantial difference in the medical care paid for or allowed. It is important to catch those small errors early, and you, as the claimant, are the best person to do it.

You do not have to become an insurance expert to be able to oversee just how your insurance company is processing the medical bills you are incurring. At the least, you can get minor errors corrected quickly; at worst, you have built a solid file that will save the attorney or benefits counselor you hire a lot of billable time. It will take some time and effort on your to understand how the process works and how you can affect it, but it will be well worth it.

The first step is, of course, “Know Your Coverage.” Easy advice to give, but this is often the biggest problem in overseeing your coverage. Insurance contracts are scary; they’re hard to read; they don’t make a lot of sense if you’re not a lawyer. You don’t need to memorize your plan or know every single provision to understand how it works.

Get a copy of your coverage. It may be an insurance policy, a booklet of coverage, a Summary Plan Description, or a chapter in an employee benefits manual. The health plan description will cover twenty to thirty pages or more.

Don’t try to sit down and read it all the way through. That would put anyone to sleep. But, look through it. Note the different parts. There will be parts that describe the benefits. There will be sections that tell when you become covered and when your coverage ends and what may be available after it ends. Don’t try to memorize every provision of your plan so much as just get familiar with where things are so you can refer to them as you deal with the insurance company.

Things you should try to find are:

The Schedule of Benefits – This is often at the front of the plan. It’s the part that tells what the insurance company pays and what you pay. It lists the deductibles, the insurance percentages they pay, the co-pays you are expected to pay at each doctor’s visit, etc.

Covered Benefits – Often separate from the schedule of benefits, this will be a listing of what is covered. In some plans this will be a fairly long list; others will give a short list of a broad range of benefits covered.

Exclusions and Limitations – This lists the things that the plan will not cover like experimental treatment, or cosmetic surgery. It also lists the things that it will cover but puts special limits on, such as mental health, or convalescent home care, or treatment for conditions that existed when your coverage started. You may want to paperclip this section, as you may need to refer to it more frequently.

Claims Procedures – This will be a couple of pages that talks about filing claims. The important section here is the part that tells you how to appeal denials. You may want to read that through, as there are usually some important time limits and other information there.

Mark it up. This is the rulebook that the insurance company must play by so don’t hesitate to use paperclips, tabs, highlighting and underlining to make it easier for you to use.

The policy alone may not be that helpful, but you will find it valuable as you work with the insurance company and your medical provider when there are claims questions since it must contain the basis of their denials or cutbacks.

How you watch the medical claims depends on what type of plan you are under. If you have coverage through an Indemnity Plan or a Preferred Provider Organization (PPO) Plan, the insurance company will process the claims and pay their portion after you have received the treatment.

With these plans you will receive an Explanation of Benefits (EOB) every time they process a charge. Review each EOB carefully. Was everything “allowed” in full even if only a percentage was paid. If not, call and ask for an explanation. There will usually be a toll-free number on the EOB. Take notes as to whom you talk to and what they say. Don’t be bashful about asking for more clarification. Follow the appeal procedures to challenge their decision, if you disagree. Ask for your doctor’s help with supporting your appeal.

For Health Maintenance Organization (HMO) Plans, most of the claims work is done between your doctor and the HMO and consists of authorizing treatment before it is given, not paying the bill after. Learn about your medical condition. Know what alternatives to treatment are available.

Then you need to spend some time with your doctor (or your doctor’s insurance clerk) to understand when and what has to be pre-authorized by the HMO. How successful are they in obtaining approvals? How often are they denied? Can you be notified of denials and participate in appeals?

Health insurance is not maintenance free. It can’t be just “turned on and forgotten.” Just as you must take an active role in your health care and treatment as a patient, you must also stay alert and active as an insured with how your medical care is authorized and paid for.

Jacques Chambers, CLU, spent twenty-five years in the health and life insurance industry. He received his Chartered Life Underwriter in 1976. Since 1990, Jacques and his company, Chambers Benefits Consulting, have worked with people dealing with disabilities, educating them about their rights and advocating on their behalf. In addition to regularly writing on benefits and disability Mr. Chambers maintains a private practice where he provides individual counseling on benefits issues. He can be reached at 1-888-739-2595 or at jacques@helpwithbenefits.com. His website is: http://www.helpwithbenefits.com

The information presented in this Site is for general informational purposes, and should not be taken as legal advice. If you have a specific legal issue or problem, we recommends that you consult with an attorney.

 What is Long–term Care?

Long–term care refers to a wide range of medical, personal and social services. You may need this type of care if you have a prolonged illness or disability. This care may include help with daily activities, as well as home health care, adult daycare, nursing home care or care in a group living facility. Long–term care insurance is one way to pay for long–term care. It is designed to cover all or some of the services provided by long–term care.

When will benefits be available?

Long–term care policies have an elimination period, which is the number of days you must need nursing home care or home health care before your policy pays benefits. A shorter elimination period will mean you pay a higher premium. Elimination periods may range from 0 to 180 days. In addition, a long–term care policy does not guarantee coverage unless you satisfy certain requirements. For example, most policies require that you be unable to perform a given number of daily living activities, such as dressing, bathing and eating without assistance. Also, most policies have a benefit trigger for cognitive impairment. For example: as a policyholder you can only qualify for these benefits if you are unable to pass a test assessing your mental functioning.

How much in benefits will the policy pay?

The benefit amount usually is a daily benefit ranging from $50 to $250 per day. You may choose a benefit period that is a specific number of days, months or years. A maximum benefit period may range from one year to the remainder of your lifetime. It is important to ask the person selling the policy if the benefit amounts will increase with inflation and if that coverage increases your premium.

Are there exclusions?

Every policy has an exclusion section. Some states do not allow certain exclusions. Many long–term care policies exclude coverage for the following: 

• Mental and nervous disorders or diseases (except organic brain disorders)
• Alcoholism and drug addiction
• Illnesses caused by an act of war
• Treatment already paid for by the government
• Attempted suicide or self inflicted injury

Considerations before buying long–term care insurance

Whether you should buy long–term care insurance depends on your age and life expectancy, gender, family situation, health status, income and assets.

Age and Life Expectancy: The longer you live, the more likely it is that you will need long–term care. The younger you are when you buy the insurance, the lower your premiums will be.
Gender: Women are more likely to need long–term care because they have longer life expectancies and often outlive their husbands.
Family Situation: If you have a spouse or adult children, you may be more likely to receive care at home from family members. If family care is not available and you cannot care for yourself, paid care outside the home may be the only alternative. Different policies may cover different types of long–term care. It is important to buy a policy that will cover the type of care you expect to need and will be available in your area.
Health Status: If chronic or debilitating health conditions run in your family, you could be at greater risk than another person of the same age and gender.
Income and Assets: You may choose to buy a long–term care policy to protect assets you have accumulated. On the other hand, a long–term care policy is not a good choice if you have few assets or a limited income. Some experts recommend you spend no more than five percent of your income on a long–term care policy.

Do you qualify for Medicaid?

As an older adult, you may qualify for Medicaid, which pays almost half of the nation’s long–term care bills. To qualify for Medicaid, your monthly income must be less than the federal poverty level, and your assets cannot exceed certain limits. Medicaid will cover you only in Medicaid-approved nursing homes that offer the level of care you need. Under certain circumstances, Medicaid will pay for home health care.

Some states have long–term care insurance programs designed to help people with the financial impact of spending down to meet Medicaid eligibility standards. Under these “partnership” programs, when you buy a federally qualified partnership policy, you will receive partial protection against the normal Medicaid requirement to spend down your assets to become eligible. Check with your state insurance department or a counseling program to see if these policies are available in your state.

Key points to remember

• Long–term care insurance policies cover a wide range of medical, personal and social services.
• Understand what must happen for a policy to begin paying benefits.
• Understand the elimination period.
• Understand the daily benefits provided.
• Understand your coverage and exclusions.
• Match your need for long–term care with your need to protect assets and your ability to pay premiums.
• Understand how much your premium will be and how often it must be paid.
• Your premium may increase after your purchase.

The Web site for the National Clearinghouse for Long–term Care Information features a number of resources to help individuals start the planning process, including interactive tools such as a savings calculator, contact information for a range of programs and services, and real-life examples of how individuals have planned successfully for long–term care.

The Clearinghouse was authorized by the Deficit Reduction Act of 2005, which mandates that they provide the following: objective information to help consumers decide whether to purchase long–term care insurance or to pursue other private market alternatives that pay for long–term care; information about states with long–term care insurance partnerships under the Medicaid program; and information about the availability and limitations of coverage for long–term care under the Medicaid program. 

For more information, contact the Centers for Medicare and Medicaid Services.

The information presented in this Site is for general informational purposes, and should not be taken as legal advice. If you have a specific legal issue or problem, we recommends that you consult with an attorney.

Corporate medicine is intent on shackling health care expenses by doctors and other medical profes-sionals against the interests of patients. For the patient denied treatment, this is an adversarial system.

How can patients or their allies help themselves in a system that is set up not to help them get treatment?

Your tactics must be those of negotiation. Everything is negotiableÅwith the HMO, the HMO doctor, and the HMO hospital. In a negotiation, establishing what is reasonable is the goal. What should a reasonable person have to do in order to document his or her need for treatment? What should a reasonable cooperation have to provide and how long should it take? Is the company reasonably living up to the letter and spirit of state law? Reasonableness always includes a reasonable timetable. When will a decision be made to approve care? Who is the decision-maker? How long will it take to schedule the procedure? What is the longest it will take before this doctor sees me? These are the types of standards someone negotiating with their HMO or HMO doctor must require.

HMOs have time on their side. They will delay as a tactic of denial. Because most patients cannot sue HMOs for a denial or delay of treatment and receive damages if they prevail, the company has an incentive to stonewall. A seriously ill patient may not have the energy for a struggle and others close to them must take on that role. So what can a patient or their allies do?

There are some general rules one can follow in dealing with HMOs, but there are no panaceas, simply precautionary measures.

Write everything down. Bring a notepad and pen and take notes on what your doctor tells you. It will help keep track of your care, catch any errors, and provide a record should there be a question of inappropriate treatment.

If you are denied care, ask for it in writing. You will need a record of the denial if you want to dispute it. Leave a “paper trail”. If it becomes apparent that you are not getting cooperation, memorialize in written correspondence all conversations.

Find out the timelines. Most states have regulations establishing the timeframe within which a treatment or coverage decision must be made. Contact the appropriate regulatory body in your state and find out what those timelines are. Then make sure that everyone you deal with at the medical group or HMO knows that you know those timelines and then, make sure that they stick to them. In addition, non-government groups that accredit HMOs may have more stringent timeline requirements. Find out if your HMO is a member of organizations such as the National Committee for Quality Assurance (www.ncqa.org), American Accreditation of HealthCare Commission/URAC (www.urac.org), and the Joint Commission on Accreditation of Health Care Organizations (www.jcaho.org). Know that organization’s timeline requirements for the health plan’s decision-making process.

Appeal treatment denial to regulators. Find the appropriate state agency and their rules for filing a complaint. Medicare and Medicaid recipients can take a complaint to the federal Health Care Financing Administration. Don’t rely on governmental agencies as your savior; many are ineffective. Patients must be persistent. HMOs don’t like too many documented complaints, so include a carbon copy to state regulators and politicians of any contested correspondence.

Complain to the accrediting organization. HMOs rely on their accreditation by non-governmental organizations (NCQA, URAC, and JCAHO) in marketing to employers and unions. In addition to copying your documentation to the state regulators, send a copy to any accrediting organization where your HMO is a member.

Find allies in the medical profession. When medical experts advocate care HMOs find it harder to deny treatment. Insist on second or third opinions from a qualified professional. If your HMO won’t pay for a second opinion, pay out of your own pocket. It could save your life.

Ask how your doctor is paid. Under new rules, Medicare recipients are entitled to see a summary of their physician’s contract with their HMO, which would give details of any incentive to withhold treatment. Many states also provide that this information must be given to plan members if requested. Ask for it. File a complaint with your state’s medical board if you believe that your doctor is withholding treatment for his of her pecuniary gain.

Never take “no” for an answer. Always ask if there are treatment options available for you other than those that the HMO recommends. If you have a problem, take it up the ladder — fast. If you get health care through your work, enlist the help of your employer’s personnel department.

Never stay in the hospital by yourself. Have a spouse, loved one or friend present at all times when you are in the hospital, even if that means they sleep in a chair. Having an advocate present to monitor what is happening around you, to make sure you get the treatment that you need, is essential. If something goes wrong, he or she can act quickly to secure assistance.

Don’t be intimidated by someone else’s uniform, occupation, credentials and stature. You’re paying the bills, not only as a consumer, but also as a taxpayer that helps fund the medical system. Write or call everyone you can think of in the HMO; contact your elected representatives for help; write the newspapers; whenever possible, enlist your doctor as an advocate for you; involve your employer if you get your health care through work. Don’t let the bureaucrats slow you down.

Always maintain a reasonable, professional and calm demeanor both in person and in writing. If you lose control, make threats of violence or use foul language, you will simply be dismissed as a “crank”, a “flake”, or a “weirdo” and you will not accomplish your goal.

Get the medical care you need. You must always remember that your health care is your most important priority. Do whatever you have to do to get the medical care you need — mortgage your house, get loans from friends and relatives, try to make deals with doctors and hospitals, get community help with fundraisers. Get the care and worry about the money later.

Get a lawyer if you need one. Lawsuits are no fun. Most who have gone through the process say they underestimated how hard it would be, especially to relieve medical trauma. There is the possibility that you can have a legitimate case but will be unable to prove it in court, or laws won by the insurance industry may limit your right to even go to court. Nevertheless, legal options are often your only leverage against profit-driven managed care.

If possible, never give up the right to go to court. Avoid signing arbitration agreements that force you into HMO-controlled private justice systems. Cross out arbitration clauses and initial it. If your employer has signed your right away, lobby to change that provision of the contract. Some insurers require you to file complicated internal complaints before going to court. Follow these instructions exactly, but don’t delay consulting a lawyer in the meantime.If you do not want to be denied care, remember that the fight begins with an understanding of the system and its foibles. Be an aware consumer.

Jamie Court is a Consumer Health Care Advocate with the Foundation For Taxpayer and Consumer Rights. For additional information, you may want to read his recent book on the topic Making A Killing: HMOs and the Threat to Your Health (Common Courage Press, 1999), and you can find it on the Internet at www.makingakilling.org

The information presented in this Site is for general informational purposes, and should not be taken as legal advice. If you have a specific legal issue or problem, we recommends that you consult with an attorney.

Having & Understanding This Coverage Can Be Essential to a Company’s Survival!

A metals manufacturer suffered a fire loss to key machinery in its manufacturing process. Although operations were interrupted for less than three weeks, the company suffered more than $1.5 million in lost earnings and extra expenses.

Fortunately, this particular company—with due credit to their insurance broker—had purchased adequate business interruption insurance before the potentially devastating event occurred. Equally important, perhaps, the client sought outside professional assistance which proved to be critical when an impasse was reached with the carrier over the true value of the claim.

Many companies are not as fortunate as this one. Because when it comes to property insurance, the real and personal property are often the principal concerns. In fact, the key to surviving a disaster may very well depend on the firm’s loss of income protection.

Over the years, this coverage has evolved and undergone several name changes—being known as time element, loss of use, and loss of use and occupancy (U&O) coverage, as well as by the more familiar name of business interruption insurance. The newer ISO Commercial Property forms refer to it as business income insurance.

In this article I am going to discuss the key components and considerations of this important coverage—primarily from an adjusting point of view. The post-loss perspective provides excellent food for thought for any business that is realistic in contemplating its insurance needs. I like to compare this approach to preparing for a disaster to that taken by the accomplished golf professional who plays each hole in his head backwards, visualizing the putt, the approach shot, and the drive in reverse order! In much the same way, good risk management planning involves creating various scenarios of what might happen if a deliberating loss occurs—preparing for all the “hazards” that lie ahead. Whether it be pre-loss or post-loss, a business interruption loss calculation requires a good understanding of the key fundamentals. Following are several areas that should be considered when evaluating a potential business interruption exposure or actual loss.

Protecting the Lifeblood of a Business!

Let me begin by reviewing why business income insurance is so important.

The necessity of insuring tangible assets like buildings, machinery and equipment is readily accepted by business owners and managers, with firm reinforcement of the coverage requirement by the banks when mortgages exist. What is not appreciated in all cases—even by mortgagees—is the critical need for business income insurance to protect the lifeblood of the business when a disabling loss occurs. It goes without saying that one of the most important advantages of owning any asset is the right to its use and to the revenue it generates. If this revenue stream is not properly insured when a loss occurs the results could be catastrophic to those having rights to the property. (In addition to the obvious effects on the owners or lessees, the unfavorable impact extends to others, like employees, customers, vendors, mortgages, etc. All could suffer economic loss as well.) While it’s proper that the value of the asset itself be insured, losing the ability to generate revenue could easily force an owner out of the business.

Gross Profit—The Basis of the Coverage

The aim of business income insurance is to provide a business, whose operations have been interrupted by a loss, with income equal to what the firm would have enjoyed had the loss not taken place. The gross profit or earnings—the primary source for meeting operating expenses—is the focus of the coverage. According to policy language, coverage applies to reduction in “gross earnings” less “expenses which do not necessarily continue.”

A mistake often made in evaluating a potential business income claim is considering only the net profit. This approach is woefully incorrect. For example, let’s say a business had $7 million in sales per year, gross earnings of $5 million, and a net profit of a respectable $500,000; and management expected that six months is as long as the company would be out of business. It would be foolish for the firm to buy $250,000 of coverage at 100 percent coinsurance since it would collect only five cents on the dollar! A quick look at the formula by which such a business interruption claim is calculated shows why:

Amount of insurance x loss = claim
Coinsurance % x Gross earnings

or

$250,000 x $250,000 = $12,500
100% x $5,000,000

Consequently, business income insurance is generally sold on a “gross profit” (or “earnings”) basis rather than “net profit” basis. The industry recently changed the general definition of coverage from “gross profit less discontinuing expenses” to “net profit plus continuing expenses.” Since the policy form writers insist there is no intended diminution in coverage, the calculations will have the same result.

Period of Interruption

The period of interruption is defined as the “reasonable amount of time necessary for the insured to resume business.” Obviously, the time required will vary not only by the amount of damage suffered but also by the nature of the company’s operations. Most policies will not cover the entire period needed to rebuild the business to the level that would have been enjoyed had the loss not occurred, but only to the point where goods or services are being produced again—presuming the markets are still there. Consequently, under the standard forms quite a void could exist for many insureds. For example, a restaurant forced to close for repairs over a lengthy period may need additional time to rebuild its popularity and gain back its clientele— beyond the period it takes to just repair the damage and open its doors again. To prepare for such an eventuality, an extended period of indemnification may be obtained for an additional premium. The business income claim is one of the most difficult to prove because of its theoretical nature. As the period of interruption is analyzed, other factors can occur that the insured might want to consider, like changes in marketing and pricing.

Projecting Sales

The first consideration is determining what sales would have occurred had no loss taken place. To project sales, trends must be established and supported by the results of previous years’ experience and market conditions, as well as by factors that might influence sales and production achievements. Some adjusters review sales trends and assume that if sales had fluctuated by five percent over the previous years, the same trend will automatically continue in the fourth year. It would be disadvantageous to the insured not to consider the positive impact of the recent changes like the addition of a second shift, the introduction of an additional product line, or even the modernization of equipment and systems that impact the trend. Changes in the marketplace must also be considered when making such projections. Remember: business interruption policies are based on sales that would have occurred, not sales that could have occurred!

For example, if a snow storm occurs during the interrupted period, affecting sales in the local market, the insurer would be correct in calculating its effects on the claim settlement. The storm would have occurred whether or not the business sustained the loss. Depending on the type of business, however, the results could vary greatly. A snow storm would have helped the insured if the company sold snow blowers, but hurt them if it sold bathing suits! On the other hand, if a new competitor emerged in the marketplace as a result of the insured’s loss, the carrier would not be correct in taking this into consideration (the event would not have triggered had the loss not taken place).

In the claim of the metals manufacturer cited at the beginning of this article, the insured ultimately received a settlement virtually three times the insurance company’s opening valuation. Key to the business interruption claim presentation was establishing realistic production/sales projections, based on the company’s sustained growth over recent years, using accepted statistical methods for projecting those results forward. In addition, recent modernization and equipment changes had improved the company’s production dramatically.

Deducting the Cost of Goods, Establishing Value

Should the policy contain a coinsurance or contribution clause, the calculation of insurable value is a very important consideration! Sales, minus the cost of goods sold, yields gross profit, which is the true starting point of the claim. Once sales are projected, the anticipated cost of goods/services must be subtracted. In most industries this factor is generally constant over a long period of time. However, if the insured has made or plans to make changes in the gross profit percentage would certainly be in order.

Except in cases involving independent contractors, labor expense is not taken into account in calculating gross profit under most policy forms. An ordinary payroll exclusion—which lowers the amount of insurance needed for an insured to meet the coinsurance requirement—may be purchased for an additional premium. However, if the insured needs to retain non-key employees during the period of interruption, such an exclusion would not be a wise purchase. If a firm is out of business for only 60 days, for example, it may opt to retain all its employees. Being out of business for 180 days might make that choice impossible. Consequently, 60-day payroll coverage might be appropriate.

Under the old forms, projected gross earnings (gross profit) formed the basis of the claim, with payroll not considered an expense, and the projected 12-month gross earnings period calculated from the date of the loss. The newer ISO forms, however, leave less exposure for the insured, allowing the insured to calculate the projected gross earnings from the inception date of the policy. This point has great significance for a growing business! Otherwise, every month the insured might have to reevaluate the amount of business income insurance they should be carrying!

Considering Discontinuing Expenses

A key, if not the most important calculation in a business income claim, is subtracting expenses which “necessarily” discontinue. The word “necessarily” appears in most policies and its importance can hardly be overrated.

Consider the case in which an insured is forced to shut down permanently as the result of a devastating loss. Many insurers would attempt to stop (or discontinue) most expenses. However, the insured would need to calculate expenses that would have occurred if the company had returned to business. For example, if the company had been operating from a leased location, rental payments might actually cease for only nine months out of 12. The insured would need to continue to lease the property while renovations were made and the merchandise restocked. Therefore, in making these calculations only nine and not 12 months rent would be saved.

Depreciation is another factor that can often be used to the disadvantage of the claimant because many insurers prefer to use the insured’s income tax return for the depreciated value of property or equipment it reflects. Values on a tax return are often highly misleading! The IRS policy of allowing an asset to be depreciated over an accelerated period of time does not necessarily reflect the actual life span or value of that asset.

To cite an example, from an IRS perspective an oak conference table may be depreciated over a five-year period and, as a result, have no value at all if it was over five years of age. In actual practice that table would probably last at least 20 years, so depreciation taken on this asset should be 1/20th per year rather than 1/5th. This will not affect not only the property claim but the business interruption claim as well. Using 1/20 per year would yield a higher business interruption claim because the actual expense of doing business would be less than using the 1/5 amount reflected on the income tax form.

I thoroughly agree with the insurance accountant who, during a recent industry seminar, noted that the first thing the prudent adjuster needs to do is recast the profit and loss statement normally used for tax purposes, to meet the manner in which the insurance policy covers such operations!

Expediting and Extra Expenses

The insured has a duty to minimize the business interruption exposure and resume all operations possible under the circumstances. However, the insurer does not have a right to force the insured to operate the business or deal with competitors in ways the insured feels do not reflect wise business decisions. The insured must remember that the insurance company is primarily concerned with the business during the interrupted period, whereas the insured must consider the livelihood of the business for years to come. As a result, the insured must make the prudent decisions that are best for the business. Expediting an extra expense coverage can provide the insured with the latitude to make those decisions.

Expenses to reduce a loss—also known as “expediting expenses”—will have a substantial effect on a business interruption claim. For example, if the insured were to have parts flown in rather than delivered by truck, in order to reduce the business interruption loss, the increased loss would be covered under expediting expenses. They are covered only to the extent that they actually reduce the loss. For example, if it costs $1,200 to save $1,000 of business interruption, the insurer would pay only $1,000 as an expediting expense. However, if the $1,200 is spent reasonably in an effort to resume operations, the $200 difference would be covered under “extra expenses.” The prudent business person might actually spend $1,200 to save $1,000 when the long-term benefits in protecting market share justify the additional expense.

Extra expense coverage which expands the basic business interruption coverage can provide benefits for many businesses, especially those that can ill afford to be closed for any amount of time. Banks, newspapers, and the like try to operate regardless of cost, or they could lose their markets completely. Other businesses must resort to subcontracting work to maintain their market position and reduce their loss of earnings. This is precisely what happened to our metals manufacturer, who had to use the facilities of a competitor—at substantially higher costs because of variances in production standards and procedures. However, the firm recovered nearly $800,000 in expediting and extra expenses as a result of the detailed analysis and calculations.

Executive Overtime

Another point to be considered in business income claims is the time spent by staff trying to resume operations under adverse conditions. This often involves not only hourly employees but salaried personnel and officers as well. If part of an officer’s time is needed to plan strategies for operating under the interrupted conditions, additional time should be calculated in the claim settlement. If after a loss officers must concentrate on minimizing the business income claim instead of handling their normal tasks, such loss of expertise needs to be addressed in the calculation of the claim. (It should be noted that carriers normally resist this type of claim by maintaining that unless additional compensation is actually paid, there is no actual loss!)

Advanced Payments May Speed Recovery

The manner in which the business interruption claim is handled, and the business’s recovery effort made, will have a profound impact on the company’s ability to thrive after the loss. Immediately after a loss, expenses generally skyrocket as revenues plummet. To prepare for the cash flow problem, the insured should be cautious and plan for every eventuality when initially estimating their business interruption claim, and based on those calculations, request a meaningful advance payment. Most insurance carriers will respond to a reasonable request for an advance payment because it is in everyone’s best interest for the insured to invest monies to limit the claim to the fullest extent possible.

Understanding the Coverage is Paramount

When trying to control financial risk, insurance is the cornerstone. And business income insurance can prove to be the foundation for survival of a business whose operations have been interrupted by a devastating loss. If the insurance policy will not occur losses the business might incur, the owners/managers must re-think their strategies.

What’s more, just having business income insurance isn’t enough. Understanding it—both when the coverage is purchased and when a claim is adjusted—is every bit as critical. Misunderstanding it can not only magnify loss, it can be a fatal blow when such a loss strikes an otherwise healthy business!

Ronald J. Papa is the President of National Fire Adjustment Co., Inc. (NFA)

The information presented in this Site is for general informational purposes, and should not be taken as legal advice. If you have a specific legal issue or problem, we recommends that you consult with an attorney. 

When you get in an accident, what should you do? The first steps are easy: move your car to the side of the road, make sure everyone is okay, call 911, take pictures of the vehicles, exchange information with the other party and call your insurance company. But what do you do when the insurance company calls you?

Dealing with your insurance company

Many times, the first person who will call you is a claims adjuster. This person works for your insurance company. It may be a “staff adjuster” employed by your insurance company, or it may be an “independent” adjuster. (An independent adjuster works for a private company, but has been hired by the insurance company.) They are going to ask you a series of questions, generally in this order:

1. Where is your car located
2. Is your car damaged?
3. What happened in the accident?
4. Was anyone hurt?

They want to know where your car is located to make sure that it is not accruing storage charges from a tow shop. If it is, they will ask you to call the tow shop and authorize the vehicle to be released. Most insurance companies will then move your car to one of their preferred body shops. If your car is at a tow yard, you should release it to your insurance company. Let them move it. This is not a battle to fight.

They then want to know if your car was damaged, and generally where the damage is located. You do not need to speak in auto terms — just tell them “driver’s side,” “passenger’s side,” “front,” “back,” etc… If the car is seriously damaged, let them know. If the damage is minor, let them know that as well.

When they ask you what happened in the accident, they may ask you for a recorded statement. You are NOT required to allow them to record your statement. Your policy requires that you cooperate with your insurance company but there is nothing in most policies that requires you to give a recorded statement. Answer their questions but do not give them a recorded statement at this time. Tell them what you know, and if you are still shaken, tell them that you want a day or two to settle down, and then talk to them.

You should let them know if anyone was hurt. You may have medical payments (med pay) coverage that will pay any bills you incur for injuries you sustain. They also need to know if anyone else was hurt. Tell them what you know, and if you are not sure if you are hurt, tell them that as well.

Repairing Your Car

The insurance company is going to recommend one of their preferred shops. They have arrangements with shops that will do some of the work (such as photographing your car) for the insurance company. You are not required to go to one of their shops. You can go to any shop you choose. There are some very good shops that are preferred vendors for some insurance companies. There are also some very bad shops. You should never go to a shop unless you can get a personal recommendation from a friend, reliable contact or family member. When you determine where you want the car fixed, tell the insurance company and the adjuster will reach an agreed price with the shop. This is the price that the insurance company agrees to pay, and the shop agrees to accept. You should not be charged anything other than your deductible.

The parts your car was manufactured with are known as Original Equipment (from) Manufacturer, or “OEM”. The insurance company may write an estimate using pricing for aftermarket (sometimes called “crash” or “non-OEM”) parts. There has been a lot of debate as to whether these parts are as good or reliable as original equipment manufacturer parts. If your selected body shop agrees and in most cases, non-OEM parts will be fine, but if they recommend OEM parts or if you have a high end vehicle you should demand that your insurer cover the cost of repairs with OEM parts only. Support for your position can come from the basic principles that insurance is designed to put you back as close as possible to the same position you were in before a loss and “like kind and quality” has traditionally been the standard for replacement.

The insurance company may also want to put on used parts. These are parts that can be bought at an auto recycler from another car that was damaged. These parts are usually OEM parts and are a good replacement if your car is damaged. If your choice is between good condition used parts from an auto recycler or non-OEM parts, choose the former.

You may also be entitled to a rental vehicle. (For tips on properly insuring a rental car read UP’s tips from our Fall 2005 newsletter) Your policy will pay a maximum, usually $20 or $25 per day for the rental vehicle. You will be responsible for all extra charges. Call around and find the best deal for a rental car. You do not have to go with the insurer’s recommended rental car company.

Resolving Your Injury Claim

If you are injured in an accident, you are entitled to recover the reasonable value of your medical bills, your lost wages and a reasonable value for your pain and suffering. Despite what you may read on the internet, there is no formula for calculating this amount. Each case has its own value. Determining what your case is worth takes experience, and you probably want to consult with an attorney.

If you decide to go it alone, remember that you have two years from the date of the accident to either settle your case or file a lawsuit. The adjuster cannot extend this time for you — even if they agree to extend it. You must settle or file a lawsuit, period.

Some adjusters will tell you that their computer gave them a value. Do not listen to them. Their software, generally Colossus, cannot figure out what a case is worth. It determines value based on what they input. Since you do not know what they input, you cannot trust the outcome. Therefore, you should not accept this amount.

Other adjusters will “drop draft” you. This means that they send you a check, usually for $500, and a release. They ask you to sign it, deposit the check, and mail the release back to them. Do not accept this. Adjusters do not drop draft you for the full value of your case. They only drop draft when they are trying to settle a case for less than it is worth. If you receive a check in the mail from the insurance company, that should be a sign that you need legal representation.

Conclusion

When you are in an auto accident, the insurance adjuster may try different tactics with you. Most of these tactics have the same goal — saving the insurance company money. The insurance adjuster is not your friend, although the good ones will make you think they are. While these tips do not cover every circumstance, they will give you enough of a start to make the adjuster know that you have an idea of how the system works. That alone will help you with your claim.

This article was written at UP’s request by Elk Grove, CA. attorney and C.P.C.U. society member Jonathan G. Stein. Jonathan worked for many years in the insurance industry before “switching sides.” He now represents policyholders in claim dispute. His website and articles are recommended reading.

The information presented in this Site is for general informational purposes, and should not be taken as legal advice. If you have a specific legal issue or problem, we recommends that you consult with an attorney.

NEW YORK (CNNMoney.com) — Earlier this week, we told you how to cut your fees. Now, how to save more money on your insurance. Here are some insurance policies you should think twice about.

1: Skip the cancer insurance

This kind of insurance is meant to supplement health insurance for cancer-care costs. But generally you’re better off putting your money toward comprehensive health policies.

Premiums range from $200 to $3,000 a year for cancer insurance, according to Consumer Reports. And some policies only pay for hospital care. This is a big deal considering that cancer care treatment is given on an outpatient basis…including radiation and chemotherapy.

Some policies have waiting periods of a month – and if you’re diagnosed with cancer within that time, you may not be covered. Other policies stop paying benefits after a fixed period of two or three years. And sometimes you won’t even be able to get this insurance if you smoke.

2: Say “no” to Mortgage Life insurance

This kind of insurance policy will repay your mortgage in the event of your death, disability or some incapacitating disease. But the cost of this policy can be three to five times as much as comparable term-life insurance, according to Consumer Reports.

Plus, the value of this insurance actually declines as you pay down your mortgage. If you’re worried about burdening your heirs with mortgage payments, you’d be better off buying straight life insurance.

3: Forget ID theft insurance

This kind of insurance is sold by banks, credit-card issuers, and specialty insurers. It covers the cost of repairing your credit and sometimes attorney’s fees. Policies can cost between $25 and $50 for up to $25,000 in coverage.

But remember getting this insurance isn’t going to fix your credit or give you back the thousands of dollars stripped from your bank accounts.

In fact, a recent study found that most ID theft victims lost about $750 – but incurred no out of pocket costs. The ID Theft Resource Center even noted that they’ve never heard of a claim being paid out. And don’t forget, you have some consumer protections in place already.

You’re only liable for $50 for unauthorized credit card purchases. The bottom line is that you’ll be much better off keeping an eye on your credit reports.

4: Be wary of Annuity Fees

Buying an annuity may seem like the next best thing to mom’s apple pie. After all, you’re putting away as much tax-deferred money as you can and getting a monthly check for life. And since annuities are marketed heavily, it’s no doubt, you’ll get a rosy picture of these investment vehicles. But you’ll really want to keep an eye on those fees and withdrawal penalties.

On average, you’ll pay about 2 percent to 2.35 percent in basic fees for a variable annuity, compared with 1.40 percent for the average mutual fund. And don’t forget, you’ll have to pay the taxman sooner or later. And remember, annuities are not guaranteed by the government. Make sure you check the credit worthiness of the insurance company, says Dave Evans of Independent Agents and Brokers of America.

The information presented in this Site is for general informational purposes, and should not be taken as legal advice. If you have a specific legal issue or problem, we recommends that you consult with an attorney.